New Labour Codes: Pro-business or Pro-labour?

By Yuvaraj Mandal & Anushka Chib

For ages, the employees and employers of India were tangled in a web of complex labour laws. Since the beginning of his tenure, Prime Minister Modi has emphasised the shift from “Satyamev Jayate to Shramev Jayate” which denotes the significance of workers in the process of nation building. For improving the working conditions of workers, the government has enacted several health and welfare schemes as well as recently launched four new labour codes-  the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020, and the Occupational Safety, Health and Working Conditions Code 2020.  

WHAT ARE THE ADVANTAGES OF THE NEW LABOUR CODES?

  1. Simplifying regulations

The four labour codes greatly simplify the process of legal compliance in India. Despite being known for its huge manpower force, India is riddled with massive regulations such as 40 central labour laws and more than 100 state labour laws, which overcomplicate its labour system. As a result, India loses out on potential industrial investments from several nations. Since the four labour codes replace 29 existing labour laws, prospective businesses have an easier understanding of required legal regulations. 

For example, The Code on Wages 2019 replaces The Payment of Wages Act 1939, The Minimum Wages Act 1948, The Payment of Bonus Act 1965 and The Equal Remuneration Act 1976. Not only were some of these laws irrelevant in the present because they were formed in the distant past but they also contained varying definitions of wages which acted as loopholes for exploitative employers.

  1. Promoting effective communication between workers and the management 

Industrial Relations Code 2020 mandates that every industrial establishment should have a negotiating council or a negotiating union. The union which is supported by more than 51 percent of the workers will be declared the sole negotiating union during disputes. However, in events of no majority, the leaders of those unions who have the support of at least 20 percent of the workers will have to proportionately constitute a negotiating council. 

Thus, effective communication between the management of industrial units and their workers is facilitated as various unions will have to reconcile their differences amongst themselves, and the management needs to deal with just a single body, simplifying the whole process of deliberation.

  1. Boosting female participation in the labour workforce

The Occupational Safety, Health and Working Conditions Code 2020 is a promising measure toward empowering women and transgender people in the domain of employment. This code gives women the authority to decide whether to work during night shifts with appropriate safety mechanisms in place and hence, recognises the need for their proper consent. Moreover, this code permits women to work in all establishments for all types of work, something which was not allowed under erstwhile laws. 

An employer is also prohibited from employing a woman immediately within six weeks after her delivery, miscarriage, or abortion, thus giving her adequate rest and recovery. With other amenities such as compulsory creche facility and extended maternity leave being introduced, Indian lawmakers have leveraged the creation of safe working spaces and other incentives to boost female participation in the workforce.    

  1. Empowering  and employing marginalised sections of the community 

There is a growing need to improve the inclusivity of marginalised sections in the Indian employment sector. Labour codes are indeed representative of the government’s efforts to promote such diversity. 

In fact, these codes instruct all establishments to provide separate facilities to transgender people, similar to those usually offered to men and women, such as restrooms, canteens, etc. This aims at providing a conducive working environment for transgender people, whose needs are often not met in society.

At the same time, there are other categories of workers which have been accommodated due to their vulnerability to exploitation. Unorganised sector workers like inter-state migrants, casual workers, gig workers and platform workers are amongst them.

Under the new labour codes, a number of provisions have been formulated for inter-state migrants. Employers need to provide migrant workers with an annual journey allowance for covering their migration expenses. Migrants can avail the public distribution system in the host state and get benefits from the construction cess imposed by state governments. 

Simultaneously, a database of migrant workers will be maintained using an online portal which the government intends to utilise for enhancing their employment opportunities and extending social security benefits.

  1. Extending the benefits of the formal sector to India’s informal workers 

The labour codes, for the first time, provide a proper definition for gig and platform workers. This brings them under the purview of Employees State Insurance Corporation and helps them access formal sector benefits like provident fund, life and disability cover, housing etc. 

The employers of gig workers and platform workers will need to contribute a certain percentage of their turnover to a social security fund for the welfare of the unorganized sector. Thus, the Indian lawmakers clearly understand the requirement to carry out some formalisation of the informal sector.

  1. Encouraging permanent employment and protecting the interests of fixed-term employees 

The Occupational Safety, Health and Working Conditions Code 2020 prohibits contractual employment in the domain of a firm’s core activities. This ensures that the firms are compelled to hire permanent workers to carry out their core businesses, and as a result, have to comply with stricter regulations which protect the rights of workers. 

Similarly, fixed-term employees have been treated on par with the permanent workers. A fixed employee’s working hours, wages, allowances and statutory benefits have been made identical to those of a permanent worker. This is definitely a step ahead to foster workers’ interests in seasonal industries. 

  1. Facilitating worker-friendly employment termination 

Nonetheless, the Code on Wages Act 2019 also demands that outstanding wages should be paid to employees within three days of their employment termination. This directly helps the workers as the management will have to speed up their internal procedures and give workers their due amount within the stipulated duration. 

Therefore, these new four labour codes will have wide-ranging impacts on the Indian labour market and will go a long way in addressing the issues faced by the Indian workers.

WHAT ARE THE DISADVANTAGES OF THE NEW LABOUR CODES?

While the government outlined that these codes were necessary for the economy to recover from COVID and would be beneficial for all, most trade unions and workers feel otherwise. Significant unrest has been witnessed amongst workers regarding these codes as they can have the potential to give an exorbitant amount of power to the employers, further deteriorating the working conditions. The codes also overlook that workers often end up involving themselves in work more than 8 hours per day, despite multiple provisions against it. This is because they fail to take into consideration the time and effort spent on commuting daily, preparing for work the next day, etc. 

  1. Massive power to the employers to hire and fire workers 

Workers have also expressed grievances against the new codes because they assign greater power to the employers to fire and hire employees at their will. The Code permits companies with upto 300 or less workers to fire their employees without any prior government approval, signifying a shift from the current criterion of 100 or less workers. 

This leads to insecurity about the tenure of work amongst the workers, putting them in a constant state of dilemma.   

  1. Increasing political interference in the industrial sector

Another shortcoming of the labour codes is the heavy intervention of the government authorities in the day to day functioning of industrial establishments, adversely impacting the productivity and work environment of the establishment. 

In fact, the state government or central government can exempt all classes of establishments from any or all of the provisions of the Industrial Relation Code, provided it is declared necessary by them in the public interest.

  1. Depriving workers of the Right to Strike

Furthermore, these Codes snatch away the immediate right to strike from workers by prohibiting strikes without prior notice. This severely hampers the ability of the workers to carry out spontaneous strikes in response to harsh working conditions and other unjust practices.

Similarly, no lock-outs are permitted from the employer’s end without prior consent. This becomes a disadvantage for those businesses which operate in markets with irregular demand and fluctuating financial viability.

  1. Reducing the importance of trade unions 

As discussed earlier, the Industrial Relations Code also ensures that employers do not differentiate between fixed term and permanent employees. However, the acknowledgement of individual agreements for fixed-term employees has a bearing on negotiating the services of permanent workers as well. 

Intuitively, this diminishes the role of trade unions in fixing wages and service conditions via collective bargaining. Therefore, the inclusion of individual settlements under the definition of settlement goes against the idea of collective bargaining. 

  1. Loopholes for businesses to exploit

As for the Occupational Safety, Health and Working Conditions Code, it fails to take into consideration any establishments with less than 10 employees. While this has certain benefits, it incentivises employers to hire less than 10 workers to avoid complying with any regulations. 

Issues have been raised about the safety conditions of workers because this code does not require safety provisions to be applicable for workplaces that have less than 250 employees. This implies that workers in small businesses and unorganised groups remain exposed to the risk of hazardous working conditions

  1. Contradictory and confusing regulations 

The Social Security Code 2020 which attempts to define gig, platform or unorganized workers faces the issue of overlapping definitions since many workers can fall into more than one definition. 

Moreover, there is confusion regarding the payment of gratuity to employees who have been employed for a continuous period of five years or more. 

While it is not applicable to fixed-term workers whose contract terms expire before the period, the Industrial Relation Code, on the other hand, considers an employee to be eligible to receive gratuity if he has served the employer for one year. 

This depicts how both the codes are, in fact, contradictory to each other and as a result, no uniform criteria are available to claim gratuity.

Conclusion

In short, the labour codes have been an issue of contention in recent years. The codes were passed in the parliament during the opposition boycott and had been formally made into legislation in 2020. 

However, its implementation has been postponed due to the delays on the part of states in preparing draft rules or state-level regulations. Only after properly executing these codes can the impact of such reforms be accurately assessed. There is a deep mistrust in the minds of the government and workers’ organisations. 

Therefore, a proper dialogue should exist between them and safety mechanisms should be in place to address the issue of potential exploitation.

Yuvaraj Mandal and Anushka Chib are first-year students at Ashoka University.

Image credits – Scroll

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