The Modi government will unleash the next set of reforms necessary for improving the ease of doing business by pressing for the passage of the twin codes on wages and industrial relations that form the crux of its agenda for reducing labour market rigidities. Official sources told FE that both the codes, which have already undergone legal vetting, would be taken to the Cabniet soon for approval and once it is secured, placed in Parliament, most likely in the second half of the budget session.
Among the major proposals are introducing fixed-term employment – which was made applicable in the textile and garment industries last year – in all the sectors, allowing units employing up to 300 people to retrench/lay off workers and/or close down without government approval, making trade unions with negotiating powers more representative, barring outsiders from being office-bearers of unions in the organised sector and reducing such persons’ role in union activities in the unoranised sector. Also, an industrial strike would be defined afresh by including concerted casual leave by 50% of more workers while the provision for prior notice of strike would be extended to “all activities similar to existing public utility services”.
The extension of fixed-term employment to all sectors would help generate fresh jobs and thus, could be a win-win for both the workers and employers, analysts said.
However, trade unions are opposed to this, calling it a backdoor entry for the hire-and-fire policy. Last year, the government made it mandatory for units in the textile and garment industry to treat a fixed-term worker on par with a permanent worker in terms of working hours, wages, allowances and other statutory dues. The emulation of the policy by all the other manufacturing and service industries, would help address the current stagnation in job growth and generate “decent employment”, government sources said.
The government proposes to increase the severance compensation in case of retrenchment or closure from 15 days’ wages now to 45 days’ wages for every completed year of service. However, such compensation won’t be available to those recruited for fixed-term employment.
As these steps are regarded as industry-friendly, the proposed codes also seek to enhance the workers’ privileges. The code on wages, for instance, proposes making minimum wage a statutory right and extending it to all employees – currently the relevant Act applies to 51 “scheduled employments” only. In what is expected to reduce the disparity in minimum wages across states, the central government will notify a “national minimum wage” (below which no state can fix their minimum wages) and this will be revised every two years (five years if the dearness allowance becomes part of the minimum wages). Also, the changes proposed in the Payment of Wages Act will ensure payment of wages to all in time and mostly to the bank accounts. Besides, the maximum wage for computing bonus will be “Rs 7,000/month or the minimum wage whichever higher” against the Rs 7,000/month now.
By allowing larger units to lay off workers sans the government nod, the policymakers are aiming at a more efficient unlocking of investments and easier exists for industries, which is also buttressed by the new bankruptcy code. While the government proposes to bar outsiders from being office bearers of trade unions in the organised sector to preclude undesirable interference, in case of trade unions in the unorganised sector, the number of outside office bearers would be restricted to two, or 25%, of the total office-bearers, whichever is less, from 50% of the office-bearers at present.
The proposed codes also provide for a greater facility for skilling of workers and resolving trade union disputes.