Haryana’s domicile quota will kill jobs as firms move to states that don’t mandate such restrictions

By: |
November 10, 2021 5:15 AM

Reserving jobs in the private sector for locals will prompt companies to move to jurisdictions that don’t mandate such restrictions

Such narrow-minded and restrictive policies cannot encourage top corporations—or even smaller ones—to expand their businesses.Such narrow-minded and restrictive policies cannot encourage top corporations—or even smaller ones—to expand their businesses.

The new recruitment laws for the private sector in Haryana may win politicians a bigger mandate but they are unjustified and could compromise the quality of work. Rather than promoting meritocracy, such politically-motivated policies hurt businesses and the economy in general. Forcing corporations to hire persons according to their place of domicile, rather than their capabilities, is regressive.

With the January 15 deadline for the new laws to take effect not far away, it is possible some private sector companies will explore options outside of the state. Nasscom officials, who believe some 150,000 IT jobs could be impacted, have indicated as much; Gurgaon’s loss could be Noida’s gain or even Delhi’s. The big concern though is that it could lead to harassment of smaller companies by the authorities.

The new legislation requires companies to set aside 75% of the jobs—up to a gross monthly salary of Rs 30,000—for locals; earlier, this threshold was more onerous at Rs 50,000. The required period of domicile, initially fixed at 15 years, was later lowered to five years. Before Haryana, Andhra Pradesh too had introduced legislation requiring the private sector in the state to set aside 75% of the jobs for locals.

Such legislation is unfair and impedes the ease of doing business. The private sector needs the freedom to hire and fire according to needs of the business without governments breathing down its neck. Such narrow-minded and restrictive policies cannot encourage top corporations—or even smaller ones—to expand their businesses.

The business environment is changing, especially with the rapid growth of the start-ups and gig economy; entrepreneurs want and deserve flexibility and should not be constrained by restrictive labour practices. Representatives of India Inc have rightly argued the legislation reduces competitiveness and productivity, but it is unlikely it will even be re-examined, let alone recalled.

Labour legislation—whether for blue- or for white-collar workers—needs to enable corporations, who the ones risking their capital, rather than constrain them. India’s labour laws have been restrictive, often hindering the smooth functioning at factories. The best of managements has had to face labour unrest on frivolous grounds; there have been tussles even in top corporations where workers earn good salaries.

In July, 2012, a general manager at Maruti Suzuki was burned to death amidst violence. While the interests of workers must undoubtedly be protected, the rules and regulations must be reasonable. For instance, the government’s move to bring in a minimum wage—as mandated in the Code on wages—is a good one so long as the levels are reasonable. Burdening employers will result in businesses closing down rather than flourishing.

The smaller enterprises in particular, which provide employment to thousands, would be badly hit. Even in the case of the Haryana reservations, the law covers any enterprises—including societies, trusts and partnership firms—employing ten or more persons.

Already, a fair share of jobs in the public sector is reserved for those from certain sections of society. However, the public sector now is creating fewer jobs than the private sector, which is why governments have enforced job quotas there too. In fact, reserving all public sector jobs for locals is also unjustified.

In Maharashtra too, the MVA government in Maharashtra had wanted 80% of the jobs in the private sector to be reserved for locals. The courts need to intervene against such disruptive policies.

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