The new wage code Bill 2020 is all set to be implemented from April 21 2020 and with it there will be changes in the Employee provident fund and wages. Before we delve deeper into how the new wage code will effect EPF and wage, let us understand what is Code of Wages.
What is Code of Wages
Code of wages is one of the four codes passed by the Government of India in the last monsoon session. The four new reforms in the labour codes are:
- The Industrial Relation Code 2020
- The Occupational Safety, health and working conditions code 2020
- The Social Security Code 2020
- The code on wages 2020
The new wage code laws are merged with the existing 44 labour laws that existed in the country from long time. However, these labour laws have been overlapping and therefore the need of the hour was to streamline these laws.
Once, the laws are detangled, monitoring becomes easier. The Government has designed these four codes with the intent to serve different purposes. For instance, the Industrial relation code 2020 is intended to streamline the laws that regulate the Industrial disputed and trades by replacing the existing laws that are redundant in the face of changing industrial and corporate landscape of the country.
Coming to the wage code passed in 2019, there are provisions for minimum payment of the wages to all the workers in India within the due time. Code of wages is an amalgamation of four laws – Payment of wages act – 1936, minimum wages act, 1948, Payment of Bonus Act, 1965 and Equal remuneration act, 1976.
The Government of India will fix the floor wages to be paid by the corporates and the industries. Moreover, the code will be uniformly applied to all the establishments irrespective of the employee strength.
How will it change the EPF
The Government has decided to calculate the EPF under the Code of Wages Act, 2019. Traditionally, Code of Social Security covered the EPF under its ambit.
Since the Government will set a standard definition of wages, the EPF contribution will be based on this new wage. In the wage code 2020, the Government has defined the list of inclusion and exclusion. Moreover, if the exclusions are more than inclusions in your salary then anything above 50% mark has to be included in the wages. Thereafter, on this new wage the EPF will be calculated.
What’s The Catch
In most of the cases, EPF will increase under the new calculation method. However, the new provision is applicable to those earning under 15000 for now.
Benefits to the Employees
The new wage code 2020 ensures that the employers avoid keeping the wages less than 50% of the total remuneration. As of now, many companies practice an unethical computation which ensures that their contribution towards EPF remains low. Government has taken the step towards the benefit of the employees. Employees, after the enactment of Wage Code Bill 2020 will see a significant increase in their retirement corpus.