In an effort to streamline and modernize labor regulations, the Indian government has consolidated 29 existing labor laws into four comprehensive labor codes:
- The Code on Wages, 2019
- The Industrial Relations Code, 2020
- The Occupational Safety, Health and Working Conditions Code, 2020
- The Code on Social Security, 2020
These codes aim to simplify compliance, enhance labor welfare, and promote ease of doing business, particularly for small employers.
- Key Changes Affecting Small Employers
- Compliance Checklist for Small Businesses
- Steps to Ensure Compliance
- Conclusion
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Key Changes Affecting Small Employers
Several provisions within the new labor codes are particularly relevant to small businesses:
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Threshold for Standing Orders: The requirement to formalize standing orders now applies to establishments with over 300 workers, an increase from the previous threshold of 100.
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Fixed-Term Employment: Employers can now hire fixed-term workers directly, with these employees entitled to the same benefits as permanent staff, including prorated gratuity.
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Grievance Redressal Committee: Establishments with 20 or more employees are mandated to establish a grievance redressal committee to address workplace disputes.
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Contract Labor Applicability: The provisions related to contract labor now apply to establishments employing 50 or more contract laborers, raising the threshold from the previous 20.
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Definition of Factory: The definition has been expanded to include premises with 20 workers (if the process uses power) and 40 workers (if the process does not use power).
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Compliance Checklist for Small Businesses
To align with the new labor codes, small employers should consider the following actions:
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Review Employment Contracts: Ensure all contracts reflect current terms, especially for fixed-term employees, guaranteeing they receive appropriate benefits.
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Establish a Grievance Redressal Mechanism: If employing 20 or more workers, set up a committee to address and resolve employee grievances promptly.
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Update Standing Orders: For establishments with over 300 employees, draft and certify standing orders that outline clear employment terms and conditions.
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Assess Contract Labor Engagements: If engaging 50 or more contract laborers, ensure compliance with the relevant provisions, including registration and welfare measures.
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Ensure Workplace Safety and Health: Adhere to the prescribed safety standards, provide necessary facilities, and conduct regular health examinations as mandated.
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Maintain Accurate Records: Keep detailed records of wages, working hours, and other employment details to demonstrate compliance during inspections.
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Provide Appointment Letters: Issue formal appointment letters to all employees, clearly stating terms of employment.
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Facilitate Leave Entitlements: Ensure employees are aware of their leave entitlements and that leave policies comply with the new regulations.
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Steps to Ensure Compliance
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Stay Informed: Regularly update yourself on notifications and guidelines issued by the Ministry of Labour and Employment.
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Conduct Internal Audits: Periodically review HR policies and practices to identify and rectify any compliance gaps.
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Seek Professional Advice: Consult with legal or HR professionals specializing in labor laws to navigate complex compliance requirements effectively.
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Train HR Personnel: Equip your HR team with the necessary knowledge and tools to implement and monitor compliance measures.
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Engage Employees: Educate your workforce about their rights and obligations under the new labor codes to foster a cooperative compliance environment.
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Conclusion
The introduction of India’s new labor codes marks a significant shift towards a more organized and transparent labor framework. For small employers, understanding and implementing these changes is crucial to ensure compliance and promote a harmonious workplace. Proactive adaptation to these regulations will not only mitigate legal risks but also contribute to improved employee satisfaction and business growth.
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