Parliament has passed 3 labour code bills aimed at labour welfare reforms covering more than 50 crores organized and unorganized workers in the country. This also includes gig, platform and also opens up the doors for social security to those in the self-employment sector. These three Bills are (i) Industrial Relations Code, 2020 (ii) Code on Occupational Safety, Health & Working Conditions Code, 2020 & (iii) Social Security Code, 2020.
Highlights and Significance Labour Law Reforms:
- The central government proposes to replace 29 existing labour laws with four Codes. The objective is to simplify and modernise labour regulation.
- In the globalized economy we need to be competitive in terms of prices for which production should be high and cost should be low for which labour group plays a very important role.
- The major challenge in labour reforms is to facilitate employment growth while protecting workers’ rights. Key debates relate to the coverage of small firms, deciding thresholds for prior permission for retrenchment, strengthening labour enforcement, allowing flexible forms of labour, and promoting collective bargaining.
- Further, with the passage of time, labour laws need an overhaul to ensure simplification and updation, along with provisions which can capture the needs of emerging forms of labour (e.g., gig work).
- The way good and services are produced has undergone large changes, technology used also has changed.
- Coverage: Most labour laws apply to establishments over a certain size (typically 10 or above). Size-based thresholds may help firms in reducing compliance burden. However, one could argue that basic protections related to wages, social security, and working conditions should apply to all establishments. Certain Codes retain such size-based thresholds.
- Retrenchment: Establishments hiring 100 or more workers need government permission for closure, layoffs or retrenchments. It has been argued that this has created an exit barrier for firms and affected their ability to adjust workforce to production demands. The Industrial Relations Code raises this to 300, and allows the government to further increase this limit by notification.
- Labour enforcement: Multiplicity of labour laws has resulted in distinct compliances, increasing the compliance burden on firms. On the other hand, the labour enforcement machinery has been ineffective because of poor enforcement, inadequate penalties and rent-seeking behaviour of inspectors. The Codes address some of these aspects.
- Contract labour: Labour compliances and economic considerations have resulted in increased use of contract labour. However, contract labour have been denied basic protections such as assured wages. The Codes do not address these concerns fully. However, the Industrial Relations Code introduces a new form of short-term labour – fixed term employment.
- Trade Unions: There are several registered trade unions but no criteria to ‘recognise’ unions which can formally negotiate with employers. The Industrial Relations Code creates provisions for recognition of unions.
- Simplification and updation: The Codes simplify labour laws to a large extent but fall short in some respects. Further, the Code on Social Security creates enabling provisions to notify schemes for ‘gig’ and ‘platform’ workers; however, there is a lack of clarity in these definitions.
- Delegated Legislation: The Codes leave several key aspects, such as the applicability of social security schemes, and health and safety standards, to rule-making. The question is whether these questions should be determined by the legislature or be delegated to the government.
How this labour codes help the labour workforce?
- There is general apathy towards labour laws.
- If implemented in right spirit, there will be huge improvements.
- Employers are so allergic to labour rules and regulations laws that many a times they resist from setting a new enterprise.
- Idea behind the new codes are to create more and more employment so proper conducive environment is created.
- Implementation was difficult of earlier 44 laws.
- The code is simplier, remove contradiction in definition, regime to give protection and further their welfare, benefits and incentives to workers
From economic point of view, how important is it to come out of this old archaic laws?
- The labour markets both geographically and employment wise is fragmented.
- But the code still leaves some of the fragmentation intact.
- It has 2 different version for organized and unorganized workers separately.
- There is high level of distinction intact because of which informalization they persist more.
What are the concerns raised over the new labour codes?
- Analysts say the increase in the threshold for standing orders will water down the labour rights for workers in small establishments having less than 300 workers.
- The increase in the threshold for standing orders from the existing 100 to 300 is uncalled for and will give tremendous amounts of flexibility to the employers in terms of hiring and firing.
- The Industrial Relations Code also introduces new conditions for carrying out a legal strike. The time period for arbitration proceedings has been included in the conditions for workers before going on a legal strike as against only the time for conciliation at present.
- For instance, the IR Code proposes that no person employed in an industrial establishment shall go on strike without a 60-day notice and during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings. Thus, elongating the legally permissible time frame before the workers can go on a legal strike, making a legal strike well-nigh impossible.
- The IR code has expanded to cover all industrial establishments for the required notice period and other conditions for a legal strike. The Standing Committee on Labour had recommended against the expansion of the required notice period for strike beyond the public utility services like water, electricity, natural gas, telephone and other essential services.
- At present, a person employed in a public utility service cannot go on strike unless he gives notice for a strike within six weeks before going on strike or within fourteen days of giving such notice, which the IR Code now proposes to apply for all the industrial establishments.