In the first year of the labour code’s implementation, the government is considering a high cap on allowances of 75-80 percent of an employee’s pay. According to sources involved with the discussions, this may be gradually reduced to 50% over three years, as indicated in the code.
The other major modification under consideration is the restoration of the industrial relations code’s proposed 300-employee threshold for requesting government authorization before downsizing or shutting down operations to 100 from the projected 100.
The sector has fought a cap on allowances of 50% of salary, claiming that it would increase staff costs.
Wages are defined as all payment received in the form of salary, allowances, or other forms of remuneration, and include basic pay, dearness allowances, and retention allowances, if applicable, but do not include allowances such as house rent allowance or overtime allowance.
According to the code, if all of these non-wage allowances sum up to more than one-half of one percent, the excess amount is considered remuneration and is added to wages under this article.
More earnings would necessitate increased contributions to the provident fund by both employers and employees, as well as increased gratuity payments. Workers’ take-home income would be reduced as a result, but they would contribute more to retirement savings.
Parliament ratified the Wage Code in 2019, and the Industrial Relations Code was adopted in September 2020.
Despite the fact that the regulations controlling the four codes authorised by Parliament were ready by March 2021, they have yet to be implemented due to employer and employee opposition on key points.
The industry is concerned that the planned modifications to the code, which would come at a time when the economy is still recuperating from the effects of the pandemic, will put them under undue stress and raise labour costs.
The threshold for requiring a standing order, which are norms of behaviour for workers employed in industrial enterprises, was raised from 100 workers to more than 300 workers under the Industrial Relations Code.
This would have allowed more enterprises to manage their employees without the need for government approval.
Experts say that altering some of the requirements could help the government gain companies’ and trade unions’ trust, allowing for faster implementation of the laws, which are crucial to business ease.
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