Since the implementation of the four Labour Codes on November 21, the government has been getting positive feedback on several of its aspects and is also working to clarify concerns, says Vandana Gurnani, Secretary, Ministry of Labour and Employment. In an interview to BT, she explains that the ministry is now working on framing rules, implementing the Codes and rolling out the digital infrastructure. Edited excerpts:
Q. What is the feedback you have received on the Labour Codes over the last few weeks?
VG: The overall feedback has been extremely positive and constructive and also very forward looking. There has been extremely positive feedback from many of the workers and trade unions on several progressive moves which enhance workers’ welfare. This includes the universalisation of minimum wages, which were earlier available to only 30-35% of the workforce, mandatory appointment letters, because they ensure that the benefits are transparent, and encourage formalisation, which is equally important for workers. The Code on Wages also has clear provisions for timely payment of wages. The provision of flexibility to workers is also being appreciated because it gives them agency and autonomy. It also gives employers flexibility, like when they have peak requirement of workers, they would be able to adjust schedules accordingly, and even when workers or employees have to work beyond eight hours in a day or 48 hours in a week, there is a provision for overtime, which is at twice the rate of normal wage.
The universalisation of social security, which was earlier limited to a few sectors, has also been appreciated. The welfare provisions under the Code on Occupational Safety, Health and Working Conditions are also being appreciated. Any establishment with more than 10 workers must have certain minimum welfare provisions that have been defined based on various threshold of workers in the Codes such as canteen facility, resting facility. Annual health check-ups for workers aged above 40 is another element that is being appreciated. This is beneficial to industry as it increases productivity and will be able to detect any red flags on occupational safety in the workplace, so that immediate corrective action can be taken.
Industry is appreciating these measures because these will enhance productivity as well as retention. Workers who are productive, happy and satisfied also stay longer. There has been a lot of positive feedback on the huge amount of compliance reduction as part of the Codes, including single return, single registration as well as decriminalisation. Earlier, there were about 87 provisions that attracted criminal liability, which is now down to 22, out of which 16 are compoundable. The major ones that are criminal or not compoundable are six, which are also the serious ones in case of violation of safety standards or in case of non-remitting of social security contributions collected from employees.
The flexibility in working hours, the concept of inspector-cum-facilitator, the digital processes under the Codes make it very efficient and transparent and remove human interface. Provisions of auto registration, auto renewal of licences, which are going to very strongly bring down the compliance cost. Essentially, it’s going to make it easier for industries to carry on their business and also to expand when they need to do so. It’s also going to be a very transparent and predictable and efficient system.
Q. What is the road map for implementation in terms of rule framing and notification?
VG: We see this entire road map in about three buckets or so. One is the legal aspects. The first and most important is the pre-publication and final publication of rules, both by the Centre as well as states, which will operationalise the Codes in the field. Some sections need rules, some do not and these are already enforced. But many sections do need rules. There would be 45 days for all the stakeholders to give their comments. We will go through these comments and finally finalise the rules. The second part is capacity building of our enforcement machinery, both at the central and state levels, of the trade unions so that workers know what the Codes have specifically enhanced for them and capacity building also of the industry, especially MSMEs.
The third part is the IT enablement of the various processes. The registration, licences, returns, everything is through an online system. Even the inspections have to be web-based and randomised, so that there is no discretion with the enforcement machinery. All these processes have to be now fully digitised. We are doing that at the central level, and we also discussed with the states to modify their systems so that they are ready for the digital transformation.
There is also a fourth component. We are working on certain handbooks, especially for industry and MSMEs, for compliance. We have also prepared certain checklists and shared it with the states because there is a sequence of actions that need to be taken, whether it is rules, notifications, regulations, the governance system, the boards have to be put in place, the funds have to be set up.
We will soon have regional meetings and conferences with the states so that we can continue to discuss these and if there is any area in which they require any legal clarification or technical assistance, we will be there to support them.
Q. What is the effective date for the Codes to become fully applicable?
VG: Legally, the Codes become fully effective when all the rules are ready. However, the digitisation part is very important and is happening simultaneously. We are working to ensure that both the finalisation of rules and the modification of our digital systems and the state system happen in sync and simultaneously, so that those benefits can flow. Instead of looking at a date driven approach, we are looking at a systematic approach.
Q. The reforms are expected to boost investments by improving the ease of doing business. What are your thoughts on this?
VG: You are spot on that this will bring a very predictable and efficient and transparent system for industries. That should boost investor confidence and enhance trust in the system. Provisions on decriminalisation, features like fixed-term employment (FTE) and flexible working hours will also help industry tailor their actual employment or the number of people or hours based on the business decision. But they will have to pay overtime and ensure rest for workers as prescribed in the Codes. I would view formalisation also not just as a cost to industry, but as something that will ensure a more satisfied workforce and enable retention. The design of the Pradhan Mantri Vikas Bharat Rozgar Yojna also incentivises retention as the employer and employee get incentives only once they stay for the six-month period.
We expect more domestic and foreign investment and more employment. Even on exports, the provisions on social security and welfare now align with what many developed countries have. This should also encourage our exports because we are in sync with developed countries’ standards.
Q. Employers are concerned about certain provisions like payment of gratuity and computation of salary. Could you provide some clarifications?
VG: On gratuity, the eligibility of five years continues, except that now for FTE workers, it will kick in after one year of service. There is no change in how it is calculated, the only change is on account of the change in the definition of wages. The definition of wages now mandates that the basic wage and the retaining allowance should be 50% of the cost to company and if allowances are more than 50% that, they get added to the basic wage. In certain cases where the allowances were artificially high and the basic was artificially low, there will be some correction. What is important is that the definition is uniform across the four Codes, which will provide clarity, predictability and transparency.
Q. Certain trade unions continue to have concerns on issues including overtime, working hours, women working at night, and minimum wages. Your thoughts.
VG: We are trying on a daily or real-time basis to clarify concerns through our social media handles. We are trying to engage on a regular basis with workers and unions through our Chief Labour Commissioner and have also suggested this to states. For women workers, the Codes remove all kinds of discrimination, which hindered their employment and ability to get equal pay for equal work in the past. The Codes enable women to work at night, but their consent is essential and there must be adequate safety measures like transportation, CCTV cameras. For women, there are certain other provisions, apart from the maternity benefits, including work from home post maternity in certain industries. The grievance redressal committees must have proportionate representation of women, and there is a right for creches.
The way minimum wages will pan out is that there is a provision for a statutory floor wage now, and wages cannot be fixed below that minimum wage by the Centre or states. The floor wage will be fixed through a process that would include a committee of experts and take the advice of the Central Advisory Board, which will have equal representation of workers and employers. On overtime, if workers work for 12 hours for four days, then they have to be provided three days of rest. The 48-hour limit per week is sacrosanct. If one has to work beyond 48 hours, then overtime kicks in. 
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