Are the Labour Codes Going to Be Brought In?

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The government is considering bringing the three remaining parts of the proposed labour codes into force simultaneously vide an ordinance. The Code on Wages has already been passed but there still remains uncertainty with regards to its enforcement. COVID-19 and its consequent economic fallout is the main reason the government is contemplating the above action.

Key Highlights

In a press conference on 14th May, Finance Minister Nirmala Sitharaman spoke about the introduction of various provisions in the labour code that were aimed at alleviating the burden that the working class is currently carrying. 

The first of these measures is the proposed reduction in the period of service required for gratuity payment for fixed-term employment. Currently, an employee in such a type of employment would have to complete five years of service as a precondition to avail the benefit. Whereas in the proposed labour codes the requirement is reduced to one year of service.

Another set of measures aims at providing gig/platform workers with a social security scheme and a re-skilling fund for employees that have been retrenched. A National Floor Wage has been proposed to simplify the fixing of minimum wages and to reduce the disparities that exist between various States. The same is strengthened by the universalization of the right to minimum wages and timely payment thereof.

Additionally, there is the proposed expansion of ESIC coverage to all districts and establishments employing 10 or more employees. This marks a departure from the prevailing position of law under which the coverage applied only to notified districts/areas. There is also the promotion of formalization of employment with the Finance Minister promising that all workers will be provided with appointment letters.  

Proposed Reforms: Boon or a Bane?

The government has cited promotion of foreign investment, local employment and removal of bureaucratic red-tape as benefits for India’s private sector. With advocates of the reforms citing the archaic nature of the laws as a reason for their support. Another argument advanced was that these reforms will give the manufacturing sector a much-needed kick-start. It has also been argued that the reforms will improve ease of doing business and will thus provide India with a competitive advantage with respect to its neighbouring countries.

In contrast to the above, major labour unions have opposed the labour codes from time of their introduction. Labour organizations are upset over the government’s unilateral decision-making and have cited the lack of consultations in consonance with the universally recognized principle of collective bargaining as a major reason for their opposition. The above has added to the discontent over the reforms introduced by various State governments suspending certain parts of key labour laws.

Are the labour codes going to usher in a new era of prosperity and growth? Or are they diluting regulatory frameworks to the extent of undermining basic labour rights?

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