Labour reforms: Ministry drops plan to allow companies with up to 300 staff to sack them

Labour ministry drops plan to allow firms with up to 300 staff lay off workers, rethinks curbs on unions.

Labour reforms, Narendra Modi, Narendra Modi government, labour reforms agenda, trade unions, negotiating powers, Industrial Relations Code, labour ministry
Labour ministry drops plan to allow firms with up to 300 staff lay off workers, rethinks curbs on unions. (Image: Reuters)
Labour ministry drops plan to allow firms with up to 300 staff lay off workers, rethinks curbs on unions. (Image: Reuters)

Approaching the last year of its tenure and elections already on top of its mind, the Narendra Modi government has decided to whittle down its ambitious labour reforms agenda. According to sources, a key proposal to allow firms employing up to 300 people — against 100 now — to retrench/lay off workers and/or close down without government approval has been removed from the Industrial Relations Code (IR Code). The labour ministry is also having second thoughts on barring outsiders from becoming office-bearers of trade unions in the organised sector and a few other proposals intended to make unions with negotiating powers more representative, like a stipulation that at lest 10% of workers are needed to form a union. The Centre has developed cold feet on these proposals even as eight states including Madhya Pradesh, Rajasthan and Andhra Pradesh have already implemented all or most of them.

Another major proposal in the IR Code is to introduce fixed-term employment — which was made applicable in the textile and garment industries last year — in all sectors. If these proposals are implemented, job creation will get a fillip as businesses will be encouraged to hire workers for seasonal and other jobs. The code, on which tripartite consultations (trade unions, employers and the government) are over and is in the final stages of drafting, will soon be sent to a group of ministers headed by finance minister Arun Jaitley for consideration. It could be tabled in the budget session of Parliament. The government had introduced in the last session of Lok Sabha the code on wages that proposes a universal minimum wage for the entire working population, including unorganised sector workers.

The wage code will subsume four existing central labour legislations — the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. Another draft code on social security has been posted on the labour ministry’s website for public comments. “Job creation needs a bold state. And, given the growing dissatisfaction around the same, sending the rights signals is crucial. Hence, this roll-back is disappointing and is contrary to the central theme of the present government,” said Rituparna Chakraborty, executive vice-president and co-founder, Teamlease.

Immediately after assuming office, the present dispensation embarked on long-pending labour reforms by proposing to amalgamate 44 existing labour Acts into four codes — on IR, wages, social security and industrial safety and welfare — with the aim of simplifying them and ensuring a conducive and harmonious environment for doing business. However, stiff opposition from trade unions, including the RSS-affiliated Bharatiya Mazdoor Sangh, has slowed the reforms’ pace. Moody’s, which upgraded India’s sovereign rating by a notch to Baa2 from the lowest investment grade ranking of Baa3, has stressed that “a strong and durable recovery of the investment cycle as well as long-delayed land and labour market reforms” could put upward pressure on its India rating. The IR Code will amalgamate the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947.

Under the code, outsiders (read professional politicians) will be barred from being office bearers of trade unions in the organised sector and strikes can be resorted to only after 14 days’ notice. While source said no decision has been taken on the former, the mandatory notice period for strikes is retained in the final draft. The IR Code also proposes to enhance the severance pay from 15 days’ wages for every completed year of service at present to 45 days’ wages.

The Modi government’s labour reforms agenda, in fact, has been holistic. As many 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 its minimum wages) and this will be revised every two years (five years if the dearness allowance becomes part of the minimum wages).

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