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Less 'Take-Home' Salary, More PF As GOI Plans To Implement 4-Day Work-Week Policy

India is likely to implement new labour codes that would change the face of a number of aspects related to employment and work culture. As per these codes, employees’ take-home salary, working hours, and the number of weekdays might undergo some transformation. According to a senior government official (cited by the PTI news agency), these new labour codes on wages, social security, industrial relations, and occupational safety might be initiated by the next fiscal year beginning 2022.

Understanding India’s New Labour Codes

If the new labour codes are implemented, there's a good chance that Indian employees may be able to enjoy a four-day workweek from next year, as opposed to the current five-day work week. However, this doesn’t imply a break from the 48-hour weekly work requirement. The labour ministry has specified that even if the proposal gets implemented, employees will have to work for 12 hours every day for the four workdays to attain the 48-hour target.

Reduced 'Take-Home' Salary

It is also being assessed by experts that under these proposed codes, the contribution of employees to their Provident Fund (PF) every month will increase, but the monthly in-hand salary would get reduced, as it turns out. Contribution to provident fund is percentage-based, it depends on the employee's basic pay and dearness allowance.

As per the regulations, 50 percent of the employee’s salary would comprise dearness allowances and half the salary would be basic pay. Say, if an employee's salary is ₹50,000 per month, their basic pay could be ₹25,000 and the remaining ₹25,000 might go into allowances. However, if this basic pay is increased, more PF will be deducted, thus decreasing the in-hand salary and hiking the contribution of the employer/company to PF. Hence, the new laws will bring about a major change in the way employees calculate their basic pay and the provident fund.

The central government has already finalized the rules under the four labour codes. Labour being a ‘concurrent subject’, the state governments are required to frame regulations on their part for their respective states.

The senior government official was quoted by PTI as saying “The Centre has completed the process of finalising the draft rules on these codes in February 2021. But since labour is a concurrent subject, the Centre wants the states to implement these as well in one go.”

As per the official, some state governments have pre-published their draft rules on these laws already, while others are in the process of doing so. Bhupender Yadav, the Union Law Minister, had said in a reply to the Rajya Sabha that The Occupational Safety, Health and Working Conditions Code is the only code on which the least number of 13 states have pre-published the draft rules. The highest number of draft notifications have been pre-published on The Code on Wages (by 24 states) followed by The Industrial Relations Code (by 20 states) and The Code on Social Security (by 18 states).