The Ministry of Labour and Employment issues additional FAQs on all four Labour Codes

The Ministry of Labour and Employment has issued detailed FAQs on the Labour Codes including

1. FAQ on Code on Wages, 2019
2. FAQ on Code on Social Security, 2020
3. FAQ on Industrial Relation Code, 2020
4. FAQ on Occupational Safety, Health and Working Conditions Code, 2020

Key Clarifications:

I. Code on Wages, 2019:

• Overtime allowance payment forms a part of the 50 percent wage calculation under the Code on Wages, 2019. Only statutory components such as employer PF and pension contributions and statutory bonus are included for arriving at 50% of wages to form part of remuneration. Gratuity, ESI and other retirement benefits are not included.
• Statutory components such as employer share of PF/Pension contribution, are a part of the specified exclusions as prescribed under the definition of “wages” under the Code on Wages Where the total of such excluded components exceeds 50 percent of the total remuneration, the excess amount will be added back to wages.
• Annual performance-based incentives do not form a part of “wages” for computation under the Labour Codes.
• Employee, including worker, whose minimum rate of wages is fixed under the Code on Wages, 2019 is eligible for overtime. Overtime allowance payment forms a part of components of “wages” under the Code. If such allowance, exceed 50 percent of remuneration then excess over 50 percent is added to the wage calculation.
• Gratuity, based on revised definition of wages will be applicable w.e.f. 21^st November 2025, i.e. the date of implementation of the Codes.
• Minimum wages are fixed by the Appropriate Government for the employees, whereas wages are fixed as per Terms of Employment between employee and employer, employed in any establishment.

II. Code on Social Security, 2020:

• Under the Code on Social Security, Fixed Term Employment covers employees who are directly engaged by the employer.
• Gratuity calculation will be applicable w.e.f. 21^st November 2025, i.e. the date of implementation of the Codes. With effect from 21^st November 2025, the definition of wages under this Code will apply. At present, Rs 21,000 per month wages, as notified for ESI coverage will be applicable.
• Fixed Term Employees will be eligible for gratuity if he/she renders service under the contract for a period of one year (from start of contract).
• Any payment made to employee which is not part of components mentioned under the definition of “wages” under the Code on Social Security, 2020 will not be considered for calculation of gratuity.
• The contribution to be paid by the aggregators for the funding Schemes for gig workers and platform workers will be notified by the Central Government. The said contribution will be credited to Social Security Fund set up by the Central Government for social security and welfare of the gig workers and platform workers.
• In case of contract labour, the contractor will pay gratuity on rendering of five years continuous service at the rate of 15 days wages for each completed year of service based on the last drawn wage.
• The employee will be paid gratuity based on the rate of wages last drawn by the employee at the time of superannuation, retirement or resignation or death etc, on and after 21st November 2025.
• Benefits under the terms of employment such as food coupons, ration items, mobile recharge etc. would constitute remuneration in kind.

III. Industrial Relations Code 2020:

• Under the Industrial Relations Code 2020, Fixed Term Employee will be eligible for gratuity if he/she renders service under the contract for a period of one year (from start of contract).

IV. Occupational Safety, Health and Working Conditions Code, 2020:

• Leave provisions will apply to workers as per this Code and only to those supervisors having wage not exceeding Rs 18,000/ per month. The definition of worker under this Code includes sales promotion employees and working journalist.
• A worker can carry forward up to 30 days of leave to the succeeding calendar year. Further, a worker who has applied for leave with wages and has not been granted, can carry forward the leave refused without any limit.
• A worker is entitled for leave encashment and sales promotion employees are included within the definition of worker.
• Under this Code, creche facility is available to employees, irrespective of gender.
• The Code prescribes working hours as 8 hours per day. If a worker works for more than 8 hours in any day as daily wager, or for more than 48 hours in any week, such worker in respect of such overtime work will be entitled to wages at the rate of twice the normal rate of wages and the same will be paid at the end of each wage period.
• The provision of this Code will prevail over the State Law for provisions which are inconsistent with the Code. However, an employee is entitled to benefits under State law if such State law is more favourable to him than those under the Code.
• There is no prescribed maximum limit for leave encashment under this Code. Leave exceeding 30 days, if applied but not granted by the employer, can be encashed at the end of the calendar year. At the time of separation from service, the worker is entitled to encash the leave to his/ her credit.
• Central rules will be applicable on the establishments where Central Government is Appropriate Government and State rules will be applicable on the establishments where State Government is Appropriate Government.

Source: Ministry of Labour and Employment