After the implementation of the new labor code, the share of your allowances in wages will come down. There will be a limit of 75-80% of the wages for the first year allowance. This can be brought down to 50 per cent in three years. The government plans to make some more changes in the newly proposed labor code.
Under the Industrial Relations Code, it will be mandatory for companies with up to 100 employees to seek government permission to lay off employees or close business. In the proposed new labor code, a limit of 300 employees was fixed for this. But after the opposition of the Labor Unions, it is being considered to make it 100.
The industry has opposed the 50 per cent cap for allowances. He argues that this will increase his employment cost. Wages in the new labor code will include salary and allowances. This will also include Basic Pay, Dearness Allowance and Retaining Allowance. However, house rent and overtime allowance will not be included.
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The code also states that if all these allowances not included in the wage exceed 50 per cent or the prescribed limit, then the additional amount will be treated as remuneration and will be added to the wedges under this clause. Thus, with the increase in wages, both the employee and the employer will have to contribute more to the provident fund. This will also increase the gratuity payment. However, the above mentioned changes will reduce the take home salary of the employee. But, the total contribution to retirement savings will increase.
The Labor Code on Wages was passed by Parliament in 2019. The Industrial Relations Code was approved in September last year. The rules related to the four codes passed by Parliament were ready by March last year. However, due to strong opposition from the employees and the employers on certain issues, they could not be implemented.
Companies worry that at a time when the economy is trying to recover from the impact of Corona, the proposed changes to the labor code will put unnecessary pressure on them and increase their employment costs. Because of this, the central government is thinking of some changes in the proposed code.
Under the proposed Industrial Relations Code, government approval was required for companies with up to 300 employees to lay off employees and shut down businesses. Now this number is being reduced to 100. This would have given the employees the freedom to retain and remove employees as per their need. But, this is being changed after the protest of the employee unions.
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