The Parliament has passed three new labour codes on Industrial Relations, Social Security and the Occupational Safety, Health and Working Conditions. This is a drastic labour reform since independence that subsumes 44 central labour Acts into four codes. The Wage Code Bill was cleared by the Parliament last year in August 2019.
"For the first time after independence this codification is a true reform that has been exercised, which has completely overhauled the labour laws," says Rishi Agrawal, CEO and CoFounder of Avantis Regtech. He explains that the labour laws were created in colonial times and the modifications introduced have been patchy. Introducing new forms or increasing threshold value resulted into a lot of duplication and redundancy for firms.
Take the case of Occupational Safety (relating to safety, health and working conditions) containing 13 Acts which include 12 registrations. As per the new OSH Code only one registration will be required. So, clearly the number of licences and registrations will come down. Similar measures have been introduced in the other two codes as well where provisions are made for single registration, return and licences.
"The new laws have set the provisions to reduce this compliance burden incentivising firms towards formalisation," he says.
He adds that regulatory cholesterol was a major reason why majority of enterprises chose to stay small and be dwarfs.
Lohit Bhatia, President, Indian Staffing Federation says the new code has simplified the compliance processes for Contract Staffing firms and also the employers to secure the services of Contract Staffing Companies.
"A nationalised labour licence under the Occupational Safety Health and Working Conditions Code for staffing companies for five years will increase the ability for staffing companies to deploy workforce seamlessly pan India; managing seasonal and non-seasonal demand better without having to deal with administrative hassles," he says. The current regulatory regime as per Contract Labour Regulation and Abolition Act (CLRA) required licences for every premises of the client. Also, in the CLRA regime, the client (principal employer) has to get a registration, which is dispensed with in the OSH code. This will significantly ease the process and get more firms to hire from organised contractors.
While the reforms have worked towards ease of doing business, they have not protected labour rights. K.R. Shyam Sundar, Labour Economist & Professor, HRM Area at XLRI - Xavier School of Management, Jamshedpur says the three labour codes seen together fail to achieve even reasonable balance between enabling of ease of doing business, and protecting & strengthening labour welfare and their rights.
He says it is unfortunate that it has come at a time of a pandemic when the unemployment is alarmingly high. "In a civilised and progressive society, the ambit of labour laws must be widened as economic development takes place. However, given the neo-liberal form of globalisation that has been witnessed in India, a reverse is taking place," he says.
He adds the liberalisation of regulations concerning standing orders and prior permission on lay-off, retrenchment and closure from 100 to 300 employees means around 90 per cent of the working factories and a little over than 40 per cent of workers employed therein will be outside their purview.
Further, the Industrial Relations Code has given powers to the state governments to exempt establishments or class of establishments from any or all provisions which unlike its predecessor Industrial Disputes Act, 1947 does not specify the conditions. Taken together, it provides too much flexibility to the employers and too little protection to employees and the absence of provisions relating to unemployment allowance/insurance in the Social Security Code means workers would have to fend for themselves. "Too much flexibility is as bad as too little; the pendulum of labour law in India swings to either extremes. That is from strong to soft regulations," says Sundar.
Also, the Social Security Code has expanded its ambit from formal to contract and gig workers. It does not include wage workers in the agricultural sector, domestic workers, bidi workers and even street vendors. "This Code unlike its predecessor, the Unorganised Workers' Social Security Act, 2008 does not provide portable smart identity card though it provides for registration. Thus, it is an incomplete code and reflects poor drafting," says Sundar.