[Answered] “The consolidated codes on labour laws to simplify and consolidate labour rules and laws is need of the hour”. Comment. Discuss the need of labour reforms in India.

To simplify and consolidate labour rules and laws under four codes, the Occupational, Safety, Health and Working Conditions Code, was approved. The Code on Wages Bill seeks to include more workers under the purview of minimum wages and proposes a statutory national minimum wage for different geographic regions, to ensure that States will not fix minimum wages below those set by the Centre.

Why Simplification and consolidation of labour laws?

1. Welfare of labour: Labor protection legislation is one of the basic features of welfare state and aims at providing social justice. The main aim of such laws should be to create more, safer, and rewarding jobs for the labour. This includes standards on minimum wages, working conditions, overtime controls etc. Thus simplification of labour laws is must.
2. Numerous laws: For the fulfilment of above needs, there are numerous overlapping, rigid and isolated acts (about 145), which are applicable to firms at any point of time. This gives immense powers to public officials and results in harassment of employers. It leaves room for corruption and increases compliance costs in terms of money and time. This type of policy runs counter to above stated desirable objectives. This makes our firms uncompetitive to foreign firms. It is quite apparent from the perpetual dismal performance of Indian manufacturing sector.
3. Huge Informal Sector– India have about 85-90 % of the workforce employed in informal sector on which these laws are not applicable. These are micro firms employing as low as 5-10 persons. These employers are discouraged to expand their businesses, by such huge number of regressive laws. Neither they have understanding of laws to that level and services of Lawyers to ensure compliance is much expensive. Further, huge majority of workforce get no formal training. This results in low productivity and low value addition.
4. Entry and exit Barriers for firms and Job security for workers– Law for this provides that government approval should be taken before retrenchment of the workers (in case industrial dispute act apply). As a rule for good economic environment, there should least entry and exit barriers for Firms in any business. But in addition, social security of the workers is indispensable. It should be notice that a businessmen will scale down his operations almost only in face of losses or in drive of modernisation.
5. Informalisation: Indeed, a major weakness of the Indian economy is the ‘informalisation’ of the economy with large numbers of workers who have little job security and earn less too. Moreover, since contract and casual workers can be easily fired, the inability to fire the workers they hire cannot be the constraint on employers growing their enterprises.
6. Changing technologies: Technologies are changing rapidly and automation is leading to loss of jobs. Thus rights of workers for decent treatment, fair wages, and adequate social security need to be taken care of through simple rules and regulations easy to understand.
7. Archaic laws: India’s labour laws are archaic, too many, often contradictory, and badly administered. They must be reformed. The reformed laws must suit emergent conditions. They must provide more flexibility to employers. Above all, they must ensure fair treatment of workers, and provide a wider social safety net. Reforms must be made with consensus amongst workers and their unions, and employers and their associations.

Labour reforms- are they the need of the hour?

1. Complex law system- Under the Constitution of India, Labour is a subject in the concurrent list where both the Central and State Governments are competent to enact legislations. As a result, a large number of labour laws have been enacted catering to different aspects of labour e.g occupational health, safety, employment etc.  Therefore, there are 44 labour legislations at central level and almost four times of them at State level. As a result, it created a lot of redundancy and loopholes in the legal system which paves way to exploitation of labour. Implementation of this complex system of laws has also become a challenge to limited number of Labour Enforcement Officers in India.
2. Labour exploitation- Because of the predominantly heavy handed labour regulations (also called as Inspector Raj) with exploitable gaps, the MNCs and domestic organizations have resorted to alternate ways i.e. employing contract labours at less than half the payroll of a permanent employee. India has 94% of its workforce in its unorganised sector. With a second highest workforce of 487 million workers (next to China), Indian GDP is grossly undervalued. This 94% of unorganised workforce accounts for 57% of GDP while the remaining 43% comes from the meagre 6%. This huge workforce getting trapped in unorganised sector is largely attributed to our stringent labour laws. Thus labour reforms are needed.
3. Impact of delay of labour reforms: The Labour Reforms if not implemented soon, it would take a gross hit on India as an investment destination. Also it would incur huge loss to the economy due to undervalued GDP production. This reflect the dire need for reforms. The other reason we quoted was economic loss. The data shows that 94% of Labour force in India is in unorganised sector and that shows how grossly Indian GDP is undervalued. This is so because the income of these people in workforce is very much less than the permanent workforce for the same output. The improper regulations coupled with complexity have led to misuse of vast Labour of India.
4. Issue of contract labour- One of the main reason for labour reforms is the concept of contract labour. Trade Unions suggest that this concept itself should be removed. There is stringent hiring and firing process defined in Industry Disputes Act. It makes it mandatory for the organization to seek Government permission before removing an employee.

This highly regulated firing process would motivate Employers and MNCs to hire contract labour. Balancing this has become a challenge to Government. Easing of firing rules would also have a detrimental effect on collective bargaining power of employees as it makes easier for employers to fire the employees and harass them in the event of encouraging the union formations. But on the other side, having a strong labour policy would make the nation a more socialist country. Thus labour reforms are needed.

Simplification and rationalisation of labour laws will require examination of labour laws individually. If necessary, certain laws may be considered for being repealed. A consensus will have to emerge from the stakeholders regarding this. Similarly, few common definitions can be provided for things like classification of work force etc. Also the wage difference between contract and temporary should have a ceiling.