It’s widely believed, with the aim of helping investors and accelerating growth, the Narendra Modi government is proposing a new labour legislation that would merge 44 labour laws under four categories—(1) wages, (2) social security, (3) industrial safety & welfare, and (4) industrial relations. There was an opportunity to undertake this reform in 1991 as well, when the country embarked up on reforms and opening up of the governance. Unfortunately, the leadership lacked the courage to dismantle the bastion of labour unions, who did little for the exploited labour instead mislead them and negotiated with the employers only for the organised labour, which was not even 5 per cent of the total labour force of our country.
The Indian economy is characterised by the existence of a vast majority of informal or unorganised labour employment. As per a survey carried out by the National Sample Survey Office (NSSO) in 2009–10, the total employment in the country was of 46.5 crore comprising around 2.8 crore in the organised and the remaining 43.7 crore workers in the unorganised sector. Out of these workers in the unorganised sector, there are 24.6 crore workers employed in agricultural sector, about 4.4 crore in construction work and remaining in manufacturing and service. (https://www.vikaspedia.in/social-welfare/unorganised-sector-1/categories-of-unorganised-labour-force)
The proposed ‘Labour Code’ is formed by contracting plethora of legislations currently in vogue relating to labour affairs. As per the government, this is expected to cover, universalization of minimum wages to provisions relating to social security funds for the unorganized sector and much more to assure a dignified livelihood for the working class of our country.
This may be noted, the significant changes proposed by a few states such as UP, MP and Gujarat were not appreciated by the ILO, which is of the view that India should withhold labour reforms and it may be noted states have subsequently restored to go back on their position due to political considerations.
Under the new proposal, the Minimum Wages Act, the Payment of Wages Act, the Payment of Bonus Act, the Equal Remuneration Act and a few others are likely to be merged.
Besides, it is expected that the laws related to social security, including the Employees’ Provident Fund and Miscellaneous Provisions Act, Employees’ State Insurance Corporation Act, Maternity Benefits Act, Building and Other Construction Workers Act and the Employees’ Compensation Act will be merged to create a single social security law or code.
Similarly, several industrial safety and welfare laws such as the Factories Act, the Mines Act and the Dock Workers (Safety, Health and Welfare) Act, will be merged to create a single category on industrial safety and welfare.
Lastly the labour Code on Industrial Relations will combine Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946.
(Various Sources including but not limited to https://www.business-standard.com/article/economy-policy/modi-govt-proposes-major-labour-law-changes-for-ease-of-compliance-119072400056_1.html)
India’s mainstream reform programmes so far seldom looked beyond capital space and probably that’s why there is a near urgency to take up reforms in other important areas like land, labour, etc. The current government tried touching land reform in the past, however, got blows from the states and that had to be put on hold which is in the cold storage since then. Though in the labour reform space, certain measures in bits & pieces were undertaken by successive Governments but recent Atmanirbhar Bharat (Self-Reliant India)announcement makes it loud and clear; this piece can’t wait any more. Thanks to the deadly Coronavirus pandemic for triggering the urgent need for sweeping changes in the existing labour laws.
Indian labour laws have been rightly targeted by critiques for being inflexible and those involve a lot many non-value-added compliances. This has been the prime persuasive factor for employers to avoid formal contracts at the time of hiring. Consequence is incremental labours’ misery and lack of social security at the time of distress or calamities like Covid-19.
It is important to recognize out of two categories of labourers, one is employed in the formal sector which represents a small number as explained earlier and the other is a significantly large proportion of contractual workers, whose condition is extremely precarious and miserable.
With so many central labour laws existing today, employing people on a formal level is almost impossible, as complying with multiple regulations is taxing and adds to the transaction cost. Corporations are therefore left with no choice but to employ contractual workers and circumvent the existing welfare provisions, which are in the interest of the workforce of our country. Consequently, these temporary workers hardly possess any protection. Impression gaining ground, we should be adopting far shorter, simpler, and easier to implement labour laws as against the current set of voluminous legislations at times intimidating enough for the employer class and continue with the inspector raj phenomena.
There is no dispute to the notion that relaxing labour laws will help many workers, who don’t have any social security benefits or protection and are mostly employed in the informal sector.
One wonders if there is need for a wider debate considering the delicate nature of the issue due to the pressure tactics adopted by the existing trade unions. Reasonable response is a big YES. In a democracy, debate and deliberation is the only medium of exchanging ideas and reaching conclusion. However, it would be important to include people beyond the usual participants with a hope to achieve a better outcome.
A section within mainstream commentators are advocating to rule out any kind of exaggeration in relation to fear related to the exploitation of workers. Only genuine issues should be taken up for the debate. However, many believe the fear isn’t blown out of proportion. It exists because labour laws protect a small portion of the powerful workforce, but the regulations are so tough that it has created so much nervousness that it prevents from employing workers formally. It is estimated about 90-95 per cent of the employed are therefore outside the formal protection. They are subjected to nothing but slavery.
Undoubtedly a nuanced discussion exercise would provide a fair opportunity to evaluate the relevant aspects what is otherwise referred to as devil lies in details. Else a superficial approach would only be for good optics and nothing more than that. Having so many laws are avoidable. However, during rationalization process, lawmakers are expected to take due care in ensuring the lacunas in current set of laws proposed to be subsumed are adequately addressed. And that is possible only when calibrated discussions happen in measured ways and right stakeholders are consulted in true spirit.
Just as an example the minimum wage cannot be the same for all the different regions. In other words, to have the uniform minimum wage across, instead of balancing will rather invite disruption.
Importantly, even without Covid, labour distresses stood exposed wide open but at least as part of the recent big bang reforms announcements to unshackle the economy, labour reform has been a preferred area of focus is indeed commendable. However, going forward, states should also take the lead. Labour reforms are the need of the hour and must be an immediate priority both for states and center keeping the enduring interest of labourer’s as central agenda.
By carrying this revamp exercise, central government is living up to its renewed commitments to bring productive reforms in the area of both labour and law. it would indeed be a powerful booster to the investor communities in terms of encouraging their incremental preference towards formalization of labour and making them an integral part of development. And at the same time, providing higher level of safety net for the protection, would result in a more motivated labour force contributing to the economic growth. In more than one way this constitutes an essential ingredient to our growth recipe. Jai Shramik!
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