The new government at the Centre after the national elections should prioritise big-ticket labour reform to improve working conditions, attract investments to spur employment creation and overall growth.
Forty-four central labour laws have been subsumed into four codes on wages, social security, occupational safety, health and working conditions, and industrial relations.
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Although these codes were passed in Parliament between August 2019 and September 2020, they have not yet been notified.
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The other major stakeholder, notably, the trade unions, have resisted any effort to make regulations less restrictive as they considered it an unbridled licence to hire and fire! For such reasons, successive governments at the Centre have shied away from this crucial reform, which remains a major lacuna of economic liberalisation since the early 1990s.
To its credit, the National Democratic Alliance government has attempted to push through this controversial and nettlesome reform, though it developed cold feet after the initial show of enthusiasm.
As labour is a concurrent subject, the states also have a role in drafting legislation.
There is a misperception that they are largely responsible for the delays in the implementation of the four codes as a few states like West Bengal, Meghalaya, Nagaland, and the union territory of Lakshadweep are yet to formulate rules.
There is a requirement for pre-publishing the rules made under the codes for public consultation. Most of the states are on board in this regard as 32 states have formulated rules under the code on wages, 30 states under the industrial relations code, 30 states under the code on social security, and 29 states under the occupational safety, health and working conditions code.
Clearly, if the efforts of the new government at the Centre to push labour reform are to succeed, it must persuade the laggard states to cooperate. After the elections, experts say they might want to give some incentive to the states to implement the new labour laws.
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It also bears mention that certain states like Gujarat and Rajasthan have pushed the envelope on reform much before the four codes were passed in Parliament.
Rajasthan passed laws that allowed employers having up to 300 workers — from the earlier limit of 100 — to reduce the workforce without the government’s nod. It also raised thresholds for the Factories and Contract Labour Acts, an example that was later adopted by several other states.
Impact assessments of such reforms by the VV Giri National Labour Institute and Indian Institute for Public Administration have shown that average plant sizes went up and so did formal employment in manufacturing.
The upshot is that labour reforms help in reviving investments by industry as they provide greater flexibility to employers to cope with the fluctuating fortunes of their business while protecting the interests of workers.
These four labour codes would indeed be efficacious if they encourage retraining of workers for new jobs as also upgrading their skills to meet the emerging needs of industry.
Above all, they would serve the cause of greater social inclusion by providing a social safety net to the vast majority of unorganised workers, of whom 29.5 crore have registered on the government’s e-shram portal.
The new government at the Centre after the national elections should prioritise big-ticket labour reform to improve working conditions, attract investments to spur employment creation and overall growth.
Forty-four central labour laws have been subsumed into four codes on wages, social security, occupational safety, health and working conditions, and industrial relations.
Although these codes were passed in Parliament between August 2019 and September 2020, they have not yet been notified.
Partly, this was to provide more time to industry to internalise these changes and reduce opposition to this reform. Industry has sought greater flexibility to adjust the workforce with the ups and downs of the business cycle.
The other major stakeholder, notably, the trade unions, have resisted any effort to make regulations less restrictive as they considered it an unbridled licence to hire and fire! For such reasons, successive governments at the Centre have shied away from this crucial reform, which remains a major lacuna of economic liberalisation since the early 1990s.
To its credit, the National Democratic Alliance government has attempted to push through this controversial and nettlesome reform, though it developed cold feet after the initial show of enthusiasm.
As labour is a concurrent subject, the states also have a role in drafting legislation.
There is a misperception that they are largely responsible for the delays in the implementation of the four codes as a few states like West Bengal, Meghalaya, Nagaland, and the union territory of Lakshadweep are yet to formulate rules.
There is a requirement for pre-publishing the rules made under the codes for public consultation. Most of the states are on board in this regard as 32 states have formulated rules under the code on wages, 30 states under the industrial relations code, 30 states under the code on social security, and 29 states under the occupational safety, health and working conditions code.
Clearly, if the efforts of the new government at the Centre to push labour reform are to succeed, it must persuade the laggard states to cooperate. After the elections, experts say they might want to give some incentive to the states to implement the new labour laws.
It also bears mention that certain states like Gujarat and Rajasthan have pushed the envelope on reform much before the four codes were passed in Parliament.
Rajasthan passed laws that allowed employers having up to 300 workers — from the earlier limit of 100 — to reduce the workforce without the government’s nod. It also raised thresholds for the Factories and Contract Labour Acts, an example that was later adopted by several other states.
Impact assessments of such reforms by the VV Giri National Labour Institute and Indian Institute for Public Administration have shown that average plant sizes went up and so did formal employment in manufacturing.
The upshot is that labour reforms help in reviving investments by industry as they provide greater flexibility to employers to cope with the fluctuating fortunes of their business while protecting the interests of workers.
These four labour codes would indeed be efficacious if they encourage retraining of workers for new jobs as also upgrading their skills to meet the emerging needs of industry.
Above all, they would serve the cause of greater social inclusion by providing a social safety net to the vast majority of unorganised workers, of whom 29.5 crore have registered on the government’s e-shram portal.
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