Over the last two decades, the Indian Government has tried to implement new statutes with the objectives of improving the working conditions of employees across sectors and making the process of adhering to compliance easier for employers. There have been multiple labour legislations passed in the past, however, industry experts believe the latest changes in the labour laws will be the most impactful of them all.
By codifying the 29 legacy labour laws into four new labour codes that deal with wages, social security, industrial relations and occupational safety & health, the Government is making the process of compliance management easier for employers.
Industry experts say with the new labour codes, there will be significant changes in the organised and the unorganised sectors.
In this context, ETHRWorld reached out to HR leaders to understand their take on the provisions of the new labour codes and their major impact on organisations and their employees.
WHAT HR LEADERS SAY ON THE NEW LABOUR LAWS
“The amalgamation of the various statutes in the form of codes is appreciated on account of the reduction in administrative activities, maintenance of registers & records, and filing of periodic returns. Post-release of the labour codes, we have deeply analysed them from the industry perspective and their implications on our company from the Compliance and Financial aspects,” says Harpreet Kaur, SVP & Head - Corporate Personnel & Admin, Godrej & Boyce.
Kaur reiterates that they have also tried to understand the views of industry experts and experts from the legal fraternity. They are creating awareness and deeper understanding with HR professionals and admin staff for building future readiness.
Veena Prakash, Human Resource, SILA, says, “The new code will attract global companies to India because it will improve the ease of doing business in the country. The new legislation is aligned with global standards and is conducive to a larger workforce.” SILA is a real estate project and facility management company with over 16,000 employees.
Babita Karki, Chief People Officer, NIIT, says, "It is critical for the leadership and all key stakeholders in an organisation to be aware of what the new codes entail from a legal, financial, operational and functional perspective.”
Karki believes that acquainting oneself with the impending changes, understanding why they are being made, and the repercussions they are likely to have on the organisation as well as the entire ecosystem is imperative for everyone.
CHALLENGES IN IMPLEMENTING THE NEW LABOUR LAWS
According to the industry leaders, there are various challenges in implementing the new labour laws. Prakash of SILA says, “As an organisation, we are excited aboutthe new labour codes. Our concern is that since most of the labour compliances are governed by states, the speed of implementation of the codes may vary in every state depending on how efficiently each state implements the new codes. Hence, we feel that the implementation phase will be challenging and time-consuming.”
According to Kaur of Godrej & Boyce, even though the Government is amalgamating the various Labour Laws into four Labour Codes, still there are a few areas whereinmore clarity is required in terms of applicability, and inclusions & exclusions. “With the implementation of the labour codes, there might be alterations in the net salary of the employees, which needs to be managed carefully. A fair understanding is required of the fixation of the floor wages and its linkages to the minimum wages,” she says.
Kaur further says that there will be an urgent need for revamping the payroll-related systems, processes and applications, as the calculations of indirect benefits will be changed due to the changes in the definition of wages.
Dr Kiran Bala, Chief People Officer, SG Analytics, mentioned the need for an overall risk analysis of the new labour codes, based on the impacts on the areas in HR, compliance, payroll, contract workforce and others to get a comprehensive 360-degree view. SG Analytics, a global insights and analytics company, has over 1100 employees.
She says, “We have considered all stages of the employee lifecycle, policies, processes, and operational protocols that will serve the organisation well. Another key aspect that we have looked into is communication. We have planned to provide for adequate employee communication which will be instrumental to the success of the massive change exercise that will come with the new labour codes.”
According to Bala, a phased rollout of the new labour codes will help in better preparation, ease of implementation and the right communication.
MESSAGE FOR THE GOVERNMENT
According to Kaur of Godrej & Boyce, there are many areas that still need to be addressed and require clarity like if the incentives can be considered as commission, etc. Hence, the Government should be proactive to revisit and refine the labour codes in facilitating the issues arising out of their implementation.
“In today's era of the highly competitive market scenario, where industries are focusing on optimising their fixed costs, the change in the definition of wages is going to add a financial burden on companies and may badly affect the small-scale industries and MSMEs which are the backbone of the industrial economy,” says Kaur.
PREPARATIONS FOR THE SMOOTH IMPLEMENTATION OF THE NEW LABOUR CODES
According to Bala of SG Analytics, the new labour codes will have an all-encompassing implication on the entire employee lifecycle, and not just the wages. Hence, the company is revisiting its compensation structures, policies, compliances, processes and practices to ensure the implementation of the new codes in a seamless and effective manner.
According to Suma R V, Partner, King Stubb & Kasiva Advocates & Attorneys, the implementation of the new labour codes can be done in two phases. In the first phase, the existing structure of the workforce, wages & benefits, HR policies and other documentation can be audited, and the gaps or exposures can be identified. This would help companies to realise the organisational and financial implications of compliance under the codes. Additionally, the HR process on collective bargaining and dispute resolution can be reviewed to be farsighted and progressive. In the second phase, the proposed structure can be re-visited and finalised, once the codes are implemented.
In conclusion, industry experts say the Government needs to plan the implementation in a phased manner and understand the possible impacts that organisations may face, such as the unified definition of wages and fixation of the monthly basic compensation, payment of gratuity to the fixed-term employees and the establishment of a re-skilling fund for the retrenched workers.
From the HRs’ action side, the new labour codes demand them to be prepared to handle a variety of tasks, including appropriately evaluating the current compensation structure to create a win-win situation for the employer and the employee, as well as revising the current service manuals and employment agreements to reflect the provisions of the new labour codes.
