Labour Codes — a step in the right direction

29 Oct 2020

The Covid outbreak has severely impacted the global economy. Judging by the current economic climate, the slowdown is likely to continue for some time, keeping investments stagnant.

At this point, it is important to incentivise the industrial ecosystem in order to boost business sentiments and restart economic operations. Labour reforms in India have been widely discussed for many years and the damage caused by the pandemic calls for structural reforms.

Labour is a concurrent subject in India, allowing both the Central and State Governments to frame laws on the subject. As many as 40 Central laws govern the labour ecosystem and the States also have their own sets of legislation. Many of these were drafted decades ago and were losing relevance in the current context of economic development, growth, global trade conditions, advance of technology and changing expectations of consumers and producers.

In this scenario, the recent passage of three labour codes is a significant measure in the overall reform journey of the country and help to align the labour ecosystem to the imperatives of India’s globalised economy.

At the same time, they provide much-needed coverage to the majority of workers who found themselves outside the regulatory environment. Parliament passed three labour Codes — the Industrial Relations Code 2020, the Code on Occupational Health, Safety & Working Conditions 2020 and the Social Security Code 2020, which together converge many of the Central labour laws.

Helping migrant workers

The new Codes not only address the numerous flaws in the existing framework, but also propose long-term solutions including dealing with issues thrown up by the current crisis. During the lockdown period, a large number of migrants moved back to their native places, leaving significant challenges to be addressed regarding livelihoods, lack of resources and infrastructure, among other issues.

To bridge the gap, the Code on Occupational Health, Safety and Working Conditions 2020 meets the needs of migrant workers by bringing jobs to the workers’ doorstep. The Code enables the provision for maintaining a database of migrant workers to help in targeting, skill mapping and utilising government schemes effectively. Also, the helpline facility is another important facility provided to the workers. The Code ensures that migrant workers get journey allowance once a year from employers to visit their hometowns.

The provision of “common licence” for factory, contract labour and beedi and cigar establishments and the concept of a single, all-India licence to engage contract labourers for a period of five years are noteworthy.

The OSH Code confers overriding powers to the Centre to regulate general safety and health of people in case of an epidemic, pandemic or disaster.

The new regulatory framework enables women to work at night in all establishments for all types of work beyond 7 p.m. and before 6 a.m., subject to adequate safety conditions being provided and their consent as well as keeping in mind holidays and working hours. This initiative will bring equal opportunity for women, reduce the gender gap and create more employment opportunities.

The coverage of plantation workers, unorganised sector, gig and platform workers in the ambit of Social Security Schemes is a major milestone in labour reforms, providing much-needed support to this large cohort. The social security net for these workers will help labour market flexibility and enhance the employment landscape of the country.

Flexibility factor

The introduction of fixed-term employment in the Industrial Relations Code 2020, for engaging employees for a fixed and pre-defined time period, ensures flexibility to the industry. This will enable the industry to hire skilled manpower directly on rolls of a company, boosting productivity and job creation.

The increase in retrenchment threshold from 100 to 300 workers will help in the expansion of medium and small enterprises. Sixteen States have already increased the threshold for closure, lay off and retrenchment in firms without government permission with up to 300 workers.

For the new Codes to make the most impact on job creation, it is essential for State governments to follow through and ensure their effectiveness.

Uttar Pradesh, Gujarat, Goa and Madhya Pradesh had earlier undertaken labour reforms to attract investments. Industries operating in these States have flexibility in hiring and there is a significant reduction in compliance regulations. Administrative processes for returns, inspections, approvals and clearances have been accelerated.

Other States too would need to implement these laws in the right spirit so that the entire country’s ecosystem is in sync with the reforms and encourage investments.

The labour reforms introduced are comprehensive and progressive, marking a huge step forward in the labour environment for the country. These reforms will definitely enhance the employment landscape, in addition to giving a fillip to investments and sustainable growth.

The article written by Mr T V NarendranPresident-Designate, Confederation of Indian Industry, first appeared in the Hindu BusinessLine on 29 October 2020.

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