India’s highly anticipated labour reforms pose innumerate considerations for multi-national companies with cross-border business or commercial interests in India. Government communication around implementation of the new codes is imminent. Progressive businesses are getting a head start in preparing themselves for this transformation.
When it comes to Payroll and HR, employers need to focus on two of the new codes: The Code on Wages, 2019, and the Code on Social Security, 2020. These codes simplify existing labour laws and communicate changes to key areas, such as wages and components. The codes clarify policies related to equal remuneration across genders, minimum wages, changes in employees’ provident funds and gratuity, faster processing of wages until the last working day, maternity benefits, fixed-term employment, and more.
The new labour codes aim to rationalise, consolidate, and simplify complex labour legislation, while promoting the digital India initiative of the Indian government. At a broad level, the new codes will improve ease of doing business, align business ecosystems with contemporary practices, and bring uniformity across organised and unorganised sectors. By increasing social security contributions, heightening the focus on maternity benefits and more, the new codes also attempt to achieve sustainable outcomes and augment social security for the entire workforce.
However, some of the new provisions throw additional complexities into the mix. For example, the minimum wage rate that each Indian state is empowered to decide should be more than or equal to the centrally governed “floor wage” – a rate that is to be maintained as the minimum standard rate across the country.
The clearer your HR and Payroll leaders are on the changes, the more effectively they can plan on transforming HR processes to meet requirements. This is critical but challenging for 3 key reasons:
- The new codes are clear on the majority of statutory requirements, but are also open to interpretation in particular instances.
- Subject matter expertise and resources to manage the extensive changes and accelerate process realignments across HR and Payroll are required.
- The new codes also require both significant process transformation and organisation-wide change management, placing significant demands on HR leaders in particular.
Why you need an expert payroll service provider
Expert involvement can ease the rollout of the new labour codes and simplify the complex journey for your business. Experts such as ADP help to simplify and clarify the changes, enabling businesses to remain compliant and plan the next steps effectively by staying on top of the new laws and guidelines. Experts know and understand the requirements and provide essential clarity on what the laws mandate and what it takes to transform, especially during the initial stages.
Preparedness: The most important step. For example, a reliable and trustworthy provider can help you assess where your business stands and where you’re headed, along with offering the advice and recommendations you need to fast-track implementation and adoption. Expert advice gives you a deeper understanding of what is changing with policies, pay structures and ways of working; helps you view such changes in the context of your business and its employees, and helps you to stay compliant.
Change management and communication: As the new codes impact both employers and employees, effective and timely sharing of information will be critical in helping you stay in control. For example, take-home pay is set to reduce due to the revisions to employees’ basic pay and proportionate changes in social security provisions like PF and gratuity. Experts like ADP can enable the change management journey of businesses by offering clarity on what is changing and how they need to communicate these changes effectively to their employees.
Implementation and technology-enablement: Experts can help your business with the right combination of services and technology solutions to implement the changes impacting your payroll. For example, ADP’s time and attendance solution is customised for your business to manage components like overtime effectively.
Facilitating the move
ADP is the partner in your journey to implementing the new labour codes. With a long-standing history in helping companies like yours navigate complex legislative and compliance changes, we have the right expertise, experience, people and technology platforms to help you stay on track throughout implementation of the new Indian labour codes. Our proven track record and expertise in managed services payroll and payroll compliance can help simplify the journey for businesses of all sizes and their employees.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Its purpose is to allow you to commence identifying any potential gaps in your current processes in order to work with your Labour Law advisors with respect to your specific circumstances.
