New Wage Code: Allowance to not exceed 50% of salary? Labour ministry holds key meet to discuss salary structure today

A crucial meeting of the Union Labour Ministry with industry stakeholders is scheduled to take place today where both the sides are expected to discuss on allowance and salary structure under the New Wage Code. 

An important matter which will be discussed in the meeting is that allowances cannot be more than 50 per cent of the salary. Industry has also sought more clarity on salary structure before new law on Wage Code is being implemented.

If it is agreed upon that allowances cannot exceed 50 per cent of the salary, then the take-home salary will be less and investment in Provident Fund will increase. 

The industry believes the new wage code is expected to increase the burden in the short term. Therefore, the industry should get 2-3 months to implement the new rules. 

Another meeting will be held between the Union Labour Ministry and state governments on August 24-25. The central government wants to implement the New Wage Code simultaneously across the country. 

The four labour codes on wages, social security, industrial relations and occupation safety, health and working conditions which were likely to be implemented from July 1, did not kick in. 

Once implemented, the new wage code will impact working hours, salary restructuring and PF contribution, encashing of Earned Leaves among the prominent ones. Since these are early speculations, employees will have to wait till government officially notifies the rules.

After the new law comes into force, these five things will have to be followed:

• No employee will  be made to work for more than 48 hours in a week. Employee will be allowed to choose to work either 4 days a week (12 hours a day) or 6 days a week (8 hours a day). 
• Basic salary will have to be 50 per cent of the gross salary, which will lead to an increase in gratuity. Both employer and employee will put in more money for PF, which will mean lesser money in hand. 
• Instead of 240 days, if a worker has worked 180 days, he shall be entitled for one-day leave for every 20 days of work done. 
• Female employees will be allowed an increased maternity leave of 26 weeks. In 2017, the Maternity Benefit Act 1961 was amended to increase maternity leave to six months from the earlier practice of granting three months’ leave. 
• Employees of both organised as well as unorganised sectors will be guaranteed minimum wages. Also, in the event of an employee leaving a company, the employer has to settle full payment of dues within two days of the employee’s last working day.