Making labour laws modern

It will take skilful political management by the Modi government to ensure a speedy passage of labour law-related Bills.

Making labour laws modern
The principal labour reform proposals are aimed at ensuring ease of doing business by merging 44 extant Acts into four codes (Reuters)

After the washout of the Winter Session of Parliament over issues of ‘intolerance debate’ and ‘National Herald’ allegations, the Narendra Modi government and the industry are looking forward to the Budget Session for the passage of various Bills, including labour reforms.

The government has embarked on biggest labour law overhaul since Independence by merging 44 extant laws into four codes aimed at ensuring the ‘ease’ of doing business, where India ranks at 130 (out of 189 economies) in the World Bank report, and moving towards reality in its stated objective of making India the global manufacturing hub.

The labour ministry has drafted a Bill to integrate three laws—Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946; and Industrial Disputes Act, 1947—into a single Labour Code for Industrial Relations.

While the draft code on wages empowers the states to fix minimum wages and makes national minimum wages mandatory, under the proposed Industrial Relations Code Bill, 2015, the employers with up to 300 workers would not require government permission for retrenchment, lay-off and closure.

Creating a labour union will become more difficult as 30% of workers will be required to sign for its creation (earlier it was 10%). It also prohibits politicians from becoming union leaders in organised sector establishments. The proposed changes would make it tougher for employees to form unions or go on strike, but would make all employees eligible for minimum wages.

Companies have long been demanding an increase in the ceiling as governments hardly grant permissions for lay-offs, making it difficult to respond to business downturns. This, according to experts, will facilitate ease of doing business without compromising on safety, health and social security of every worker.

The changes in the Payment of Wages Act replace the power given to labour commissioners with new ‘authorities’; however, this may weaken inspection norms and remove the ability of law to deter offenders.

The most significant change is in the Contract Labour Act. Amendments here will exempt companies employing less than 50 workers from the ambit of the Act (from the earlier limit of 20). Without assured minimum wage, contract, health and pension benefits, overtime allowance, and safety and sanitation at workplace, economic progress cannot be achieved.

The amendments to the Factories Act (which is a social legislation aimed at ensuring occupational safety, health and welfare of workers at the workplace) propose to keep units employing less than 40 workers out of the purview of 14 labour laws, and the draft code on wages promises a mandatory national minimum wage under which skilled workers in developed states stand to earn a minimum of R20,000 a month.

The World Bank says India has one of the most rigid labour markets in the world. That, in turn, has been a drag on manufacturing, which accounts for only 16% of India’s $2 trillion economy, compared with 32% of China’s.

Even economists cite current labour rules as the biggest constraint to Modi’s ‘Make in India’ dream to boost manufacturing and job creation. Experts feel the government needs to push forward its several big-ticket labour reforms, else the economy would stagnate and investors may start looking at other countries.

Though government feels the ‘obsolete and unnecessary’ laws being weeded out is a part of its objective to achieve ‘minimum government and maximum governance’, all central trade unions, including Bharatiya Mazdoor Sangh, are against several proposals in the code, saying they won’t allow reforms ‘at the cost of labour’. Even in its pre-Budget demands to the government, the trade union last week demanded de-linking of labour law reforms from ‘ease of doing business’ considerations of the government and called for regularising contract labour employed with government agencies.

At a pre-Budget meeting with FM Arun Jaitley earlier this week, unions’ representatives presented a 14-point memorandum asking the government to raise the minimum wage to R18,000 per month, increase the income tax exemption ceiling to R5 lakh, extend the scope of its flagship employment guarantee scheme MGNREGA, and increase the allocation to social sector schemes.

It will take skilful political management for the Modi government to ensure a speedy passage of its Bills. For this, tripartite dialogue between the government, trade unions and the industry should be the way to end the deadlock.

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