Labour Reforms and Issues

29 existing labor laws were consolidated into 4 Labor Codes in the 2019 and 2020 sessions by the Indian Parliament. These are called Labor Law Reforms. They are The Code on Wages 2019, The Code on Social Security 2020, The Industrial Relations Code 2020, and the Occupational Safety, Health, and Working Conditions Code 2020.

Need for Labor Reforms:

• Multiplicity and Complexity: The earlier 29 Labor Laws were deemed archaic and complex. Also the definition of these labor laws was very inconsistent. The previous Laws, before the four codes were implemented, variably defined wages, which led to a lot of confusion and litigation. One of the smallest things that the four codes have done is to provide a one true definition of the term wages. This would result in reducing confusion and litigation. Point to be noted is that before these four codes were passed by the Parliament, there were more than 40 central laws and more than 100 state laws on labor matters. So there was a lot of confusion. Hence the need for 4 concise Labor Codes.
• Obsolete: In the current economic situation the previous laws couldn’t stand their ground. One such example of the obsolete law was The Industrial Disputes Act (IDA). Within this act, to lay off or retrench workers, the firms who at least employed 100 workers needed permission from their respective state governments. This permission was seldom granted.
• No protection for unorganized sector workers: Earlier labor laws only protected 7 to 8 percent of the organised sector. The rest 92-93 percent of the unorganized sector was in tatters.
• Tighter labor Regulations: The earlier laws were exceedingly pro workers in the organised sectors. Too little freedom was given to industries in enforcing the labor laws. Regulations like job security and factors like pressure from the trade unions made it difficult for the organised sector industries to expand. Various studies have shown that states that have easier labor regulations go through a higher growth of labor intensive industries with better employment than other states. Hence the need for 4 codes of Labor Reforms.

Benefits of Labor Codes:

The four codes provide several benefits. We will now delve into each code in detail and the benefits it provides.

Code on Wages 2019:

• It now covers both organised and unorganized sectors as well as gig workers and freelancers. 
• It is now mandatory to review minimum wages every five years to ensure wages are up to date with changing economic conditions. 
• Under the new code, wage disparities due to gender is not a concern anymore. Both men and women will be equally paid. 
• The Floor wages is a newly introduced concept in which the disparity of regional wage is effectively solved.
• The wage ceiling is also increased from Rs 18000 to Rs 24000. It is also to be ensured that the wages are paid timely.
• The inspector Raj is replaced with a  inspector-cum-facilitator role. Within this role, the person will have the power to inspect, advise the employers relating to compliance, examine a worker from the establishment, and exercise several other powers as well. A Random ‘Web Based inspection system’ has been created as well to remove the rotten and orthodox inspector Raj. 
• The definition of wages under this code has also been made uniform and standard.
• Under this code it has been made possible for industries to apply for licence under a single law. Previously industries had to apply for their licence under different laws. The entire web of paperwork will be cut down from bringing the number the registration required from eight to one and the number of licences from four to one. The number of returns filed will also be brought down from 8 to one.

Code on Social Security 2020:

• Due to The Employees’ State Insurance Scheme (ESIC), it is possible for all workers in both organised and unorganized sectors to receive social securities such as insurance, pension, gratuity, maternity benefit etc. This scheme has been made applicable Pan-India and for every organisation employing 10 or more employees.
• The scope of ESIC has been broadened to include new-age platforms, plantation workers as well as gig workers.
• It is compulsory for all workers working in Institutions which are in hazardous areas to be registered with ESIC. 
• All the workers of Organised, unorganized and self-employed sectors are extended the security of The pension scheme Employees’ Provident Fund Organisation (EPFO).
• Fixed-term employees and permanent employees are now considered the same. Since there is no distinction between them, they will receive the same social benefits. 
• The Internet and technology is being used to ensure efficiency. Registration through Aadhaar-based Universal Account Number (UAN) for ESIC, EPFO and the unorganized sector of workers is being used for the creation of a national database of workers.

Occupational Safety, Health and Working Conditions Code 2020:

• Under this Code, the interests of workers engaged in mines, factories, plantations, beedi and cigar workers, motor transport sector, contract and migrant workers are covered. 
• A national database has also been created for interstate migrant workers, through which they can obtain One Nation One Ration card. This will ensure them with social security benefits for self and family members residing in different states.
  Creation of a cess fund has been done for building/construction workers who frequently migrate to different states for work.
• It is mandatory for Appointment letters to be issued in this code.
• It is mandatory for Employers to provide free annual health check-ups for workers.
• Under this Code, provisions for the employment of women between 7PM to 6AM including conditions related to their consent and safety, working hours, and holidays are also included.

Industrial Relations Code 2020:

• It is mandatory for every establishment having 20 or more workers to set up a Grievance Redressal Committee.
• Under this Code, the setting up of a ‘Reskilling Fund’ has also been proposed for retrenched employees.
• Definite timelines are provided for lockouts and strikes with regard to the notice and its validity.
• A trade union having 51% votes in industrial establishments shall be recognized as the sole negotiating union which can make agreements with employers. However, if no trade union gets 51% votes in industrial establishments, a negotiating council of trade unions shall be constituted for making agreements with employers.
• No employed person in an industrial establishment shall go on a strike without a 60-day notice period under this code.

Major Issues and Challenges Related to Labor Reform:

• The definition of employees and workers and relationship between organization and gig workers is not clearly defined in labor reform. In consideration of Covid’s remote working policies, overtime compensation is also not evidently explained.
• The codes do not fully direct the concern of contract labor. Although, a new form of short-term labor is mentioned in labor reforms but it doesn’t assure the protection for wages.
• Micro-scale enterprises or any unofficial sector or sectors having less than 300 workers are facing problems related to security because they are excluded from social security given under labor reforms. Retrenchment, lay-offs and closure are some hurdles which come in the way of small scale industries.
• The labor laws have been simplified into 4 labor codes but still do not fulfill some aspects; such as, Provisions for gig workers, social security concerns, problems of self-employed labor etc.
• The ‘facilitator’ is a new inclusion in labor reforms. Earlier facilitator was called an inspector who looked after the business related matters. It can create chaos between the views of traditional people and modern views.
• Invisible laborers are not mentioned in the new labor reform which somewhere shows biasness. Examples of invisible labor are mostly women who work all day without getting paid. There is no mention of working hours, offs, pay, or vacations in new labor codes.
• Charitable organisations/ non-profit organisations are not included in new labor reform. No central law is mentioned for these organisations.
• Trade unions are not acknowledged properly. There are registered trade unions which are not categorized properly. This can become a problem for employers and organisations. The bargaining rights of laborers are also affected. Here’s how the Industrial Relations Code comes into the picture by creating provisions for the recognition of these unions.
• The various matters related to safety and health aren’t mentioned in labor reforms. The main problem here is about delegation. The question is whether it should be ascertained by the legislation or be delegated to the government.
• The criteria for Minimum wages is not defined in labor reforms. Factors influencing the minimum wage such as geography, skills and difficulty levels of the work, etc are difficult to measure. This is a major concern for laborers as to how minimum wages should be determined.