The four new labour laws, which are only awaiting a government notification of effective date for roll-out, promise a lot of benefits for the salaried class. However, the gains an employee would get would depend on how he/she is categorised.
The new labour laws divide employees into two categories – ‘workers’ and ’employees’. A ‘worker’ is an individual who has no managerial or supervisory role. An ’employee’ covers all individuals who are workers as well those working in a managerial and supervisory position in an organisation. Certain provisions under the new labour laws are not applicable to employees working in a managerial or supervisory capacity. This means that managers (employees working in a managerial/supervisory role) are not likely to get many benefits vis-à-vis ‘workers’ under the new labour laws.
The four codes under the new labour laws
The four new labour laws are the Code on Wages, Code on Social Security, Industrial Relations Code and the Occupational Safety, Health and Working Conditions Code (OSHWC).
Let us look at the benefits that a manager will NOT get under the new labour laws.
Puneet Gupta, Partner, People Advisory Services, EY India says, “Out of the four new labour codes, the Code on Wages and the Code on Social Security are applicable to all types of employees – i.e., both workers and managers. However, specific provisions of the OSHWC and the whole of the Industrial Relations code are applicable to only workers. These laws will not be applicable to employees working in a managerial or supervisory capacity.”
The new labour laws allow a ‘worker’ to encash outstanding leave exceeding 30 days at the end of year. There is no such provision under the current labour laws. Manmeet Kaur, Partner, Karanjawala & Co. says, “As per the scheme of new labour laws, OSHWC provisions on yearly leave and leave encashment at the end of the year, including few beneficial provisions apply only to workers, or personnel who do not hold managerial, administrative or supervisory positions.”The Industrial Relations Code also keeps managerial employees out of all the benefits mentioned in this law. Managerial employees cannot form trade unions under the Industrial Relations Code. Archana Balasubramanian, partner, Agama Law Associates, says, “Managerial employees are not covered under the Industrial Relations Code. They will not be eligible to receive retrenchment benefits if they are fired from the job. Their severance package will be governed by their employment contract.”
Loss of benefits if promoted
Importantly, Gupta says “If a worker gets promoted to managerial or administrative positions, he will lose the benefits applicable under the worker category.”
“Currently, there are two labour laws – Industrial Disputes Act, 1947, which is a Central government law, and the Shops & Establishments Act, which is a state specific act. The rules under the Shops & Establishments Act vary from state to state. It is important to note that currently an employee may or may not be covered under these acts. This is because there are many conditions that an employee (worker) needs to satisfy to be covered under these acts,” says Gupta.
The two codes that are applicable to a company’s entire workforce are: (i) The Code on Wages which deals with minimum wages, payment of minimum wages, and bonus payments, among others and; (ii) The Code on Social Security which deals with provisions such as the Employees’ Provident Fund, gratuity and maternity benefits.
As the name suggests, the OSHWC aims to deal with the laws regulating the occupational safety, health and working conditions of employees. However, only certain provisions of the OSHWC are applicable to managers. Most of the provisions deal with the worker category of employees. For instance, the rules relating to daily, weekly offs and leaves are not applicable to managerial/supervisory employees. Similarly, the rules relating to weekly and compensatory offs are applicable only to workers.
The provisions of the Industrial Relations Code deal only with the worker category of employees. The objective of this code is to protect the rights of both employers and ‘workers’. The code deals with the ‘workers’ right to form trade unions, settlement of grievances and so on.
‘Workers’ vs ’employees’ under new labour laws
Balasubramanian says, “In the context of the new labour laws, it is important to understand the distinction between an employee and a worker. An employer is a person who employs both ’employees’ and ‘workers’. Employees is a wider term which covers both ‘workers’ and other persons employed on wages in a managerial or supervisory capacity. A ‘worker’, on the other hand, cannot be employed in a managerial, administrative or supervisory capacity. The worker would often have higher benefits than an ’employee’, as per the new labour laws.”
The rules also give clarity on the classification vis-à-vis compensation.
Kaur says, “If an individual is employed in a managerial, administrative or supervisory capacity and draws a wage exceeding Rs 18,000 per month, then the individual can be excluded from the definition of ‘worker’. However, an individual having a wage exceeding Rs 18,000 per month but not working in a supervisory, managerial or administrative capacity, will be considered as a worker in new labour laws.”
It is important to note that the Indian Parliament has passed the laws and the President has approved them. The codes are expected to be implemented after all states come up with the required state rules to implement the four codes laws. Once these rules are in force and the codes become effective, the classification of employees as described above would determine the benefits that a company’s workforce gets.