Three new Labour Code Bills were recently passed in the Rajya Sabha on 23 September, 2020 even amidst boycott by the Opposition. These Bills are:
1. Industrial Relations (IR) Code Bill, 2020
2. Code on Social Security Bill, 2020
3. Occupational Safety, Health and Working Conditions Code Bill 2020
These Bills have expectedly created a lot of ripples from different quarters, though they have been hailed by some as a major step in the direction of much-needed labour reforms. These reforms will have profound implications on various sectors in India like manufacturing, construction and services in the coming years.
These three Codes, along with the Code on Wages (already passed) have been drafted to replace 29 labour law acts. From a legislative perspective, to have labour laws condensed and simplified in this manner, is certainly a welcome move.
Below is a brief explanation of some of the changes that the Codes have introduced.
A. Industrial Relations (IR) Code Bill 2020
1. Standing Oder Requirement: As per the Industrial Employment (Standing Orders) Act 1946, it was obligatory for employers of an industrial establishment where 100 or more workers are employed, to clearly define the conditions of employment and rules of conduct for workmen, by way of standing orders and to make them known to the workmen employed in the establishment. Standing orders relate to matters including manner of informing workers about work hours, holidays, paydays, and wage rates, termination of employment and grievance redressal mechanisms for workers.
The IR Code Bill has now raised the threshold for standing order requirement to 300 workers, which means that industrial establishments with up to 300 workers will not be required by law to issue standing orders.
While industries have welcomed this change, the concern from the working class is that it will dilute the labour rights of the workers in such smaller establishments. There is concern that this will give smaller establishments the power to hire and fire workers more easily and solely to their convenience, resulting in the further dilution of employment security.
2. Notice period for strikes: Another change that has been introduced through this Code pertains to the conditions for carrying out a strike. As per the Code, no person employed in any industrial establishment shall go on strike without a 60-day notice. Strikes cannot be held during the pendency of proceedings before a Tribunal or a National Industry Tribunal and 60 days after the conclusion of such proceedings.
Evidently this change is in favour of industries and might help in reducing disruption in productivity. On the flip side, it makes it extremely difficult for workers and unions to voice themselves through strikes and could be seen as weakening them.
B. Code on Social Security Bill, 2020
This Code is intended to provide social security to even the unorganised sector which includes gig and platform workers.
1. Social Security fund: There is a provision for the establishment of a Social Security Fund for the welfare or unorganised workers.
2. Aggregators’ contribution to social security: Aggregators employing gig workers will have to contribute 1-2% of their annual turnover for social security. The total contribution should not be more than 5% of the amount payable to the gig workers.
One of the factors that has led to this provision is the advancement and spreading of digitalization-based activities, such as phone ‘app’ based taxi services, food deliveries, and many other services which are currently unorganised.
3. Fixed term contract: The Code makes provision for fixed term employment. Fixed term contract is an employment contract between employer and worker where the term of employment is fixed to last for a certain period of time. The contract can be renewed even after the expiry of this fixed term.
The provisions allow employers to engage workers directly on fixed term basis, reducing the role of middlemen such as agencies and contractors. This may be a big game changer for skilled labour workers like masons, carpenters, fitters, welders etc who can be employed by principal employers directly, instead of through labour contractors who usually take away 20 to 30 percent for their services. As the skilled labourers can be directly employed, this eliminates the need for labour contractors who have flourished at the expense of labourers who are paid minimum wages only, and incentivises the labour instead.
The Code entitles fixed term employees the same benefits, such as pension and medical insurance, and same conditions of work as are available to permanent employees.
While on one hand this is expected to allow flexibility to employers to hire best-suited workers for work that is temporary in nature, for example, workers required to complete a certain project, on the other hand, the bargaining power lies with the employer alone to decide whether or not the contract must be renewed, which may create job insecurity for employees.
C. Occupational Safety, Health and Working Conditions Code Bill 2020
1. Inter-state migrant workers: This Code defines ‘inter-state migrant worker’ as a person who has been recruited by an employer or contractor for working in another state, and draws wages within the maximum amount notified by the central government. Any person who moves from his own state to another state and obtains employment there will also be considered an inter-state migrant worker. The Bill further specifies that only persons earning a maximum of Rs.18000 per month or such higher amount as the central government may notify, will be considered as inter-state workers.
The Code provides for some benefits to inter-state migrant workers such as insurance and provident fund benefits available to other workers in the same establishment.
2. Single licence: Through this Code, top staffing firms will now be required to obtain a single licence to hire workers on contract across different locations, as opposed to the earlier requirement of multiple licences.
Prima facie, the Codes seem like a way of modernising Indian labour laws, by increasing flexibility for industries and thereby improving the ease of doing business. Hopefully, this will result in a boost in the investments in best labour-intensive industries in India. Modernisation of labour laws is also seen in the making of provisions for the security of workers in industries of recent origin such as gig economies. However, the Codes have given rise to panic and confusion among workers and unions as many aspects have either been left undefined or are ambiguous, for example, no specification has been provided regarding the minimum and maximum tenure of fixed term employees. Furthermore, some provisions that were previously included in the Labour Bills, that could have benefitted workers, such as displacement allowance to inter-state migrant workers, have been removed now.
While ostensibly the intention of these labour reforms is to strike a balance between industrial growth and protecting worker’s rights, much will depend on implementation and redressal mechanism.
- K SUNDARESHA
