India jumped 14 places to the 63rd position in the ease of doing business (EODB) rankings last year and by 79 positions in five years (2014-19). The Covid-19 situation has made the lives of both the employer and employee difficult. Under these circumstances, these new (labour) codes are bound to make new enterprises investor-friendly, increase ease of doing business and make it attractive to invite foreign entities which want to exit China. A key element of the proposed Social Security Code is to clearly define migrant workers and also enlarge the scope of the current scheme to cover the gig economy and those outside the organised sector, while recognising the emergence of online platforms and aggregators that provide access to workers.
Parliament, in its just concluded monsoon session, passed three labour code bills: The Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code. The Wage Code Bill, 2019 was passed by Parliament last year. Key provisions like making all categories of workers eligible for minimum wages, as against only 30% of the workforce being eligible at present, are indeed path-breaking. Minimum wages would be extended to the entire services sector, to domestic workers, unorganised workers and teachers, among others, to mainstream the informal sector.
Prime Minister Narendra Modi has done what none before him could even dare to attempt. India’s labour market reforms will herald the dawn of a new era in making businesses more efficient and competitive, cutting down extra flab and allowing flexibility in hiring and retrenchment, making industrial strikes difficult, removing multiple licensing and paperwork and, of course, getting rid of disguised unemployment. Disguised unemployment is a scenario where employees are underutilised and therefore underpaid, as there is not enough work that can be allocated to them for various reasons.
India jumped 14 places to the 63rd position in the ease of doing business (EODB) rankings last year and by 79 positions in five years (2014-19). The Covid-19 situation has made the lives of both the employer and employee difficult. Under these circumstances, these new (labour) codes are bound to make new enterprises investor friendly, increase ease of doing business and make it attractive to invite foreign entities which want to exit China. A key element of the proposed Social Security Code is to clearly define migrant workers and also enlarge the scope of the current scheme to cover the gig economy and those outside the organised sector, while recognising the emergence of online platforms and aggregators that provide access to workers. The bill has mandated the registration of all unorganised and gig and platform workers and the provision of insurance, maternity, creche and old age protection benefits. Industries and workers are two sides of the same coin and these three bills have tried to balance the rights and obligations of both employers and employees.
Besides, it has been proposed that companies with up to 300 workers be allowed to hire and fire workers without seeking prior government permission, as part of the Industrial Relation Code Bill, 2020.The earlier threshold was up to 100 workers. Companies with more than 300 workers need to apply for approval, but if authorities do not respond to their request, then it will be deemed approved. Besides, as per the IR Code, a notice period of 60 days will have to be given by trade unions or employees before going on a strike. During the pendency of proceedings before a Tribunal or National Industrial Tribunal, and even 60 days after the conclusion of such proceedings, workers cannot go on a strike. Strike conditions have been applied to all industries. Currently, it is between two weeks and six weeks. This is a gamechanging move that will discourage flash strikes and enhance productivity significantly.
As part of its Aatmanirbhar Bharat push, the government has decided to encourage medium enterprises to grow in size. The bill also reflects the changing nature of the economy; the growth of the gig sector and the vulnerability of sections of workers, from migrant labour to house helpers, who despite playing a crucial role, did not fit into the traditional definition of a “worker”. The new bills will amalgamate 29 existing labour laws and pave the way for simplifying laws and take welfare measures to India’s 50 crore workers, spanning the organised and unorganised sectors.
Some experts allege that the blanket exemptions to industries through various provisions will lead to social and economic unrest, promote contractualisation and take away job security and wage security. These allegations are baseless as in many areas, fixed-term workers and regular workers will enjoy equal benefits. The Social Security Code also aims at universalising social security by bringing informal workers under its ambit. Henceforth, companies with less than 20 workers can voluntarily join EPFO to get social security benefits and internal workers will be free to voluntarily join the employee state insurance (ESI) scheme for getting healthcare benefits. The code also talks about platform companies employing gig workers to make a provision of 1% to 2% of their profits for the social security needs of their workers.
People need not work continuously for five years to get gratuity benefits, according to the new Social Security Code bill. The code has removed the mandatory minimum gratuity threshold of five years, while introducing a different threshold structure for various categories of workers. Regular and permanent employees will now have to work for at least five years to become eligible, while fixed-term or contractual workers will have no such limit. Instead, their gratuity payment will be linked to their tenure of work. For working journalists, the code makes a provision to avail gratuity benefits after three years of service, and for seasonal workers, gratuity payments equivalent to the salary for seven days will be provided for every season of work. Earlier, the fiveyear gratuity payment was mandatory, which meant that millions of workers used to forfeit their gratuity deposits, the salary for 15 days for every year of work, if they resigned or lost their jobs before the stipulated period. However, the bill makes provisions such that if an employee is involved in damaging activities and/ or has damaged property, his gratuity payment can either be adjusted against the damage or forfeited.
All employees will now have an offer letter and both the Centre and the state will create a database on migrant workers and offer them several benefits including the portability of the public distribution system and construction cess benefits. Prime Minister Narendra Modi’s groundbreaking labour laws have been envisaged by recognising the changes in the global scenario in a post-Covid world. The new labour code seeks to transform India and rid it of outdated technologies and methodologies. The reduction in compliance burden would also facilitate the expansion of establishments, helping to create jobs on a large-scale across sectors, giving PM Modi’s transformational ‘Make in India’ a huge boost.
Sanju Verma is an economist, the national spokesperson of the BJP and the bestselling author of ‘Truth & Dare: The Modi Dynamic’. The views expressed are personal.