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Coming Soon: Make in India, the (Un)laborious Way!

By: Aditi Rani

Here’s a brief reckoner on the recent labour law reforms in India:

Projected to be the fastest growing major economy for the second year in a row, the spotlight on India has never been greater. Being the world’s second populous nation with a labour force of 530 million, labour occupies a significant place in the economic growth trajectory of India.

Labour falls in the concurrent list of the Constitution of India that means both the central and the respective state government can legislate on such items, with the residual law-making powers vesting with the centre. This has resulted in a plethora of over a hundred central and state laws related to industrial relations, wages, social security, employment and training, employment of women, etc. Different labour laws are applicable to a company depending on the specific nature of its business activities and employee strength. Laws such as the state-specific Shops and Establishments Acts and the centrally-enacted Factories law regulate employment conditions of commercial establishments and factories respectively besides setting out standards for working conditions, safety of workers, health and hygiene conditions, employee working hours and provisions aimed at protecting employee welfare. Labour compliance is therefore quite an onerous task for companies doing business in India with numerous registrations, maintenance of records and filing requirements under different statutes with multiple authorities in different states.   

With the realization of India’s rigid labour laws hurting its economic growth prospects, the national government has been pursuing a pro-reform agenda over the last two years to make India a global manufacturing hub and ushering in labour reforms gradually. The general trend has been to move away from a strict license/inspection regime to a self-certification regime revamping archaic regulations and simplifying regulations to protect employees’ interests yet make it easy for businesses to be set up and achieve scale.

One of the game-changers this year is expected to be the merging of over 40 labour legislations into four codes, broadly covering wages, industrial relations, social security and employee safety/ working conditions. Besides reducing the number of laws employers have to comply with, this codification exercise is aimed at phasing out obsolete regulations and replacing them with laws that meet the present needs of the workforce and businesses in the technology age. For example, wages is regulated by laws governing payment of wages, minimum wages, bonus and equal remuneration for different categories of workers. Such relevant legislations will be consolidated into a national wage code to cover both the organized and unorganized sector. Similarly, the labour code on industrial relations is expected to consolidate and amend the law relating to registration of trade unions, conditions of employment, investigation and settlement of disputes and related matters. The law governing contract labour is also expected to be amended to make it more flexible for companies to hire and fire contract labour.

While a recent amendment to the Child Labour Amendment Bill, 2016 prohibiting the employment of children below the age of 14 years, yet allowing them to help out in family enterprises after school hours, was globally condemned as exploitative. The labour ministry is considering amending the statutory maternity leave provisions for women employees. The amendment seeks to extend the maternity leave from 12 weeks to 26 weeks besides bringing in provisions relating to work from home in some cases.

This long overdue rationalization exercise on multiple aspects will practically overhaul the legislative framework governing labour in India besides aiming to formalize its workforce and provide universal social security. Some states such as Rajasthan, Maharashtra and Gujarat have already initiated labour reforms on a war footing to ease the compliance process and provide businesses with operational flexibility. Being fairly transformative in its nature and reach, the proposed labour reforms are causing some concern among some sections of the labour force (unskilled) as they apprehend losing the job security traditionally enjoyed by them over the years. However, the government is in discussions with different industry representative groups and trade unions endeavouring to strike a fine balance at protecting workers interests and simplifying compliances for businesses. 


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