The new Labour Codes

Twenty-nine central labour laws have been consolidated into four codes. The codes are in force and the Central Rules made under them have been notified. Most of what changed is administrative. One change is not, and it lands on payroll cost.

The change that costs money

Under the Code on Wages, basic salary must be at least half of total remuneration. Because provident fund and gratuity are both calculated on basic pay, raising the basic proportion raises both.

The cost moves because the base those charges are calculated on moves, not because a new charge was introduced. The codes change other things too, but this is the one that shows up in the monthly cost of an existing employee.

Why your costs rise without anyone getting a raise

For most companies employing people in India this increases the real cost of existing employees without anyone receiving a raise, and it requires salary structures to be rebuilt rather than rolled forward.

A package that was compliant when it was written can fall below the fifty per cent threshold, and correcting it moves money from allowances into basic pay. The employee sees the same total. The employer does not.

Implementation is uneven, state by state

The codes and the Central Rules are settled at the centre. Each state must also notify its own rules, and some have yet to do so, which is why the practical position still differs from one state to the next.

This is the part that catches distributed teams. Two people on identical packages, one in a state that has notified and one in a state that has not, are not necessarily in the same position today. Bridge91 tracks that state by state and handles it for the employers we work with.