New labour laws give hire-fire power to more units

Pic courtesy: ILO

Parliament, during the Monsoon session of 2020 , has passed three labour codes which replace 29 existing labour laws , bringing in major changes including the ‘hire and fire’ flexibility to more industrial units. At the same time, workers in the informal sectors mostly powered by the digital economy and known as ‘Gig’ employees would also get social security like ESIC benefits.

Trade unions and some opposition parties have criticised the new laws, stating these are against workers’ interest. However, the government claims the move would generate more employment through increased investment.

The new codes are: Industrial Relations Code, 2020 (ii) Code on Occupational Safety, Health & Working Conditions Code, 2020 & (iii) Social Security Code, 2020.

Broad feature of the codes, as compiled by the Ministry of Labour and PRS Legislative Research.

Retrenchment:  An establishment employig 300 or more persons need government permission for closure, layoffs or retrenchments. Earlier, this limit was 100. This means units with less than 300 employees do not need any government permission to hire or fire, under the Industrial Relations Code. Importanly, this exemption limit of 300 can be further raised without any more approval of Parliament. Government can just issue a notification.

  • Contract labour:  Labour compliances and economic considerations have resulted in increased use of contract labour.  However, contract labour have been denied basic protections such as assured wages.  The Codes do not address these concerns fully.  However, the Industrial Relations Code introduces a new form of short-term labour – fixed term employment.
  • Trade Unions:  There are several registered trade unions but no criteria to ‘recognise’ unions which can formally negotiate with employers.  The Industrial Relations Code creates provisions for recognition of unions.

”Labour falls under the Concurrent List of the Constitution.  Therefore, both Parliament and state legislatures can make laws regulating labour.   The central government has stated that there are over 100 state and 40 central laws regulating various aspects of labour such as resolution of industrial disputes, working conditions, social security and wages , ” a PRS note stated.

National Social Security for gig workers and platform workers:  The 2019 Bill provided for the establishment of a national and various state-level boards for administering schemes for unorganised sector workers.  The 2020 Bill states that in addition to unorganised workers, the National Social Security Board may also act as the Board for the purposes of welfare of gig workers and platform workers and can recommend and monitor schemes for gig workers and platform workers.  In such cases, the Board will comprise of a different set of members including: (i) five representatives of aggregators, nominated by the central government, (ii) five representatives of gig workers and platform workers, nominated by the central government, (iii) Director General of the ESIC, and (iv) five representatives of state governments.    

Role of aggregators:  The 2020 Bill clarifies that schemes for gig workers and platform workers may be funded through a combination of contributions from the central government, state governments, and aggregators.  For this purpose, the Bill specifies a list of aggregators in Schedule 7.  These mention nine categories including ride sharing services, food and grocery delivery services, content and media services, and e-marketplaces.  Any contribution from such an aggregator may be at a rate notified by the government falling between 1-2% of the annual turnover of the aggregators.  However, such contribution cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.

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