Story Of The Week


Labour ministry, in the 46th Indian Labour Conference, introduced bills in Parliament despite trade unions opposition for the same. They have proposed the conversion of the 44 labour laws into more manageable 4 codes. Of them, two codes are almost ready – Industrial relations and wages. Social security and safety are in process. Child labour (Prohibition and Regulation) Amendment Bill has been approved. Government is working for Mr. Narendra Modi’s vision of “Make in India”, to raise the country’s place in global ease-of-doing-business rankings and consequently attract capital to fuel economic growth.

Current Scenario:

Currently, there is a lot of distrust among the workers. The focus is on accelerating the manufacturing sector thereby creating productive jobs and removing poverty on sustainable basis. Multiplicity of labour laws is hampering the growth of India as a whole. Some of the areas which command Indian government’s attention, in order for it to achieve its ‘Make in India’ dream are:

  • Legally, 12 weeks of maternity leave to employees is granted. But some organizations offer additional time off and other perks too. For example: Accenture offers 5 months, Flipkart offers 24 weeks paid leave. Citibank, along with some multinational firms and investment banks, offers crèche allowances.
  • The Payment of Bonus Act of 1965 was last revised in 2006 with the following changes – Rs 10,000 salary cut-off criteria used as a base and ‘calculation ceiling’ used for actual bonus payments. Calculation ceiling refers that employees earning more than Rs. 3,500/month were assumed to have Rs 3,500/month as salary. Now, government is referring to an inter-ministerial group which has proposed to raise both the above mentioned thresholds in line with changes in the consumer price index since 2006.
  • Three bills lined up for introduction – Employees Provident Fund and Miscellaneous (Amendment) Bill, Payment of Bonus (Amendment) Bill and Small Factories Bill.
  • EPF Amendment will bring 2 changes – National Pension System (NPS) to be an alternative to the EPF, 9% deduction of salary instead of the current 12% for mandatory provident fund compliance for small scale industries.
  • Expected changes in Small Factories Bill – like compliance with 14 central labour laws, including the Industrial Disputes Act, will not be required if workers are less than 40 workers. Also bill approval will result in doubling of overtime hours from 50/quarter to 100 and in cases of emergencies, from 75 hours to 125 hours. This will create an option for the employers to get the work done easily at times of urgency. And employees will get extra salary on their will as overtime is voluntary.
  • Another step taken by the government includes drafting a proposal to allow companies to hire up to 300 employees, and to lay them off without prior notice. At present, this is only allowed for companies who have up to 100 workers.  But in order to protect the workers’ interest, the government has also raised the prior notice period to three months from the current one month. In addition, the retrenched workers will also be paid an average salary of 45 days (currently they are paid for a period of 15 days).

Our Labour laws are very ‘tardy’. India, where 60-70% of the employees are workers, possesses very complicated laws. These workers are the ones who actually work on the lines and machines without the feeling of being secured. Major problems because of which there is a dire need to reform the labour laws of the country are:

  • There are 250 labour laws in India – both at the central and the state level. In addition to the existing labour laws, the multiplicity of laws has resulted in ineffective implementation.
  • Informal sector has always been a crucial part of the Indian economy. Due to complexity and unawareness about the laws, the compliance with the same has become a major issue.
  • The restrictive nature of labour laws hurt the investments in the manufacturing sector, resulting in an in-acceptance of the same.
  • The Industrial Disputes Act (1947) restricts the closing down of any industrial organization even in an open-shut case, where scope of improvement is seriously low. This is because of rigid provisions such as compulsory and prior government approval in the case of layoffs, retrenchment and closure of industrial establishments employing more than 100 workers.
  • Changing the nature of work of an employee or group of employees can be very tricky as 21 days’ prior notice is required to be given under the Indian law. While not being particularly restrictive, in practice the changes also require the consent of the employees.
  • As the Trade Union Act allows outsiders to be members of the union office, it leads to lockouts and strikes without any genuine grievances.
  • Foreign investors are wary of investing in the Indian market as they are not sure if they would be able to exercise power and control on the Indian employees.

Future course of action:

Keeping in mind the need of the hour, Narendra Modi’s government is looking forward to bring some amendments in the labour laws which are as follows –

  • Maternity leave for working women to increase from 3 months to 6 months. One option could be that provision of this law will be for up to two children only, after that 12 weeks off.
  • Changes in the Payment of Bonus Act, resulting in an increase in the salary limit for getting a bonus from Rs 10,000 to Rs 19,000 per month.
  • Discussions on the Gratuity law i.e. removal of the 5 year continuous service clause in a single workplace to be undertaken, keeping in mind the resultant flaws of transfer from one job to another.
  • Liberal inspection system and a rational and modern system of record compliance. Along with minimum outside physical inspections.
  • Maintain the thin line which divides the interest of industry and industrialists, government and action, labour and labour organisation.
  • More focus on building a robust manufacturing sector in India for the success of “Make in India” campaign.

All this is happening for the success of “Make in India”. Labour Minister Bandaru Dattatreya has assured the International Labour Organization (ILO) that India will live up to its conventions.

Let’s see whether the government will be able to enforce the rules of law or will dilute the principles, in theory or practice and whether the country’s position will be raised in global ease-of-doing-business rankings along with attracting capital to fuel economic growth or not.

  1. Economic Times:

  1. Labour laws: Modi government’s effort to unilaterally push through reforms delaying process:

  1. Labour ministry to introduce bills in Parliament despite trade unions opposition:


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