New labour laws for India: will they make a difference?

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The Indian Parliament recently passed three new Labour Codes aimed at simplifying the country’s complex labour laws. Two experts give their views on the possible impact of the new legislation for businesses and workers.

On 23 September 2020, the Indian Parliament passed three long-anticipated ‘Labour Codes’ aimed at reforming the country’s complex labour laws.

The Industrial Relations Code, 2020; the Occupational Safety, Health (OSH) and Working Conditions Code, 2020; and the Social Security Code, 2020, amalgamate a number of previous labour laws into three codes. They also introduce certain new duties on employers and certain new rights and protections for workers. A fourth code, the Code on Wages, became law in 2019.

The Indian government’s Minister of State for Labour and Employment, Shri Santosh Gangwar, said the codes “will prove to be an important milestone for the welfare of the workers in the country”. He added the codes would “balance the interests, rights and obligations of employees and the employers in the country”, and the OSH Code “envisages a safe working environment for workers, especially women”.

However, the new codes have been criticised in some quarters. For example, some Indian trade unions claim the new laws will increase workers’ vulnerability, encourage business-friendly worker ‘hire and fire’ policies and have a negative impact on trade union rights, including the right to strike.

We asked two experts for their views on the likely positive and negative impacts of the new laws. We interviewed:

Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII). The CII works to help the development of India, partnering with industry, government and civil society. It works closely with government on policy issues and seeks to enhance business opportunities for the industry.

Virjesh Upadhyay, Director General of Dattopant Thengadi Foundation, a research organisation of Bharatiya Mazdoor Sangh (BMS), India’s largest trade union.

What are the good features and benefits of the OSH and Working Conditions Code? What new duties does it place on employers?

Virjesh: As far as good provisions in the OSH and Working Conditions Code are concerned, the very first thing is that in the case of establishments carrying out hazardous and life-threatening occupations, the government can now notify coverage of the OSH Code even on those establishments that have less workers than the number set out in the Code’s threshold. This means coverage is now on the basis of the nature of the job, not on the number of workers only.

Second, the benefit of the Employees’ State Insurance (ESIC) scheme has been extended to plantation workers. Third, a free annual health check-up has been introduced. Fourth, the appointment letter has been made mandatory. Fifth, a bipartite safety committee has been introduced for establishments in factories, mines and plantations, in place of hazardous factories. Sixth, the activities of plantation workers dealing with substances like insecticides and pesticides have been included as hazardous processes. Seventh, the provisions relating to inter-state migrant workers have been strengthened and now include the provision of an annual travelling allowance for the inter-state migrants to visit their home towns.

Virjesh Upadhyay, Director General of the Dattopant Thengadi Foundation.

Chandrajit: The OSH and Working Conditions Code consolidates and amends the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment. The OSH Code makes provision for providing free of cost annual health check-ups for employees above a specified age in certain classes of establishment. This will make it possible to detect diseases at an early stage for effective and proper treatment of the employees. The duties of employers are:

  • Providing a workplace that is free from hazards
  • Providing free annual health examinations in notified establishments
  • Informing relevant authorities in the event of any accident at the workplace that leads to death or serious bodily injury to any employee.

Is anything missing or lacking from the OSH and Working Conditions Code? Who could be negatively affected by any missing rules or duties?

Virjesh: The very first objection about the OSH Code is regarding the threshold limit. The definition of an establishment does not include those establishments with less than 10 workers. Also, the definition of a factory does not include those with less than 10 workers with power and less than 20 workers without power. The definition of ‘factory’ also excludes many places of work, such as running sheds, hotels, restaurants and eating places etc.

Also, the definition of ‘industry’ does not include domestic service and plantations below five hectares are not included. The definition of ‘employee’ does not include apprentices, managerial and supervisory, technical, clerical, administrative etc. Inter-state workers do not include workers directly hired; and this does not include migrant workers of the same state. Also, there is no displacement allowance for inter-state workers which was there earlier.

As per the existing law, governments may prohibit contract labour in three areas: core activities; perennial or permanent work; and regular work. The entire purpose of the previous law has been lost. Now, contract workers can be engaged in works of permanent nature.

Other than these, the principle of ‘equal pay for equal work’ is also not incorporated, and even unqualified contractors will be given a ‘work-specific licence’.

For contract labour provisions, a threshold of 20 employed workers is currently needed, but the new code increases this to 50. Now, workers will lose the following rights:

  • Prohibition and regulation
  • Principal employer to pay wages if the contractor fails
  • Welfare facilities to be provided by the principal employer
  • Inter-state contractor licence (issued after consulting both states)
  • General contractor licence.

The OSH Code allows women to work nights if they give their consent. However, the conditions put by the courts are absent, like transport to and from work and protection from harassment.

Thus, a significant number of workers will go outside of any legal protection.

What is good about the Social Security Code? Which workers will benefit from it and how? Is anything missing from the Social Security Code? Could workers miss out on social security protections?

Chandrajit: The Social Security Code consolidates nine different central laws. It extends the protection of welfare provisions to gig workers, platform workers and unorganised sector workers.

The code also contains provisions relating to EPFO, ESIC, building construction workers, maternity benefits, gratuity and social security funds for unorganised sector workers. Overall, the code is quite comprehensive and makes provision for additional schemes for workers in the unorganised sector.

Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII).

Virjesh: As far as the good points in the Social Security Code are concerned, the first is the extension of the facility of ESIC to all districts in India. Second, the code extends the reach of EPFO. Third, it creates of a social security fund. Fourth, it introduces a national database of unorganised workers.

What is good about the Industrial Relations Code? Is anything missing from it? Which workers will benefit from it, and how?

Chandrajit: The provision of fixed term employment is a win-win for both workers and industry. On one hand, it gives flexibility to industry to employ workers on a short-term and seasonal basis without involving contractors. It simultaneously ensures that all statutory benefits are given to the fixed-term workers in line with the permanent workforce.

Virjesh: The adoption of the name ‘Industrial Relations Code’ instead of the Industrial Disputes Act is a welcome step.

However, there is a continuation of the unfair labour practice on the part of employers “to employ workers as casuals or temporaries and to continue them as such for years, with the object of depriving them of the status and privileges of permanent workers”. The chapter on bipartite forums provides for a works committee where there are 100 or more workers and a grievance redressal committee where there are 20 or more workers. However, these are needed in units that have just one worker to ensure smooth functioning.

The Industrial Relations Code also covers working journalists and sales promotion employees. Also, the office-bearers of a trade union will have be elected once every two years. This will remove trade unions that are bogus and which do not function democratically.

The threshold at which a business is required to get prior permission for lay-off of staff, retrenchment and closure of the business has been increased to 300 workers. This will provide ease of closing business, not ease of doing business.

What is good about the Code on Wages? Does it lack anything? Will any workers be negatively affected by the Code on Wages?

Chandrajit: The Code on Wages ensures minimum and timely payment of wages to all workers.

The most crucial aspect of the Code on Wages is the simplification of the method of fixation of minimum wage rates. Now, factors to be considered while fixing the minimum wages are skills and geographical location as against the present employment-wise system. The number of minimum wage rates in the country will be reduced from  10,000 to around 200. For those establishments directly under the authority of the central government, there would be just 12 minimum wage rates compared to the existing 542.

Virjesh: The universalisation of the minimum wage and a national level floor wage are good steps for the benefit of labour.

Will the four new codes be sufficient to protect the health and safety of all migrant workers? Or do they fail to protect the health and safety of some groups of migrant workers?

Chandrajit: The new Labour Codes provide legal protection to all unorganised and migrant workers, which itself is a milestone for the country. The registration of migrants, journey allowance and portability of benefits are the significant steps for the protection of migrants. State governments have also launched many schemes to ensure the livelihoods of the migrant workers.

Virjesh: The new codes partially address the health and safety concerns of the migrant workers but in some aspects they fail to do so.

The adequacy of the codes can be found in the following:

  • A new labour code to envisage covering over 50 crore workers from organised, unorganised and self-employed sectors for minimum wages and social security
  • Social security net of ESIC and EPFO to widen, opening up for all workers and self-employed
  • Setting up of a social security fund for 40 crore unorganised workers along with gig and platform workers – this will help in widening universal social security coverage
  • Pay parity on gender basis
  • All migrant workers will now be covered instead of only those who were brought to work in a state by contractors
  • A database on migrant workers will be established through the law to help better targeting, skill mapping and utilisation of government schemes by such workers
  • Migrant workers will get a journey allowance from their employers, to visit their home town once a year
  • A helpline will be established for grievance redressal.

However in some the aspects, the codes need a revision as well.

Will the various new duties imposed on employers improve health and safety at work in India?

Chandrajit: Until now, the provisions of the Factories Act 1948 regulated the duties and responsibilities of employers to ensure health and safety at work.

The OSH and Working Conditions Code expands the applicability of the safety provisions to all establishments having 10 or more workers.

The Confederation of Indian Industry (CII) believes that all the Codes are quite inclusive in terms of ensuring ease of compliance to the industry and ensuring the health, social security and safe working environment of all workers.

Virjesh: The codes will help to keep a check on the working conditions, facilities, wages and security-related aspects of workers. This will help to create better conditions for workers and improve their health and safety concerns as well.

What should the government focus on now that the four codes have been adopted? Should they focus on enforcing the new laws, educating employers about their new responsibilities and/or educating workers about their new employment rights?

Chandrajit: The next priority is to ensure the smooth implementation of the four codes. The new codes have received the President’s assent and the government is planning to implement all four codes in one go by the next financial year.

India has waited for the reforms for decades and the comprehensive reforms will certainly improve India’s Ease of Doing Business ranking. This will make India a preferred investment destination.

Virjesh: The priority is definitely enforcement. However, enforcement and education are inter-related in our system. It is ethical and profitable both because labour is the only appreciating asset of the business.

Do you have any additional views on the four Labour Codes?

Chandrajit: The CII believes the reforms introduced through the four codes are progressive. They will help to build a future of work that is safer, fairer, greener and more resilient.

Virjesh: The codes are only valuable if they are implemented in a manner that benefits the maximum number of the working population associated with them. The codes are very well drafted however they have some shortcomings.

It is now the responsibility of employers and those associated with the enforcement of the legislation to ensure that the benefits of the laws reach the maximum number of Indian workers.


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