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Study Shows 50% of Indian Firms Ready to Implement New Labor Codes


The four Labor Codes, i.e. Code on Wages, Code on Social Security, The Occupational Safety, Health and Working Conditions Code (OSHWC), and The Industrial Relations Code are expected to bring in much awaited labor reforms to the country.

Over half the surveyed companies in India said that they are confident about their readiness to implement the new labor codes, says Grant Thornton Bharat’s Industry Expectation Survey on New Labor Codes.

The survey, released at a webinar organized by Grant Thornton Bharat and CII, tapped into a respondent pool of over 4000 CXOs, said, the provision will be part of the labour code, and once the new rules are implemented, employers will no longer be required to seek government permission to shift to a four- or a five-day working week if their employees approve the arrangement.

The survey shows that 64% respondents are optimistic about the long-term impact of the implementation of new labour codes. “Overall sentiment on the resulting changes is positive and businesses have their work cut out,” said Vikas Vasal, National Managing Partner, Tax, Grant Thornton Bharat.

According to him, the overall employee compensation costs are expected to rise and it is important for organisations to evaluate the financial impact areas such as ‘gratuity’, ‘leave encashment’, ‘statutory bonus’, etc. for better planning.”

Key findings of the survey

-With the objective of effective implementation, 43% organisations have started internal reviews. 13% are waiting for the final announcement on implementation date. While 20% firms have on boarded external consultants for better preparedness, 20% have not decided their implementation strategies yet.

– 85% respondents agreed that a minimum transition period of up to 6 months be allowed to implement various obligations and compliance applicable under new labour codes.

– While 54% think the new labour codes will achieve the objective of widening social security coverage to the unorganized sector, 29% disagree.

– Nearly 55% respondents support the view that people with fixed minimum wage rate should be entitled to overtime payment; 29% say this entitlement should be reserved for people in non-managerial roles.

– 66% respondents voted in favor of providing organisations the flexibility to hire contractual employees for their core activities; 7% not sure about the benefits.

-54% of the respondents believe that the compliance burden on employers would be reduced over a period of time under the new codes.

“We are confident that very soon this preparedness percentage would be much higher, as our results show that nearly 43% of the organizations have already started reviewing the impact internally; this will increase going forward,” said Leena Madhok, Director, Grant Thornton Advisory Pvt. Ltd.

She added, as per the survey, nearly 62% of the organizations are really certain about increase in their compensation cost, thus the emphasis is towards getting their HR Policies, procedures, service rules, employment contracts etc. reviewed well before the implementation.

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