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The government has amalgamated and simplified 29 labour laws into four codes. While this is being called simple consolidation, there are significant changes that will remove rigidities in the labour laws. Over 20 sticky provisions across these four codes can now be changed through simple notification without requiring any amendment in the Acts.In other words, codification of labour laws has given immense flexibility to the government (centre/states) to notify changes in labour laws as per requirement. Be it changing thresholds for coverage under respective codes, or seeking approval from the government for retrenchment beyond a certain threshold of employee strength, or changing the definition of allowances under the Wage Code and that of worker under the IR Code, all this can now be done through simple notification, making it much easier for a government to tweak their labour laws.This, the labour ministry claims, will substantially improve the ease of doing business in India, as going forward “we can tweak labour laws as per the requirements of the country and states”.
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“Labour is in the concurrent list and sates will now have greater responsibility to drive labour reforms and attract investments, based on their labour market and industry scenario,” a senior labour ministry official said.India ranks 103 out of 141 countries on the competitiveness of its labour market, according to the latest World Economic Forum Report. Apprehensive of the rigid labour laws in India, investors usually prefer other destinations for setting up manufacturing units across sectors. “Restrictive labour regulation in India is associated with a 35% increase in firms’ labour costs,” according to a research paper by University of Kent economist Amrit Amirapu and Michael Gechter of the Pennsylvania State UniversityFor example, the Code on Social security, 2019 has given flexibility to the Centre to tweak thresholds on the number of employees as well as wage ceiling for employees in an establishment to be covered under the Employees’ Provident Fund Organisation and the Employees’ State Insurance Corporation through simple notification instead of any amendments to the legislation.
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This is significant. Till now, any such change could have been done only through amendments of the respective Acts. The Labour ministry’s view is that it takes very long as it has to go through the Parliament. Currently, it is mandatory for an organisation employing more than 20 people with basic wages up to Rs 15,000 to provide coverage to its workers under the EPF & MP Act, which makes the employees eligible for provident fund, pension and insurance.Similarly, all factories and establishments with 10 or more persons with monthly wage up to Rs 21,000 are covered under the Employees’ State Insurance Scheme and get benefits like health insurance, death and disability coverage among other benefits.According to an industry representative, moving from legislative powers to executive powers will speed up the process of labour law changes in the future. “It is a welcome step as the issue of tweaking labour laws will not be politicised anymore as the government of the day would not require to go back to Parliament,” BP Pant, former advisor (labour), Ficci, added.However, the proposal is likely to face stiff resistance as trade unions feel that the essence of the law has been done away with by giving all powers to the government to tweak the threshold. Bharatiya Mazdoor Sangh, a central trade union with affiliation to RSS, has strongly condemned the proposal saying any such notification will have to be vetted by the board before being implemented. “Government cannot bypass the board of trustees of EPFO. Hence, we will oppose any such proposal for a notification as and when it comes to the board for consideration,” Vrijesh Upadhyay said.If this was not big enough, the government has also given powers to competent authority to change the threshold on number of employees needed in an establishment seeking closure or retrenchment under the Industrial Relations Code through notification through retaining the current threshold at 100.
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This means as and when the state government feels that the threshold has to be raised, they can do it without any amendment to the legislation, thus making it easier for employers to retrench people or close down units without seeking prior government approval. States like Gujarat, Jharkhand, Uttar Pradesh, Madhya Pradesh, Rajasthan, Haryana, Andhra Pradesh, Maharashtra, and Assam have allowed factories with 300 workers to retrench staff without official sanction after seeking Centre’s nod. “Going forward, Centre’s nod will not be required,” the official said.However, industry is unsure if the impact of this move will be positive. “While this means easier governance for the government as they would henceforth not require Parliament approval, it does not benefit employers as government will continue to play the decisive role,” Rituparna Chakraborty of the Indian Staffing Federation said. Labour ministry has proposed four labour codes after amalgamating relevant legislations under each code. While the Labour Code on Wages has been approved and notified, the Code on Occupational Safety, Health and Working Condition is under consideration of the standing committee on labour. The other two codes, the Industrial Relations Code, 2019 and the Code on Social Security, 2019 — introduced in the last winter session of Parliament — has also been sent to the standing committee on labour for examination as the government feels a large number of technical provisions in the two bills need further vetting.
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