Labour Codes in Outline — Practice

Question 1

What is the minimum percentage of total remuneration that basic pay, DA and retaining allowance together must constitute under the Code on Wages?

Accepted Answer

50%.

Question 2

What is the worker-count threshold above which an establishment needs prior government permission before retrenchment under the Industrial Relations Code?

Accepted Answer

300 workers.

Question 3

What is the contract-labour licensing threshold under the OSH Code?

Accepted Answer

50 workers (raised from 20 under the earlier Contract Labour Act).

Question 4

An employee's total remuneration is Rs. 80,000, of which Basic + DA is Rs. 28,000. Compute the 'wages' figure for statutory purposes under the 50% rule.

Accepted Answer

50% of Rs. 80,000 = Rs. 40,000 (the floor). Since Basic + DA of Rs. 28,000 is below this floor, the excess of non-wage components over 50% (Rs. 52,000 actual non-wage - Rs. 40,000 ceiling = Rs. 12,000) is added back. Wages = Rs. 28,000 + Rs. 12,000 = Rs. 40,000.

Question 5

A worker with 4 completed years of service, last drawing Rs. 15,000/month (Rs. 500/day), is retrenched. Compute the standard retrenchment compensation and the separate re-skilling fund contribution.

Accepted Answer

Retrenchment compensation = 15 days' wages per year x 4 years = 15 x 500 x 4 = Rs. 30,000. Re-skilling fund contribution = 15 days' wages (flat) = 15 x 500 = Rs. 7,500, credited within 45 days, in addition to the compensation.

Question 6

Explain why the Code on Social Security's gig-worker provisions are described as a 'first' in Indian labour law.

Accepted Answer

It is the first Indian statute to formally define and extend social security coverage to 'gig workers' and 'platform workers' as distinct categories, separate from the traditional employer-employee relationship that all earlier labour law was built around.

Question 7

An aggregator has annual turnover of Rs. 200 crore and pays Rs. 30 crore to its gig workers. If the notified contribution rate is 2% of turnover, calculate the actual payable contribution, applying both caps.

Accepted Answer

2% of Rs. 200 crore = Rs. 4 crore (uncapped figure). Second cap: 5% of Rs. 30 crore paid to gig workers = Rs. 1.5 crore. Since Rs. 4 crore exceeds Rs. 1.5 crore, the actual payable contribution is capped at Rs. 1.5 crore — whichever of the two caps produces the lower figure governs.

Question 8

Explain the policy purpose behind the Code on Wages' 50% rule, using the concept of CTC structuring in your answer.

Accepted Answer

Before this rule, employers could structure a CTC package with a large share of allowances (HRA, conveyance, special allowances) and a small basic-plus-DA component, which reduced the base on which PF contributions, gratuity and retrenchment compensation are calculated — since those statutory dues are traditionally computed on 'wages' rather than total CTC. The 50% rule closes this by forcing basic pay, DA and retaining allowance to constitute at least half of total remuneration, and treating any further inflation of non-wage allowances beyond that 50% as wages anyway for statutory computation purposes, removing the incentive to structure pay packages specifically to minimise these statutory liabilities.

Practice — Labour Codes in Outline

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