Since when the Current Central Government Came into power, two things were discussed very frequently which were 1) Labour Reforms and 2) Ease of Doing Business and both these things are some where interrelated, as from time to time if you bring reforms in labour laws the ease of doing business will itself boost and jump upwards.
In India, the labour acts would fall under concurrent list which means both central government and state government could make laws on it. There were more than hundred acts in various states which were governing the labour laws and at the same time there were more than 40 acts which were governed by the central government, due to which the labour compliances in the nation turned out very complex.
To resolve all this complexity a Labour Commission was formed in Year 1999 to which they submitted their report in year 2002 and recommended that the then current labour laws are very old and outdate and need an immediate reform. Agreeing to it, the then central government agreed to come up with the four labour codes. However many Governments came in power since then, but those four labour codes were passed recently in year 2019 and 2020.
With the help of current reforms in labour codes, the central government aims to push India to among the top countries in ease of doing business index. As per the Ease of Doing Business report for year 2020, India had jumped 14 places to the 63rd position in the ease of doing business rankings. India has improved its rank by 79 positions in five years (2014-19).
A detailed comparison score has been charted out after reviewing the Ease of doing business index global reports of the under mentioned countries for the mentioned years.
Multiplicity of labour laws has resulted in distinct compliances, increasing the compliance burden on firms. On the other hand, the labour enforcement machinery has been ineffective because of poor enforcement, inadequate penalties and rent-seeking behaviour of inspectors. The Codes address some of these aspects.
So many labour laws were creating confusion and overlapping, so the government had a look out on the same and decided to remove this confusion by introducing 4 Labour codes in place of 40+ Labour laws. This would result in
The very first Labour Code that is code on wages was the first milestone in Labour Law Reforms which consolidate four labour laws viz; Payment of Wages Act, 1936, Minimum Wages Act, 1948, The Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976
Now, let’s discuss the recently passed Three Labour Codes.
KEY CHANGES IN INDUSTRIAL RELATIONS CODE, 2020
The Second Labour Code that is the Industrial Relations Code, 2020 combines three labour laws viz; Trade Union Act, 1926, Industrial Employment (Standing Orders) Act, 1946 and Industrial Disputes Act, 1947
The major changes in Industrial Relations Code relates to number of workers. If there are 300 or more than 300 workers in an establishment then it has to compulsorily make rules and regulations on 1) Workers Classification 2) Wage Rates 3) Holidays and 4) Paydays. These regulations are also called Standing orders. Earlier this limit was of 100 workers.
Next change from this code is, if in any establishment there is activity related to Closure, Retrenchment or Layoff, in which there are more than 300 workers, then it has to obtain prior permission from government
This Code also talks about that, if any employee/worker has to go on strike then it has to give the establishment a 14 days prior notice, before strike or lock-out and this notice would be valid for maximum of 60 days.
In this code there are few changes made for Trade unions as well. If in any establishment there are more than one trade unions, then it would be provided with Sole Negotiating union only when at least 51% of the employees are members to it. Earlier this requirement was of 75%.
KEY CHANGES IN CODE ON SOCIAL SECURITY, 2020
The Third Labour Code that is the Code on Social Security, 2020 Substitutes Nine labour laws viz; The Employees Compensation Act, 1923, The Employees State Insurance Act, 1948, The Employees Provident Fund and Miscellaneous Provision Act, 1952, The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, The Cine Workers Welfare Fund Act, 1981, The Building and Other Construction Workers Cess Act, 1996 and The Unorganized Workers Social Security Act, 2008.
This codes brings out a concept of universal social security for the very first time, which includes organized workers as well as unorganized workers. Various provisions are made for comprehensive social security to workers of unorganised sectors as well.
This code speaks about that Government should from time to time formulate and notify suitable welfare schemes relating to provident fund, employment injury benefit, housing, educational schemes for children and further more.
In this code the definition of employees has been expanded to include more workers like, interstate migrant workers, gig workers, platform workers, film industry workers and further more.
After this code came, the gratuity period for working journalists has been now reduced from five years to three years.
Taking into view the recent Covid-19 situation, the government may in future, reduce Employer’s and Employee’s contribution percentage in provident fund, in case there is another such Pandemic, Endemic & National Disaster situation.
KEY CHANGES IN CODE ON OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS, 2020
The Fourth Labour Code that is the Code on Occupational Safety, Health and Working Conditions, 2020 Substitutes thirteen labour laws viz; Factories Act, 1948, Dock Workers Act, 1986, Contract Labor Act, 1970, Inter-State Migrant Workers Act, 1979 and Nine other Acts.
Apart from regulating employment, the main focus of this code is to regulate health, safety and working conditions.
The definition of factory has been expanded, if in any establishment where there are more than 20 workers where power aid is used or where in the number of workers is more than 40 but there is no use of power aid, then it would come within the definition of a Factory.
The earlier limit on manpower limit on hazardous working conditions has now been removed. This code has now become compulsory on contractors who employees more than 50 workers. Under this code the daily work limit cannot be more than eight hours.
Under this code, now a woman can work in any establishment.
It would the responsilibty of the employer to provide adequate safeguard in hazardous conditions.
Both Central and State government has to maintain a record of inter-state migrant workers. For this the government is planning to soon come up with a portal.
Worker earning till Eighteen Thousand Indian Rupees would be called by inter-state migrant workers and can obtain various benefits.
Other Key Amendments:
a) The total number of hours of work in any day will not exceed twelve;
b) The spread over, inclusive of intervals for rest, will not exceed thirteen hours in any one day;
c) The total number of hours of work in any week, including overtime, shall not exceed sixty;
d) No worker will be allowed to work overtime, for more than seven days at a stretch and the total number of hours of overtime work in any quarter shall not exceed one hundred and twenty five;
e) Such overtime work shall not be made compulsory or obligatory for any
It would be a huge task for both the State and Central Government to cope up with the new labour codes. As per these codes, now the employers will change their policies and infrastructure then unorganized workers, who were neglected till date will get the basic security and results in business growth. Now with time only we will get to know that how effective and beneficial these new changes will be to the employees, employers and to Economy in general Labour laws would act as catalyst after the reform process is completed with passage of time.
At present, it is cumbersome to be an entrepreneur due to this vicious web of old labour laws which make compliance practically difficult. It is easy to seek employment rather doing own business and becoming a job creator. The codes provide for ‘one labour return, one licence and one registration’ to smoothen compliance.
The major challenge in labour reforms is to facilitate employment growth while protecting workers’ rights. Key debates relate to the coverage of small firms, deciding thresholds for prior permission for retrenchment, strengthening labour enforcement, allowing flexible forms of labour, and promoting collective bargaining.
Further, with the passage of time, labour laws need an overhaul to ensure simplification and updation, along with provisions which can capture the needs of emerging forms of labour (e.g., gig work).