Govt cautious but decisive on labour reforms

Written by Raj Kumar Ray | New Delhi | Updated: Jul 30 2014, 07:12am hrs
When Prime Minister Narendra Modi underscored the need for skill, scale and speed to compete with China, it was just an indication of what the NDA government intends to do in the days to come to help the economy come out of a slump.

While many expected some big-bang labour reforms in the form of amendments in the Industrial Dispute Act to make hire-and-fire easy, the government is treading slowly but decisively on reforms with focus on skill development and youth employment. It is likely to move amendments in the Apprentices Act to help absorb many of the freshers in manufacturing while changes in Factories Act is being considered to allow companies to scale up operations through extended hours of work.

In case of the Apprentices Act, a labour ministry note said the proposal is to enhance the scope of apprenticeship training to all graduates in various fields such as BA, BCom and BSc, other than the those having a technical education from ITIs or engineering colleges. Also, the proposal is to make it mandatory for industry to keep the number of apprentices to 2.5-10% of the total workforce with the flexibility to take into account seasonality in operation. The government also wants to extend the period of apprenticeship training to a maximum 5 years from the present 6 months to 4 years.

Also, companies can be allowed the flexibility to frame their own policies on whether to retain an apprentice or not after completion of training. Under the present rule, companies are not bound to offer any employment to any apprentice after the completion of training period, nor it is obligatory on the part of the apprentice to accept an employment under the employer. While this is an impediment which discourages youth to join the apprenticeship training as they are not sure whether they will get employment after completion of the apprenticeship training, companies are also wary fearing that employees may join competitors at a higher salary after the training.

What could be a game changer is a proposal to dilute the penalty under Apprentice Act. Due to fear of imprisonment, employers tend to avoid coming under the purview of the Act and training facilities available with them go unutilised. The government may propose that the penalty should be R1,000 every occurrence of the offense of not meeting the apprentice quota.

Industry experts and trade union leaders are not averse to changes in the Apprentices Act as it can serve twin purposes of increasing jobs and honing up skills. The Act needs a complete overhaul as it has no incentives for neither the industry nor for job seekers while increasing hassles for employers, said Rituparna Chakraborty, president of Indian Staffers Federation and co-founder of TeamLease.

In case of the Factories Act, the labour ministry proposes to allow companies to hire women workers for night shifts while doubling the overtime to 100 hours in a quarter. The amendments are being opposed by some trade unions. Increase in overtime may come in the way of new employment. We are also opposed to night shift for women without adequate safeguards, said DL Sachdev of AITUC.

Though discussion has also started in amending the politically-sensitive Industrial Disputes Act to make hiring and firing easy, the relaxation may first be applicable for National Investment Manufacturing Zones (NIMZs) and not the entire manufacturing sector.

While the broad contours of what the Centre intends to do will come out in the months to come, industry body CII has presented a detailed report to the labour and industry ministries seeking major changes in the Act, including raising the threshold limit from 100 workers to 1,000 for a company, to mandatorily seek government approval for retrenchment, lay-offs or closure of an unit.

In the wake of rising strike calls in big companies, specially in the auto sector, CII pointed out that the ID Act mandates prior notice for a strike only for public utility services which means workers in other industries can go on a lightening strike even without a single day prior notice. A small change in the Section 22 of the ID Act can moderate strikes and ensure a better work culture.

Trade unions have opposed any changes in the ID Act while industry experts remain cautiously optimistic saying it is a long drawn process.

Labour minister Narendra Singh Tomar has sounded off state governments, industry and trade unions on the need to amend archaic labour laws. States views are necessary as labour is a concurrent subject as per the Constitution. Out of the 44 labour laws that Centre enacts, 16 can be enforced both by the Centre and states, including the Industrial Disputes Act, Contract Labour Act, Apprentice Act and Minimum Wages Act. Another 16 laws are enforced specifically by states, including the Factories Act, Trade Unions Act, Employment Exchange Act and Unorganised Workers Social Security Act. Only 12 laws are enforced exclusively by the Centre, including the EPF Act, ESI Act and Mines Act.

Clearly, states, specially the BJP-ruled ones, are going to play an important role in driving the labour reforms. Rajasthan has taken a lead here but other states are expected to follow suit once the Centre initiates the process.