A step towards ‘atmanirbharta’: New labour codes do away with the regressive regime that existed so far

By Shishir Jaipuria

India’s labour laws date back to post-Independence era—they were framed between 1947 and 1980. There had been no significant legislative changes since then. However, from then till now, there have been changes in how we do business and engage labour. We have gone through the whole cycle, starting from industrialisation to opening up economy to foreign investments. The increase in market demands has led to the engagement of flexible workforce through contractors. In recent times, a new segment of gig and platform workers has entered the labour market.

Labour laws, due to their multiplicity and complexity, were looked upon as a major irritant in matters of investment promotion and employment generation. A simple, transparent and compatible labour law was the need of the hour to spur growth and competitiveness. The recent labour codes that have received Presidential assent, therefore, are welcome.

In the past, none of the labour laws have had a common definition or concept. Neither did they have any consistency. The current labour codes have, to a great extent, succeeded in bringing common definitions and concepts, ensuring that there is a commonality and uniformity across codes.

Labour codes also give chance to rectify compliance before any action is taken against them. Offences can be now compounded under the code. This is a major development and has been industry ask for long. E-maintenance of register and records already exists and provides substantial relief to employers.

Once the code comes into play, it will prevail over all other laws in force. Given its overriding clause, it will be interesting to observe how it plays out for legislation under each state. Keeping in view the nature of Indian economy and its sectoral diversification, and predominance of informal sectors, the codes need to be tweaked partially for more effectiveness and better implementation. The central rules for each code will be very important for effective implementation.

The definition of wages as set out in the codes needs greater clarity. It has been the government’s endeavour to simplify the law, but basic terms such as ‘wages’ as drafted are prone to several interpretations, which may lead to litigation. Secondly, due to the new wage definition, there will be a substantial increase in statutory payments that will be an additional burden on the employer. The graded penalty and fixing of the wage period is welcome, but doing away with the concept of schedule employment for fixing wages may render certain types of small household work, requiring limited number of manpower and lower capital, unviable.

Under the Industrial Relations Code, the increase in the threshold limit from 100 to 300 for the purpose of rationalisation measure is appreciable, but applying it across the board, i.e. in all types of industrial establishments, is bound to increase problems manifold. It is in this context that the provision under Chapter V-B needs to be retained. There has also been a need for recognising a bargaining agent to reduce inter- and intra-rivalries amongst trade unions. Hence, the provision for negotiating unions for settling dispute to have 51% membership for sole bargaining right is welcome. Introducing compulsory arbitration on the failure of conciliation will reduce pressure on adjudication machinery, which already has many cases pending.

Under the OSH & Working Conditions Code, employers fully support the increase in the threshold limit of the factory from 10 to 20 with aid of power and 20 to 40 without the aid of power. We welcome allowing women for night shifts, with adequate security measures. Employers welcome the reduction in the lead time for permission of approval for obtaining licence from three months to 30 days.

Inclusion of gig and platform workers and the formulation of schemes for providing comprehensive social security to workers in unorganised sectors under the Social Security Code is laudable.

We’re sure the new codes will promote ease of doing business, thereby encouraging investment and promoting entrepreneurship, and also lead to employment generation by opening new horizons for the informal sector. I am certain these reforms will help us become atmanirbhar.

The author is president, All India Organisation of Employers, an allied body of FICCI