Government's Debatable Labour Codes Are the new amendments prescribed in the labor laws sufficient for accomplishing the envisioned objectives?

By Shivanand Pandit

Opinions expressed by Entrepreneur contributors are their own.

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Around the world, enduring business sustainability has been gravely hit by the deadly epidemic. The economic disaster shaped by the contagion has placed livelihood of billions of people in a hazardous position. Such circumstance calls for power-packed reforms from the government such as resilient employment strategies and wide-ranging social fortification schemes to safeguard the functioning of business entities and the health and welfare of every worker. For that reason, to strengthen diverse or old labor laws and reinforce reforms fall in this group, Parliament has passed the three labor codes in the pandemic forced short duration monsoon session. The Industrial Code Bill 2020, the Code on Social Security Bill 2020 and the Occupational Safety and Health and Working Conditions Code Bill 2020 are the new varieties of labor codes.

For close to thirty years, people wanting robust labor reforms have called for revolutionary changes in India's antiquated labor laws. Since 2004 UPA I and UPA II tried to execute the labor reforms but strong political opposition paralyzed its intention. Although Yashwant Sinha, who was the finance minister in the Atal Bihari Vajpayee government, had proposed few modifications, but extensive disparagement compelled him to retrace his moves. Even the Narendra Modi government having comfortable majority in the Lok Sabha took long time to alter the nation's labor rules. After a long wait, the labor laws have ultimately been rabbited and many central laws have been chomped into new codes. Though the government intends to upsurge the domain of social security or safety by including inter-state migrant workers, it has also propositioned measures that will offer bigger suppleness to employers to hire and fire workers without obtaining government authorization.

New wine in the new bottle

The Industrial Relations Code Bill contains terms to confine the rights and privileges of workers to strike. The government also recommended a rise in the limit connecting to dismissals and retrenchment in industrial firms having 300 workers from 100 workers or more at present. The Code has increased the threshold for prerequisite of a standing order containing regulations of conduct for workmen employed in industrial organizations to more than 300 workers and therefore industrial establishments with up to 300 workers will not be obliged to furnish a standing order.

In April 2020, the standing committee on labor had also endorsed raising the verge to 300 workers. However, few state governments such as Rajasthan had already enlarged the threshold. Accordingly, the provisions of standing order prescribed by Industrial Relations Code will be mandatory for every industrial establishment wherein three hundred or more workers are employed, or were employed on any day of the preceding twelve months. Fresh terms and conditions have also been specified for carrying out a legal strike. The time period for arbitration or negotiation actions has been incorporated as against only the time for conciliation at present. As per the Code, no person employed in an industrial establishment shall go on strike without a 60-day notice and during the pendency of proceedings before a tribunal or a national industrial tribunal and sixty days after the ending of such proceedings.

The Code covers all industrial institutions for the obligatory notice period and other stipulations for a legal strike. The standing committee on labor had suggested against the extension of the mandatory notice period for strike beyond the public utility amenities such as water, electricity, natural gas, telephone and other elemental services. Currently, a person employed in a public value service cannot go on strike without giving notice for a strike within six weeks before going on strike or within fourteen days of giving such notice. The Code has also suggested a worker re-skilling fund and mentions that the employers' contributions towards the fund should be amounting to fifteen days wages very last drawn by the worker immediately before the retrenchment or cutback along with the contribution from such other sources.

The remaining two codes also proposed various transformations for intensifying welfare and safety of workers. The second one, Social Security Code proposed to establish National Social Security Board to advise the central government in devising apposite strategies for diverse segments of unorganized, gig and platform workers. According to the Code aggregators engaging gig workers will have to contribute 1-2 per cent of their yearly turnover for social safety. However, the total amount of contribution should not be beyond 5 per cent of the sum payable by the aggregator to gig and platform workers.

The third code, namely Occupational Safety, Health and Working Conditions Code has widened the definition of worker and included inter-state migrant workers in the definition. According to the definition the worker who has come voluntarily from one state and obtained employment in another state, having monthly earning up to INR 18,000 termed as migrant worker. This makes a difference from the contemporary definition of only contractual employment. The Code has erased the previous provision for provisional housing facility for workers near the worksites and recommended a journey allowance and the employer should pay a lump sum amount of fare to assist the worker to travel from his or her native place to the place of his or her employment and back.

Sweet-Sour reform

To large extent, the ratifying of labor codes viewed as a breakthrough which came after several years of deliberations between the government, industry, trade unions and other patrons. The new codes introduced may fabricate novel setting for job creation due to mass applicability of the law to approximately 580 million of workers along with other policy reforms such as Shram Suvidha Portal, Micro Units Development and Refinance Agency, Startup India, Make in India, Skill India, Digitization of labor law compliances, etc. Involvement of female labor force is a mainspring for any nations' rapid growth. For a long time, dwindling women's workforce contribution in India has been a matter of grave concern. By allowing the employment of women in night shifts for all nature of work the new labor law has bought major change.

The induction of new labor reforms is highly greeted by the business community and many are of the opinion that restructurings will surely enhance entrepreneurship and investments which are vital for stimulating India's economy. According to Confederation of Indian Industry, all three codes are reformist and aid to construct a future of work that is securer, rational, simpler and more buoyant. It has also mentioned that the reform measures deal with the fundamental needs of revival of economy and eradiation of barricades of growth of business firms.

Numerous transformations introduced in the inspection rules specifically the Web-based randomized electronic inspection scheme, jurisdiction-free inspections, calling of information electronically for inspection, compounding of offences, etc. are progressive. In addition, several registers, returns and forms can be filed and maintained electronically in a single template. Many corporate entities will be profited by this move.

At the same time, the codes have dark side too. In their entirety, they have bestowed excessive autonomy to establishments relating to appointment and dismissing of employees which will adversely affect the genuine claims of trade unions. Enhancement of threshold of standing orders will dilute the labor rights for workers in minor business firms having less than 300 workers and this indicates the government is very eager to give enormous volumes of elasticity to the employers in terms of hiring and firing and employers can misuse this freedom of dismissal or retrenchment for any economic reasons. This will lead to widespread destruction of employment security and safety. Stretching the lawfully allowable time frame before the workers can go on a legal strike will make the legitimate strike practically dreadful and more challenging.

Moreover, these codes have given massive liberty to governments to exempt industrial units from the ambit of the law and to define the boundaries within which they will perform their business activities. The strong evidence for this is how Uttar Pradesh lately attempted to exempt employers from many labor reforms by a decree.

The codes do not forbid many erroneous actions like not keeping a register and allow compounding penalties to be paid instead. Expansion of the scope of codes to all segments of workers is also dubious and this prevents many to proclaim the new legislation. The codes are not focusing on reducing the number of operational laws recognizing ongoing actualities.

To conclude, between 2022 to 2032, India is protruded to have the largest working populace in the world. About 10 million youth will enter the workforce per annum. Employment capability of the industry is indispensable to unleash the true latent of such robust workforce. Therefore, instead of beating the drums the government must introduce utilitarian labor laws to address the complexities and managerial encumbrance in the labor regime. The new amendments prescribed in the labor laws are not sufficient stipulation for accomplishing the envisioned objectives. Credible changes are necessary to lower the cost of factory land, transport, electricity for industrial consumers, streamlining of elucidation of tax and other decrees, preserving a suitable exchange value for the rupee etc. Failure to do all this will have the opposite of the anticipated outcome and workers earnings will get pressed down completely. One is not certain whether the union government has conversed national trade unions including its own sister entity Bharatiya Mazdoor Sangh, before introducing new labor law vicissitudes. Undoubtedly the government is taking a gigantic risk in pushing these unprecedented modifications deprived of decorous dialogue and debate.

Shivanand Pandit

Tax specialist, financial adviser

He is a tax specialist, financial adviser, guest faculty and public speaker based in Goa. He can be reached at

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