Don’t force industry to pay wages during COVID-19 lockdown

By: |
April 25, 2020 5:50 AM

Growth was already slowing before the corona outbreak; forcing industry to pay full wages imperils MSMEs’ survival

Indeed, for many, the wage bill, at a time when they are shut or are functioning in a very limited manner, could mean the difference between having to close down permanently and staging a recovery over a period.Indeed, for many, the wage bill, at a time when they are shut or are functioning in a very limited manner, could mean the difference between having to close down permanently and staging a recovery over a period.

The Centre using the Disaster Management Act to order all establishments, including industries, to pay full wages to their workers regularly for the period they are under lockdown, apart from restraining landlords from seeking rent for a period of one month from workers renting their premises, is a draconian step. State governments have followed suit, with Delhi talking about action against landlords for insisting on rent from students and workers, and Maharashtra reiterating the Centre’s stand on payment of wages.

The intent could be to limit the economic pain from the lockdown for the vulnerable classes, but this is an abdication by the State of its responsibility to ensure people’s well-being during a raging pandemic and seems not to be mindful of the pain of MSMEs as well as small commercial establishments—even before the corona outbreak, the Indian economy was not doing too well, and now, with every likelihood that economic activity may not be back to the pre-corona normal for a long time, most experts don’t see signs of a stable economic recovery any time soon. So, with no money coming in, how are shops, MSMEs, etc, to find the money to pay regular and full wages to their employees? Indeed, for many, the wage bill, at a time when they are shut or are functioning in a very limited manner, could mean the difference between having to close down permanently and staging a recovery over a period.

Thanks to such myopic policy decisions, with a clutch of companies rightly fighting back, the government will now have to dedicate resources to fighting legal battles while these could have been used elsewhere. Two firms, Nagreeka Exports Ltd and Ficus Pax Private Limited, and a Ludhiana-based association of MSMEs have petitioned the apex court seeking quashing of the Centre’s order.

The order, as the petitions claim, seem to violate Articles 14 and 19 of the Constitution, which relate to the right to equality before the law and the right to do business. Moreover, as the Nagreeka petition highlights, expecting a business-as-usual scenario from corporates is inequitable when the government is deferring payment of the entire salaries during lockdown—Maharashtra and other states governments announced this last month. It also points that the clutch of government orders violate Section 25C and 25M of the Industrial Disputes Act, 1947, which deal with payment of 50% wages when a worker is laid off and exception to lay-off workers during a natural calamity.

To be sure, the government must act to ensure that the survival of daily-wagers/low-wage earners is not imperilled in the middle of the pandemic because of loss of wages. And, the private sector, including small establishments and MSMEs, can be reasonably expected to pitch in. But, this can’t be coercive. Strong-arming MSME players, already impacted by the lockdown, will imperil the recovery of the industry that will be crucial to kickstarting growth after the pandemic.

With even the parliamentary standing committee on labour saying that employers should not be forced to pay full wages during a natural calamity—“which often result in closure of establishments for a considerably long period without the employer’s fault”—the government must pay heed. If India is to recover from this crisis, it must ensure that policies don’t leave the private sector, especially the MSMEs, floundering.

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