Finally, in working condition

Context: Government has recently passed legislation — Industrial Relations Code, 2019, Occupational Safety, Health and Working Conditions Code, 2020, Code on Social Security, 2020 — on three labour codes focusing on social security, industrial relations and occupational safety.

Issues with Labour Sector:

• Regressive nature of labour laws: Manufacturing sector remained stunted since the 1970s and 1980s due to the regressive nature of labour laws.

• For firms with seven or more Employees Trade Union Act, 1926 was applicable.

• For firms with ten or more Employees Factories (Amendment), Act 1987 kicked in.

• The Industrial Disputes Act of 1947 became operational when the number of employees reached 100. 

• The enterprise could not fire an employee without prior approval from the government, even if the enterprise is bankrupt.
• With exit options limited, investors were wary of investing in the manufacturing sector.
• Small coverage: The Industrial Disputes Act covered about 2.6%, the Industrial Employment (Standing Order) Act, 1946, covered about 1.3%, and the Shops and Establishments Act covered only about 1.7% of the labour market.
• International Competition: Countries like Vietnam and Bangladesh overtook India in textile exports.

Advantages of recently introduced labour reforms:

• Industrial Relations Code: It will allow companies with up to 300 workers to fire workers without prior approval, providing greater flexibility to employers. 
• The law consolidates three laws associated with dispute management and collective bargaining, while making provisions for establishing a reskilling fund, with the employer contributing 15 days’ salary for a retrenched employee. 
• Strikes now require a 14-day prior notice, along with a detailed process to recognise Unions.
• The Occupational Safety, Health and Working Conditions Code: It consolidates 13 laws governing health, safety and working conditions for labour.
• Provides flexibility to state governments to exempt new factories from the provisions of the code (Covid-19 outbreak, for instance), while entitling women to work during the night shift.
• The Code on Social Security: consolidated nine laws and four registrations overseeing social security for workers, including contractual, migrant and platform workers.
• Elevation of Contract workers, who will now be treated as direct employees of a company. 
• Relief to Migrant workers, who are offered greater protection, with state governments required to maintain records of such workers. 
• Migrant workers are also allowed a journey allowance once a year to visit homes, along with gaining access to the public distribution system (PDS).
• Synergy in reforms: India has passed key structural reforms, recently, in labour, agriculture and education, which in synergy will enable both labour and capital market.

Conclusion: Such reforms will free Indian entrepreneurs and firms from a maze of filings, compliances and laws that have effectively created a rent-seeking State.