Fact Check

Are Labour Reforms Still No-Go? Let’s Check Some of the Facts

The Business Standard opinion piece “Labour minister Santosh Kumar Gangwar’s agenda” airs its scepticism about the ability of the government to speed up and see through labour reforms, which the article considers an economic imperative, as well as “bring trade unions on board”. The writer, while acknowledging that the current administration has not been sitting idle on this matter, nevertheless grounds the article’s incredulity on precedence – the fact that reportedly “no government has had the courage to take on the trade unions beyond some initial feel-good statements and tentative actions”, implying that the current dispensation is also likely to tread the same path, thereby putting labour reforms on the back burner.

Before we judge whether the writer’s apprehensions are justified or not, let us first take a tour of what has happened vis-à-vis labour reforms in the last few years. We find that in the last three years, the following labour and labour-related reforms have taken place:

  • Minimum wage hiked by 42% in both agricultural and non-agricultural sectors.
  • Bonus eligibility cap increased from Rs 10,000 per month to Rs 21,000 per month.
  • Minimum pension of Rs 1,000 to 28 lakh Employee Provident Fund (EPF) pensioners with pension below Rs 1,000.
  • Unique Account Number allotted to all members of EPFO. This acts as an umbrella ID for the multiple IDs allotted to one individual and ensures the portability of PF benefits. Also, the conditions for withdrawal from PF accounts have been relaxed.
  • Multiple labour laws are to be merged under just four (4) separate acts dealing with wage-related, social-security related, safety-related and industrial relations-related issues. This will remove contradictions and confusion, as well as smoothen the implementation of laws.
  • The Payment of Wages (Amendment) Act, 2017 enables employers to pay wages to their employees by cash or cheque or by means crediting the same to their bank accounts.

In addition to this, the licence raj system has also been addressed by disallowing labour inspectors from swooping down on companies. Instead, a data-based digital system has been put in place to randomly send them on inspections, based on data trends and other objective criteria.

Moreover, with the launch of the Shram Suvidha Portal, transparency and accountability in inspections appears to have been further strengthened, since employers can submit a single compliance report for 16-odd labour laws.

As a matter of fact, the Business Standard article itself acknowledges that the current administration, after assuming office, announced its decision to combine “44 labour laws into four codes”. But in the same breath, it is quick to claim that except the Code on Wages Bill, the rest are gathering dust. This claim is made without evidence or citing sources. As it happens, the administration has begun the process of rationalising 38 Labour Acts by framing four (4) labour codes. These are: the Code on Wages; the Code on Industrial Relations; the Code on Social Security; and the Code on Occupational Safety, Health and Working Conditions.

Perhaps a better indicator of intent and ability on the part of the state today is the progress it has made on the wages bill and the other major steps it has taken as cited above. Since deliberations and the drafting process were already in place for the Code on Industrial Relations, which would essentially deal with trade unions, and as the wages code is already in Parliament, it might be a non-sequitur to claim that the rest has gathered dust.

As of December 2015, the government had carried out the process of tripartite consultation for drafting the Labour Code on Industrial Relations, where representatives from Central Trade Unions, Employers’ Associations and Central Ministries/ State Governments participated and gave their suggestions. During consultation, the draft of the code was also shared with experts of the International Labour Organisation (ILO) who provided their suggestions on the provisions. The provisions of the draft code are under consideration and industrial relations, as evident globally, tend to require prolonged negotiations.

The article feels that, along with a set of rules, the persuasive powers of the government are an imperative to convince trade unions that times have changed. In fact, the priority given to the wages code bill itself may well serve the purpose. Trade unions, after all, are considered necessary for workers and as an interface between labour and management. However, it has also been seen historically that the presence of outsiders within establishment-specific trade unions ends up putting roadblocks in the path of negotiations and resolutions. By directly addressing workers through the Code on Wages Bill, the state now appears to be mitigating the role of trade unions, especially those outsiders who often wielded undue influence therein, in redressing grievances.

It is worth taking a look at some of the steps taken via the Code on Wages Bill, which was introduced in the Lok Sabha on August 10, 2017:

  • At present, the provisions of the Minimum Wages Act and the Payment of Wages Act do not cover substantial number of workers, as the applicability of both these Acts is restricted to the Scheduled Employments/ Establishments. However, the new Code on Wages will ensure minimum wages to one and all and timely payment of wages to all employees irrespective of the sector of employment without any wage ceiling.
  • A concept of statutory National Minimum Wage for different geographical areas has been introduced. It will ensure that no state government fixes the minimum wage below the National Minimum Wages for that particular area as notified by the Central government. With this, the state has refuted reports and apprehensions that minimum wages of Rs 18,000 per month have been fixed for all employees. The minimum wages will vary from place to place, depending on skills required, nature of the work, and geography.

As can be perhaps be seen from the facts stated above, the administration has addressed labour reform from the twin perspective of both removing hindrances to economic growth and industrial development as well as ensuring and enhancing labour welfare. These facts ought to serve as evidence of the progress made in labour reforms, an area which, as the article rightly says, has been neglected by all previous administrations.

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