The Union government has taken a significant step towards implementing the long-pending labour reforms by notifying the draft rules for all four labour codes. The Ministry of Labour and Employment has invited feedback from the public and stakeholders within a window of 30 to 45 days, setting the stage for a potential rollout of the new regime by the next financial year.
Key Provisions in the Draft Labour Rules
The draft rules detail the operational framework for the four consolidated codes: the Code on Wages, the Code on Social Security, the Industrial Relations Code, and the Occupational Safety, Health and Working Conditions (OSH) Code. Among the most notable proposals is the stipulation of a weekly working limit of 48 hours. The government will separately notify the specifics regarding daily working hours, rest intervals, and spread-over time.
In a major push for formalising the vast unorganised sector, the rules mandate Aadhaar-linked registration for every unorganised worker aged 16 years and above. For the growing gig and platform economy, the draft proposes the creation of a National Social Security Board. This board will include members from both Houses of Parliament, associations of unorganised sector workers and employers, state representatives, and seven central government nominees representing scheduled castes, scheduled tribes, women, and minorities.
Clarifications on Wages, Gratuity, and Fixed-Term Employment
The Ministry has reiterated the crucial definition of 'wages' under the new codes. Wages will encompass all remuneration, including salaries and allowances. However, if the sum of payments other than basic pay, dearness allowance, and retaining allowance exceeds 50% of the total remuneration, the excess amount will be added to the wage calculation. Notably, performance-based incentives, ESOPs, and reimbursement-based payments will not be part of wages, nor will leave encashment be considered an allowance.
Addressing industry queries, the Ministry clarified that the new provisions for gratuity will apply prospectively from November 21, 2025, the date of enforcement of the codes. A significant change introduced is the concept of fixed-term employment, allowing hiring for defined periods based on demand. These fixed-term employees will become eligible for gratuity after completing one year of continuous service, a benefit previously reserved for permanent workers after five years.
New Framework for Minimum Wage Calculation
The draft rules lay down a revised formula for fixing the minimum rate of wages on a per-day basis. The calculation will consider the needs of a standard working-class family comprising the earning employee, a spouse, and two children. The criteria include:
- A net intake of 2700 calories per day per family member.
- 66 meters of cloth per year per standard family.
- Housing rent expenditure pegged at 10% of combined food and clothing expenditure.
- Expenditure on fuel, electricity, and miscellaneous items at 20% of the minimum wage.
- An additional 25% of the minimum wage for children's education, medical needs, recreation, and contingencies.
The Ministry has assured that during the transition, the old rules will remain in force until the final notification under the new codes. With the 45-day feedback window now open, officials indicate that the final rules are likely to be notified by March 2025. This timeline would allow most industry-linked provisions to come into effect from April 1, 2025. The four labour codes themselves were passed by Parliament five years ago and formally notified by the government in November 2024.
