‘Lay-off freedom for more units to promote formalisation of labour’

‘Lay-off freedom for more units to promote formalisation of labour’

The basic objective behind the increasing of the threshold is to reduce the red tapism in the labour law governance.

Santosh Kumar Gangwar, minister for labour and employment, discusses how the recently enacted labour codes will serve the interests of both the industry and workers and catalyse economic growth. Excerpts from an exclusive interview with Surya Sarathi Ray.

Tell us how the recent labour reforms are in the best interests of both the industry and workers.

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We have attempted to maintain a balance between the rights of workers and the requirements of the industry to promote employment generation through the labour Codes. We firmly believe that workers and industry are complementary to each other and their progress is inter-dependent on each other. So, on the one hand, we have ensured that all the basic rights of the worker such as minimum wages, proper and safe working environment and social security is provided, and on the other hand, we have also ensured that the compliance burden on the employers is reduced.

We have replaced 8 registrations under the existing laws with one registration, eliminated the requirement of multiple licenses and replaced it with a single license besides reducing the number of registers and returns significantly. We have made provisions for predictable policy regime, time bound provision of services and completion of enquiries to facilitate speedy disposal of pending cases and grievances.

What kind of social security benefits are being provided to the unorganised sector? What would be the estimated cost of that and how much would be the Budgetary cost of the plan?

Progressive universalisation of social security to the entire workforce — organised and unorganised — is the intent of the government, which has been explicitly stated in the preamble of the Social Security Code. We have already started pension schemes for unorganised workers, traders and small businessmen, insurance schemes such as PM Jeevan Jyoti Bima Yojana and PM Suraksha Yojana to bring more and more workers under the social security net.
Through the social security Code, we have attempted to increase the coverage of ESIC and EPFO by introducing new provisions such as voluntary coverage for smaller establishments having workers less than the specified threshold, mandatory ESIC coverage for hazardous industries irrespective of the number of employees, removal of schedule of establishments under EPFO, option for plantation owners to join ESI scheme voluntarily, Social Security Fund for unorganised workers and coverage of new form of work such as gig and platform workers in the social security net. All these steps would facilitate the transition towards a more formal economy and enhanced coverage of workers under the existing social security institutions, which were hitherto restricted to only the organised sector workers.

There are provisions in the industrial relations (IR) Code and the OSH Code that labour laws can be kept in abeyance by the states through notifications to meet exigencies. There is a fear that this leeway could be misused.
Labour laws are a part of the concurrent list of the Constitution and both the Centre and the States are equally competent to modify the existing labour laws within their respective domains based on their respective requirements. For instance, many states have already modified the labour laws relating to thresholds applicable under Factories Act, Contract Labour Act, Industrial Disputes Act etc. based on their local requirements. Also, these provisions are required to deal with any unprecedented or pandemic like situation and such exemption provisions are also available in the existing legislations such as the present Industrial Disputes Act.

Doesn’t the concept of “negotiating council” hamper trade unionism in the country or for that matter, the right of the workers to resort to strike?

The concepts of negotiating union and negotiating council are to strengthen trade unionism and provide for strategic and streamlined involvement of trade unions on the negotiating tables so that speedy redressal of the dispute is achieved. Similarly, the right of workers to go on strike has not been taken away. However, a mandatory notice period of 14 days before going on strike is just an effort to solve the issues and disputes through negotiation and mutual discussion.

The IR Code virtually empowers the states to allow industries employing upto 300 workers to resort to lay-off, retrenchment and closure without prior permission. Don’t you think that it has the potential of increasing industrial unrest?

The provision for seeking permission before layoff/retrenchment and closure is only in respect of ‘factories’, ‘mines’ and ‘plantations’. The increase of threshold from 100 to 300 was recommended by the Parliamentary Standing Committee on Labour and the Economic Survey, 2019 also analysed the impact of the increase of threshold by the State of Rajasthan and found out that the number of factories in Rajasthan with more than 100 workers increased significantly as compared to rest of India.

After the increase of threshold from 100 to 300 sixteen states including Andhra Pradesh, Arunachal Pradesh, Bihar, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Odisha have already increased this threshold under the Industrial Dispute Act, 1948 from 100 to 300. The requirements of permission before retrenchment or closure does not serve much purpose but on the contrary leads to accumulation of losses and liabilities of the firms on verge of closure and incentives capital substitution of labour.

The basic objective behind the increasing of the threshold is to reduce the red tapism in the labour law governance. Further, due to this low threshold of 100, the establishments hesitate to expand their size beyond this threshold and often do not show workers on their roles. Increase of this threshold will therefore lead to formalisation of workforce, encourage labour intensive production and encourage establishment of bigger enterprises.

I also wish to clarify that no rights of a retrenched worker has been restricted, for instance the requirement of notice period before retrenchment or retrenchment compensation has been retained besides creation of a new reskilling fund in the IR Code, 2020.

Employers are saying their overhead cost will go up now. Wouldn’t this lead to hiring more contract workers?
The apprehension that overhead cost will go up is unfounded. Ease of compliance would infact result in reduced overhead costs for the employer as the multiple registrations, licences, returns and registrations would no longer be required. Time bound completion of enquiries would reduce litigation and associated costs. We have also recently reduced the ESIC contribution rates from 6.5 percent to 4 percent without any decrease in the benefits to Insured Persons. Further, through Pradhan Mantri Garib Kalyan Yojana, complete EPFO contribution has been paid by our government during prevailing Covid-19 pandemic.

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