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Posted at: Jul 14, 2019, 7:11 AM; last updated: Jul 14, 2019, 7:11 AM (IST)

Laborious task of labour reforms

The need for new regulations has been felt since long, but the four Codes proposed by the government are disappointing and lack clarity

KR Shyam Sundar

Employers and critics of labour regulation have since long argued that India’s labour laws are archaic, complex, contradictory, numerous, restrictive and are not suited to the new economic environment. Reforms, they argue, will attract investment which will create employment and income. The demand list is long but the key ones are the freedom to hire contract labour for both core and non-core activities — needing amendment of the Contract Labour (Regulation and Abolition) Act, 1970  — and retrench workers and close economically unviable establishments without the government’s prior permission — needing amendment of Chapter V-B of the Industrial Disputes Act, 1947. Some other demands include liberalisation of the labour inspection system and simplification of labour laws’compliance. Since 1991, 18 nationwide labour agitations have taken place against reforms and government’s economic policies. Trade unions have demanded application of labour laws to all workers (removing thresholds of application), effective implementation of labour laws, universal minimum wages and social security, among others.

As the Narendra Modi government assumed power in 2014, the industry’s expectations regarding labour market reforms surged and the then BJP-ruled Rajasthan Government carried out several core reforms that afforded labour flexibility to the employers. In competitive economic federalism such as that in India, several other states imitated the ‘Rajasthan model’ and a kind of ‘race to the bottom’ with respect to labour standards has taken place.

But the most significant reform measure will be the four Labour Codes on Industrial Relations (IR), Wages, Social Security (SS) and Occupational Safety and Working Conditions (OSWC) that it seeks to enact. This exercise assumes huge importance on procedural grounds, viz. it (a) streamlines multiple laws into one Code each, (b) brings in uniformity in definitions across the Codes, 

(c) removes multiple thresholds and thus makes it less complex, and (d) introduces worker-friendly processes. As a result, compliance is expected to rise and workers are set to benefit. On substantive grounds, the Codes in principle have made huge strides for labour welfare. For example, it universalises minimum wages, announces a single national statutory minimum wage, includes all kinds of workers in social security coverage, provides for trade union recognition for collective bargaining (a long pending demand) in the IR Code, and widens the coverage of occupational safety and health, welfare and working conditions to all establishments having 10 or more employees inOSWC Code. This is laudable.

What is lacking

The Codes, however, suffer from several infirmities. For example, the Wage Code prohibits gender-based discrimination in wages for similar work but omits the more important existing clause in the Equal Remuneration Act, 1976, of prohibition of gender-based discrimination in recruitment and in conditions of service (post-recruitment). What is the use of the former without the latter? The Wage Code fails to define in the law concretely the criteria for determination of minimum wages and leaves the same to the administrative bodies and hence could have different minimum wages. More importantly, the government has not bothered to even imagine whether it would be possible to enforce its aspiration of covering 25 crore wage earners with a meagre and much-marginalised inspection machinery. 

   Similarly, the SS Code embraces every sort of worker without paying heed to enforcement deficits. More worryingly, it has created several huge and unwieldy bureaucratic bodies the maintenance cost of which will fall on the taxpayers, i.e. workers. Further, the Code dismantles institutionalised labour welfare boards like construction workers’ boards and the EPFO and ESIC. A better option would have been to widen their coverage. Trade unions criticise that involvement of private agencies as intermediaries involves transaction costs and is a risk to workers’ interests. The grave concern is the equation of formal and informal workers in terms of their social security contributions while the payroll tax burden and gratuity costs for firms have been reduced. This Code is clumsy, complex and counterproductive.

Problem with IR Code

The Industrial Relations Code ran into controversies as it sought to ban outsiders from the executive committee of trade unions, thereby demolishing a historic practice, even a norm. The worst blow for workers is that the Code equates an individual worker with a mighty firm in levying penalties for illegal actions; the latter are so widely defined and workers on one count or the other will be committing illegal actions. If the government does not address the basic issue of the high pending cases in courts and the inordinate delays in delivering industrial justice to parties, reforms envisaged by the Code are meaningless.

Finally, the codification is a covert attempt to insert the very reform measures that the trade unions have fought stridently for nearly three decades, such as amendment of Chapter V-B of the Industrial Disputes Act, 1947 to make it applicable to industrial establishments employing 300 or more workers in place of the existing threshold of 100 workers. 

The Codes dream big, promise a lot but degenerate to being symbolic. They lack clarity and fresh thought and their Big Bang proposals do not enjoy credibility as the enforcement and judicial machinery does not have the capacity to oversee even a minority of establishments they seek to cover. Finally, trade unions save BMS have accused the government of not consulting them, contrary to government claims.  

— The writer is Professor, XLRI, Xavier School of Management, Jamshedpur

Government needs to be more sensitive, pragmatic, effect systemic changes, and engage more effectively with social partners

The government is proposing to streamline multiple labour laws into a set of four Codes. This will ensure that the process of registration and filing of returns gets standardised and streamlined. It is expected that there shall be less disputes.— Nirmala Sitharaman, Union Finance Minister

Before marriage you have decided on the divorce through fixed labour employment. The proposed reform is anti-labour.— D Raja, CPI leader

The Codes are a big cipher for agricultural workers and peasants. The government’s so-called reform measure is a big joke. —  Hannan Mollah, All-India Kisan Sabha 

This would enhance the process of exclusion of workers from the benefits they accrue from the existing laws.— Amarjeet Kaur, general secretary, AITUC


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