Wondering how the Code on Industrial Relations 2020 will affect your business? Keep reading to find out!
Overview
Labour laws play a significant role in any business. This is because they govern a company’s relations with its employees as well as the government. Changes in labor laws can massively impact your finances, hiring policies, and other obligations towards employees. Recently, the government took a step to replace 29 existing labor laws with four codes. One of these codes is the Industrial Relations Code, of 2020. In this post, we will rundown the changes made to existing labor laws by way of this code. We also assess the impact these changes will have on your business compliance obligations.
Main Features of the Industrial Relations Code
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Laying Off of Employees
- Under the new code, laying off employees has become harder. Now, the prior permission of the government is needed for establishments that have more than 300 workers. Here, laying off refers to dismissing employees due to adverse business conditions, such as the inability to pay existing debts such as salaries, closure of business, etc. (xanax online for dogs)
- For businesses meeting the threshold, an application must be filed 90 days before closure. However, if employees offer alternative employment not requiring any special skill or causing undue hardship to them, this requirement can be waived off.
2. Termination of an Individual Worker
Conflicts over the discharge, dismissal, or termination of a specific worker’s employment would be treated as industrial disputes under the code. This indicates that a company may be brought before the Industrial Relations Tribunal for decision-making.
3. Prohibition on Strikes in Industrial Relations
- The new code on industrial relations prohibits any strike or lockout without serving notice in any industrial establishment. Previously, this restriction was limited to public utility services.
- As per the code, a notice must be served at least 60 days before the strike. Moreover, there can be no strikes undertaken during conciliation proceedings, or when a case is pending before an Industrial Tribunal. This step has been undertaken in order to reduce the chances of work disruption.
4. Quick Resolution of Disputes
The code provides for two members in the Industrial Tribunal, instead of one in the earlier regime. Additionally, if a matter remains unresolved at the conciliation stage, the tribunal can be approached directly.
Fixed-term Employment – Addressing Flexibility and Exploitation
The Industrial Relations Code, 2020 introduces the concept of fixed-term employment for short-term labor. This is a creative invention under the new act that provides great flexibility to businesses in hiring employees for short assignments. Under contract labor, often, a middleman (contractor) would be involved. However, the new law bypasses this to allow direct hiring under fixed employment.
Gratuity and Other Statutory Payments for Fixed-term Employees and Contract Workers in Industrial Relations
- Gratuity is a fixed sum payable either on retirement, superannuation, death, or suspension of services of an employee. This is payable at the rate of 15 days’ wages for every completed year of service.
- Under the Industrial Relations Code, gratuity becomes payable by a business to both permanent and fixed-term employees. This is applicable if an employee has worked in the organization for a period of one year.
- The gratuity provisions under the code become applicable when ten or more employees are being employed by the organization on any day in the last twelve months
- This provision will have the impact of leading to greater business outflows – especially where fixed-term consultants are involved. However, for short-term assignments involving less than one year of work – no gratuity is payable.
Increase in thresholds for standing orders
The threshold for employees for standing orders on routine matters has been increased from 100 to 300 workers. These standing orders relate to matters such as the classification of workers, termination of employment, work hours, grievance redressal etc. This gives small and medium-sized businesses greater flexibility in hiring and dismissing workers.
What are the Major Advantages of the Industrial Relations Code, 2020 to Business Owners?
The key objective behind this act is to reduce business costs for labor while modernizing labor regulation. In addition to these there are also several other benefits being accorded to businesses on the back of this code. They are as follows
- Easier filings – During the previous regime, there was a plethora of labor compliance under various laws, such as employee state insurance scheme, gratuity, PF, workmen’s compensation, and so on. The new code combines these laws into a single comprehensive piece of legislation. This has helped save time and money on annual and quarterly filings.
- Lesser threat of litigation and faster dispute resolution – The code renewed focus on negotiation and arbitration for disputes with workers, thereby encouraging non-court, non-tribunal settlements. This helps free up precious business resources (personnel, money, time) which would have otherwise been locked up in litigious matters.
- Smooth functioning and lesser regulation – Strikes without notice are declared illegal for all businesses, this ensures that the operation of the business is protected. Similarly, greater freedom is granted to a business in designing its working hours and other employment policies.
- Incentivises businesses to grow – Under the old regime, a small business faced greater regulation as it grew in size and employed more people. This is known as a ‘perverse incentive’ – where small businesses often stay small to avoid greater financial burdens under the labour law. Under the new regime the threshold limit of employees has been increased to 300, allowing businesses to hire more without suffering from additional compliance costs.
- Definition of a Worker – The code clarifies doubts emerging over the definition of workers, mentioned in several different labour laws. It states that workers would include, all persons employed in a skilled or unskilled, manual, technical, operational, and clerical capacity, all supervisory staff drawing up to ₹18,000 a month as salary.
Conclusion
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