Labour Law Reforms

In your opinion, how should India’s labour laws be reformed? In the light of recent debate on the issue and government’s initiatives in this regard, critically discuss. (2 00 Words)

That India’s complicated labour law regime is in dire need of reform is an open secret
  1. Since 1947, India has crafted a plethora of labour laws involving safety at workplace, wages, social security and industrial relations. added layers of complexity to the overall labour law landscape. On the one hand, it has distorted the labour market and on the other it has increased compliance costs of companies. These laws are a big reason for the substitution of capital for labour. This has hurt Indian labour—in terms of employment, training and opportunities—and has not helped anyone.
  2. There are over 200 laws related to labour. Labour being in concurrent list, many states and even centre have enacted laws. So many laws leads to confusion about regulation giving rise to inspector raj.
  3. Due to the complex and massive numbers of labour laws, industries prefer to hire contractual labourers not covered under these laws and without any social security or termination protection. (Industrial dispute act demands government approval in case company having more than 100 employees wants to lay off its employees)
  4. Another major weakness in current labour reforms is less focus on apprenticeship. Our education system is not responsive to need of market therefore apprenticeship becomes important.
  1. Bundle related laws into a specific legal code for a particular industrial aspect. For example, laws related to social security—such as the Employees Provident Fund and Miscellaneous Provisions Act, the Employees State Insurance Corporation Act and other laws—will be bundled into a single social security law or code. Similarly, laws on remuneration of employees will be merged into a single law. This drastically reducing the number of laws that companies are subjected to reduces compliance costs. (Simplify and unify laws)
  2. If each state were to have its own variant of labour law “reforms”, the issue of compliance costs will return. Thus, union govt should spearhead the efforts so that there is uniformity of changes, which will be appreciated by the companies. (Uniformity of laws throughout country)
  3. Laws for formation of trade unions should be relooked and multiple trade unions in one entity should be avoided. (Trade union issues)
  4. Security and equal working conditions of women. (Gender Equality)
  5. In view of undue harassment by the inspectors, recent step by govt for a new inspection scheme based on a computer based allocation of industry for inspection and transparent publication of report on the website is a good measure.
  6. Rise of e-technology is another area which needs to be stressed upon. Designing single window portals for clearance of various formalities will help not only in reducing red tapism and quicker compliance.
  7. Liberalising apprenticeships. Labour information system should be maintained.
  8. Flexibility to undertake layoffs, ensuring adequate benefits and a reasonable notice period is needed. E.g.. Rajasthan has passed act which allows firms flexibility to terminate up to 300 employees without govt approval, unlike the industrial disputes act under which a firm employing more than 100 workers need to get permission from state govt for lay off which is usually not given or delayed.
  9. Contract labourers should be covered under workmen’s compensation act for accidents, with inflation linked wages and limited social security benefits from employee state insurance act and maternity benefit act extended to them
It was recently reported that the International Labour Organisation (ILO) is opposed to India’s labour reform measures. Write a critical note on these measures and examine why ILO is opposing to them. (200 Words)
To realise the dreams of make in India and to tap the demographic dividend of the country, it is essential to have the reforms in labour market. Further there is also need to upgrade the ease of doing business.
Labour reforms:
  1. Number of minimum employees increased from 100 to 300 to have permission from government, in case of retrenchment.
  2. Merging all the labour related central laws in to four labour codes i.e. wages, industrial relations, social security , safety and welfare.
  3. Procedural facilitiesNew portal for filing of returns, to get rid of license raj.
  4. Apprentice ship act – To include more students in this, by augmenting the areas of coverage. Further, it increased the stipend also.
  5. With the Labour laws amendment bill, small establishments can be excluded from the cumbersome labour compliances.
  6. Smart cards for unorganized sector labors and self-certification of the documents etc.
  7. Exempt the factories having 20 workers( power supply) and 40 workers (without power supply) will be out of purview of factories act. Due to strict labour laws, Indian firms remain small thereby loosing economies of scale advantage and unable to compete on global market. This reduce potential of export and job creation.
  8. Another proposed amendment mandates that shelters and restrooms be provided in factories that employ at least 75 people instead of the 150 as at present.
Objections raised by ILO includes:
  • lack of provision for collective bargaining (proposed Labour Code on industrial relations emphasizes arbitration) and
  • not allowing outsiders in union activities.
While concerns of ILO are legitimate in certain sense but they shouldn’t ignore the good provisions and intents of such reforms. The ultimate aim is to provide productive and gainful employment along with decent working conditions to millions of youth. All stakeholders should work in coordination and harmony to achieve that.
According to the World Bank, rigid labour laws are a hindrance to growth for India. The maximum number of employee that can be absorbed is in manufacturing sector. Currently, the share of Manufacturing in GDP in India is only 16% while that of china is 32%. If India envisages of  “Make in India”then its labour laws needs to be in line with international standard and not so rigid.



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