Legal Responsibilities of Employers Under the New Labour Codes

Introduction

The new Labour Codes in India have transformed employer-employee relationships by introducing a systematic, streamlined, and employer-friendly compliance framework. While the reforms, in theory, take away a lot of procedural constraints, they come with a considerable amount of legal responsibility on employers. Complying with these new laws is crucial not only to avoid fines but also to enhance workplace conditions and safeguard employee rights.

Employers now must align their policies and practices with the new legal framework as four new codes have now come into force: The Code on Wages, The Industrial Relations Code, The Social Security Code, and The Occupational Safety, Health, and Working Conditions Code. Non-compliance can lead to heavy fines, lawsuits, and damage to reputation.

This article explains the legal responsibilities of employers under the new labour codes in India, what employers can do in practice to comply, and answers to FAQs for better clarity. So, let’s break down these new labour laws and what it means!

Overview of the New Labour Codes in India

What Was Driving the Reform of Labour Laws?

India had 44 complex and outdated labour laws. The government aimed to clarify, and streamline. and modernize them.
The reforms have led to easier compliance, a reduced burden on employers, and enhanced rights for workers.
These laws are designed to encourage foreign investment and accelerate growth by providing for a more structured employment framework.

The Four Labour Codes

Code on Wages, 2019 – Establishes uniform definitions for wages, minimum wages, and payment structures.
Industrial Relations Code, 2020 – Governs trade unions, industrial disputes, and employee relations.
Social Security Code, 2020 — Consolidates and expands benefits for social security, including EPF, ESI, gratuity, and protection for gig workers.
Occupational Safety, Health, and Working Conditions (OSH) Code, 2020 – Regulates workplace safety, welfare measure,s and working hours.

Application of New Labour Codes

For Corporations of All Sizes: Most of them would have to comply with the new laws.[A1]
For Gig and Platform Workers: Freelancers and independent contractors now have social security provisions.
State-Specific Variations: Some provisions may vary based on how states implement them.

Responsibilities of The Employer Under The Code on Wages, 2019

The Code on Wages, 2019 establishes a clear framework for the same. Employers are required to address the following:

Standardized Definition of Wages: The code mandates a uniform definition of wages to avoid disputes.
Minimum Wages: Employers must ensure that employees receive the minimum wages as prescribed by state or sector guidelines.
Right to Equal Pay: The code prohibits discrimination in pay based on gender, caste, or religion.
Timely Payment of Wages: Wages must be paid monthly, weekly, or daily depending on the classification of the employee.
Overtime and Working Hours: Strict provisions govern overtime compensation, working hours, and shift work.

Reporting and Punitive Obligations of the Employer for Violation of Industrial Relations Code, 2020

The Industrial Relations Code, 2020 governs employer-employee relations, industrial disputes, and union activities. Key responsibilities include:

Hiring and Termination Guidelines: Provides structured guidelines for the recruitment and termination processes.
Standing Orders: Establishments with 300 or more workers are required to implement a compulsory code of conduct.
Trade Compliance: Employers must recognize registered trade unions and engage in fair negotiations.
Strikes and Lockouts: Workers must give 60-day advance notice of strike; employers face similar restrictions during lockouts.
Dispute Resolution: Disputes should be addressed through internal grievance mechanisms before a tribunal.

Employer Obligations Under the Social Security Code, 2020

Full-fledged benefits for employees mandated under the Social Security Code, 2020.

Employers must contribute to the Employees’ Provident Fund (EPF) and other mandated social security schemes.
Employers are required to provide gratuity benefits to employees who have completed five years of service.
Maternity Benefits: Provision of 26 weeks of paid maternity leave.
Establish state-level welfare boards and ensure the registration of unorganized workers where applicable.

The Employer’s Obligations under the Occupational Safety, Health, and Working Conditions Code, 2020

This is a code that covers workplace safety, health, and welfare. Employers must:

Implement comprehensive health and safety protocols..
Provide adequate sanitation and welfare facilities, including clean drinking water, separate restrooms, and first-aid kits.
Adhere to provisions on working hours, ensuring a maximum 48-hour workweek.
Ensure a safe work environment for all employees, with particular attention to women and night shift workers.
Ensure compliance with contract labour laws by registering contract workers and providing mandatory benefits.

Employer’s Takeaways on Compliance Measures

Keep employment contracts up-to-date.
Utilise digital HRMS for payroll and compliance tracking.
Perform internal compliance audits.
Educate HR and employees on new regulations.
Engage legal experts to ensure that all actions are in full legal compliance.

Practical Steps for Employers to Ensure Compliance

Compliance with the new labour codes is essential as it assures legal protection, employee welfare, and smooth operation of the business. This requires a forward-thinking approach by employers through robust compliance measures. Below are the key steps:

1. Perform an Internal Compliance Check

Assess existing HR policies, employment contracts, and payroll structures for compliance gaps.
Evaluate compliance with minimum wage, overtime, social security, etc.
The best way to find out what your company needs to do is to hire a labour law expert or compliance officer to do an internal audit.

2. Update Employment Contracts

Review and update job agreements in line with the new wage definitions established under the Code on Wages, 2019.
Contractual agreements must include PF, ESI, gratuity, and maternity leave; compliance with minimum wages is compulsory.
The terms should reflect current practices around working hours, dispute resolution, and employee entitlements.

3. Engage Legal Experts for Labour Law Compliance

Stay abreast with the legal amendments and state-specific regulations by consulting labour law professionals.
Connect with an expert on company termination policies, trade unions, and compliance laws applied in the case of contract labour.
Establish an HR compliance checklist to be adhered to consistently.

4. Keep Track of State Specifics

The labour codes offer a broad framework but states can make local changes.
Employers need to keep pace with the state-wise wage rates, safety standards, and work-hour regulations.
This will ensure that you stay in alignment by subscribing to official government updates or engaging in legal advisory services.

5. Put in Place Strong HR Policies to Ensure Compliance

Implement digital payroll management systems to process wage computation, tax deductions, and social security payments.
Establish robust policies that cover staff grievances, a safe working environment, and leave management.
Organize periodic training programs to help HR teams and employees understand their rights and duties.

FAQs: Questions from Employers

1. What are the penalties for violating labour codes?

The liability is up to ₹5,00,000 depending on the seriousness of the violation, imprisonment, or both. Repeat offenders can face increased fines and jail time.

2. What is the impact of new labour codes on small businesses

Small businesses are also required to adhere to their minimum wage standard, social security contributions, workplace safety, etc. There are certain flexible provisions for those with fewer employees.

3. What social security benefits are available to gig and platform workers under the Social Security Code, 2020?

Gig and platform workers are entitled to social security benefits, such as PF, insurance, and maternity leave under the Social Security Code.

4. How can employers account for pay requirements?

Companies need to digitalize payroll, do periodic audits, and make changes to the salary structure according to the new definitions of wages.

5. What must HR managers do to remain compliant?

HR managers must update employment policies, conduct regular training, and ensure ongoing legal compliance.

Conclusion

The new labour codes in India bring about a paradigm shift in the labour landscape of the country where the well-being of the worker is prioritized while ensuring ease of compliance with existing employment laws. Being aware of what you need to do legally to ensure smooth operations, employee satisfaction, and legal compliance is of the utmost importance.

HR policies, audits, and investment in compliance automation will be needed, all of which the employer must undertake to avoid penalties. Familiarizing yourself with these changes will help your business in a strong position to thrive while keeping your workplace pleasant.

About Us

Corrida Legal is a boutique corporate & employment law firm serving as a strategic partner to businesses by helping them navigate transactions, fundraising-investor readiness, operational contracts, workforce management, data privacy, and disputes. The firm provides specialized and end-to-end corporate & employment law solutions, thereby eliminating the need for multiple law firm engagements. We are actively working on transactional drafting & advisory, operational & employment-related contracts, POSH, HR & data privacy-related compliances and audits, India-entry strategy & incorporation, statutory and labour law-related licenses, and registrations, and we defend our clients before all Indian courts to ensure seamless operations.

We keep our clients future-ready by ensuring compliance with the upcoming Indian Labour codes on Wages, Industrial Relations, Social Security, Occupational Safety, Health, and Working Conditions – and the Digital Personal Data Protection Act, of 2023. With offices across India including Gurgaon, Mumbai, and Delhi coupled with global partnerships with international law firms in Dubai, Singapore, the United Kingdom, and the USA, we are the preferred law firm for India entry and international business setups. Reach out to us on LinkedIn or contact us at contact@corridalegal.com/+91-8826680614 in case you require any legal assistance. Visit our publications page for detailed articles on contemporary legal issues and updates.