4-day work-week, reduced in-hand salary, higher PF: New Wage Code likely in FY 2022-23

New Delhi: The four labour codes on wages, social security, industrial relations and occupation safety, health and working conditions are likely to be implemented by the next fiscal year, a senior official has told news agency PTI. Once implemented, the new wage code will impact working hours, salary restructuring and PF contribution among the prominent ones.

The official added that at least 13 states have pre-published draft rules on these laws, while the Centre has completed the process of finalising the draft rules on these codes in February 2021. The central government has notified four labour codes, namely, the Code on Wages, 2019, on August 8, 2019, and the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 on September 29, 2020.

Since labour is a concurrent subject, the Centre wants the states to implement these as well in one go, added the official. 

The government's notification on Code on Wages 2019 may reduce the take-home pay of employees next financial year ie, April 2021 while components like PF and Gratuity might rise. This is based on the grounds that the new wage code mentions provision entailing that the employee's basic salary will be at least 50 percent of his/her net monthly CTC. Hence, if this provision comes into effect, it will mean that employees will not be able to get more than 50 percent of his/her net monthly salary in form of allowance.

This also means that there will be a consequent rise in gratuity and PF contribution of the employee. Hence, while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.

Experts also believe that the new draft will impact the working hours of employees with some media reports saying that employees may be allowed a four-day workweek from next year, but they will have to work for 12 hours on those four days. The labour ministry has apparently made it clear that 48-hour weekly work requirement is a must.