Labour Law Reforms

Labour reforms mean taking steps in increasing production, productivity, and employment opportunities in the economy that the workers’ interests are not compromised. In India, both the Parliament and the state legislatures can enact labour laws. Before the new labour codes were passed, more than 40 central laws and 100 state laws on labour and related matters.

The central labour laws are integrated into groups like industrial relations, wages, social security, safety, welfare and working conditions because the existing labour laws were old, complex and had inconsistent definitions.

In 2019, the Government introduced four bills on labour to unite 29 central laws. These are Industrial Relations Code, Code on Wages, Social Security Code Occupational Safety, Health and Working Conditions Code. The Wages Code was passed in 2019, and the other three bills were referred to a Standing Committee on Labour. The Government passed these bills in September 2020.

Reasons for Reforms

  • Benefits were limited to the organised sector
  • Complexity and rigidity of laws
  • Labour regulations affect the ease of doing business in India.
  • To improve based on global competition.

Industrial Relations Code, 2020

The Industrial Employment (Standing Orders) Act, 1946 makes it compulsory for employers of industrial establishments with more than 100 workers to define the conditions of employment and rules of conduct for workers through standing orders/services rules and inform the workers of the same. Under the Code, the minimum number of workers to have standing orders is 300. Thus, it becomes more flexible and easier to hire and fire employees, thus increasing employment according to the Government.

Permission from the Government is required before closure, lay-off, or retrenchment of employees in establishments with more than 300 workers.

The Code also introduces new statements for conducting a legal strike. Employees are prohibited from striking without giving a 60-day notice and during the completion of proceedings before a National Industrial Tribunal. They are not allowed to go on strike before 60 days are completed after the tribunal proceeds.

The Code also suggests setting up a re-skilling fund for training retrenched workers of an amount equal to 15 days last drawn by the worker with contribution from the employer. The Code offers a compulsory facility for Helpline for redressal of problems of migrant workers and also plans to make a national database of migrant workers.

Women are permitted to work in every sector at night. The employer has to ensure their security and women’s consent is taken before they work at night.

When an employee dies or gets injured at the workplace due to an accident, a 50 % share of the penalty would be in addition to Employees Compensation.

Code on Wages, 2019

The Wages Code regulates wage and bonus payments in all employments where any industry, business, trade, or manufacturing occurs. This Code replaces the following laws: Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976.

The Code will apply to all employees. The Central Government will decide wages for employment in railways, oil fields, mines, etc. The state governments will decide the wages for other types of jobs. Wages include salary, allowance or other monetary aspect. The Government consider the difficulty level of the work and the workers’ skill levels while fixing the minimum wages. It does not include travelling allowances and bonuses. The Government will review the minimum wage set at least every five years, and the employers cannot pay less than the minimum wage.

The central or state governments will decide the number of working hours. In the case of overtime work, the employee has the right to overtime compensation which should be at least twice the regular wages. The employer can decide the salary period as either daily, weekly, fortnightly, or monthly. The Code prohibits gender discrimination in salaries and recruiting people for the same work or work, which requires skill, effort, experience, and responsibility.

Social Security Code, 2020

The employees now include construction workers, inter-state migrant workers, platform workers, and film industry workers. The gratuity period for journalists has been lowered from 5 years to 3 years. The Code discusses setting up social security funds for unorganised workers, gig workers, and platform workers.

There is a provision for the Government to decrease the employer’s or employee’s contribution to the PF or ESI for up to 3 months in the event of a national disaster, pandemic, or epidemic. The Code proposes the establishment of a National Social Security Board for the formulation of schemes for the various sections of unorganised, gig and platform workers. To make a national database for unorganised sector workers, registration of all these workers would be done on an online portal. This registration would be done based on Self Certification through a simple procedure.

Occupational Safety, Health & Working Conditions Code, 2020

The Code defines a factory as a premise where at least 20 workers work for a process with power and 40 workers without power. The Code removes the workforce limit on dangerous working conditions and makes applying the Code compulsory for contractors recruiting 50 or more workers instead of 20 workers. The Code decides the daily work limit to a maximum of eight hours.

The Code empowers women to be employed in establishments and at night between 7 PM and 6 AM, with their consent and safety. To formalise employment, the owner is required to issue an appointment letter.

The Code defines an inter-state migrant worker as someone who has come on their own from one state and received employment in another condition and earns up to Rs.18000 per month. They can utilise benefits in the destination state regarding ration and benefits of building and construction worker cess.

However, the Code has dropped the earlier allocation for temporary accommodation for workers near worksites.

The Code also suggests a Journey Allowance, which is a lump sum fare amount to be paid by the employer for the worker’s journey from their native state to the place of employment.