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New Labor Law Brings Big Changes for Indian Employees: What You Need to Know

New Delhi | September 07, 2023 : A major transformation in Indian labor laws is on the horizon, promising a better work-life balance for employees across the country. Under the new labor law, employees will be limited to 30 days of paid leave in a calendar year, with companies required to compensate for leave exceeding this limit.

In a significant move aimed at enhancing the working conditions and leave entitlements for employees in India, the government is set to enact changes under the Occupational Safety, Health and Working Conditions Code (OSH Code), 2020. This legislation mandates that employees are entitled to a minimum of 30 days of paid leave per calendar year. Any additional leave granted will incur extra compensation for the employee.

The key objective behind this legislation is to ensure that employees are guaranteed a certain amount of leave annually, thus fostering a more favorable working environment. The burning question, however, revolves around how the leave encashment will be calculated. Will it be based solely on the daily basic pay, or will it include other allowances like special allowance and house rent allowance?

Under the OSH Code, the calculation of leave encashment will be determined in accordance with the Wage Code’s definition of wages. This definition encompasses all wages payable under the terms of employment, excluding certain specified elements. These exclusions cannot exceed 50 percent of the total remuneration, with exceptions for certain employment elements like house rent allowance, carrying allowance, and bonuses mandated by law.

It’s important to note that the demand for labor code rules in India has persisted for some time. Four labor laws have been passed by Parliament and implemented in India, yet the coordination of these laws with both the central and state governments remains a challenge. Even after passing, these labor laws will be enforced uniformly throughout the country.

Under the new labor law, employees will benefit from three additional days of leave after the initial 30 days, along with extra compensation for any extended leave. However, it’s worth noting that working hours may increase on the remaining days of the week. The implementation of these new labor laws has sparked ongoing debates, with little hope of their enforcement before the upcoming general elections.

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