Full and final settlement salary in 2 days, says New Wage Code

CHENNAI: The Central government's new labour laws are likely to be implemented with effects from July 1, 2022. With this, there will be massive changes to the working factors in all industries and sectors.

According to the new wage code, any company must pay the full and final settlement of wages and dues within two days of an employee's last working day following their resignation, dismissal or removal from employment and services.

As of now, the common practice followed by businesses is to pay the complete settlement of salary and dues after 45 days to 60 days from an employee's last working day, and in some cases, it goes up to 90 days.

If the wage code is implemented, then businesses would need to revamp their payroll processes and work around the timeliness and procedures for the complete settlement of wages within two working days. But the code also allows individual states to set the full and final settlement timeline based on what the State governments think is reasonable.

The new prescribed labour code will have implications on wages, social security (pension, gratuity), labour welfare, health, safety and working conditions (including that of women). The four labour codes of wages, social security, industrial relations, occupational safety, health and working conditions were created by absorbing 29 Central labour laws.

Reports suggest that so far 23 states and Union Territories have framed and published draft rules under the new labour laws. The state labour code and rules are framed based on the new Code on Wages 2019, and the Industrial Relations Code 2020, the Code on Social Security 2020 and the Occupational Safety, Health and Working Conditions Code 2020, all of which have been passed by the Parliament.