As per recommendations of2nd National Commission on Labour,29 labor laws in India have beenconsolidated into Four comprehensive labor codeswhich aim at boosting theease of doing business,while also extendingsocial securityto millions of workers, particularly in theinformal and gig economy.
- Code on Wages:Standardized wage and bonus payments.
- Industrial Relations Code:Streamlines dispute resolution and labour relations.
- Occupational Safety, Health, and Working Conditions Code:Ensures safe and healthy working conditions.
- Code on Social Security:Expands social security benefits.
## Merits of Labour Codes:
- Simplification and Rationalization of Laws:The consolidation of 29 laws into 4 codes reduces the complexity of compliance Uniform definitionsE.g. simplifying payroll calculations.
- Promoting Formalization and Social Security:Code on Social Security brings gig and platform workers (e.g., delivery workers, app-based drivers) under the social security net
- Minimum floor wage:to be determined by the Central government based on the minimum living standards and level of skills of workers based on which state governments shall identify a minimum wage rate, to be revised every 5 years or earlier.
- Minimise exploitative practices –Provisions for overtime wages twice the normal wages on an hourly or part-of-hour basis as well as coverage of Employees’ State Insurance (ESI).
- Flexibility in Hiring and Firing: The Industrial Relations Codeallows firms with up to300 workers(previously 100) to hire and fire employees without requiring government permission.
- Improved Worker Safety and Health Standards: The Occupational Safety, Health, and Working Conditions Codemandates stricter safety norms, such as proper ventilation, cleanliness, and adequate lighting at workplaces.
- Easier Resolution of Industrial Disputes: The Industrial Relations Codemandates the formation ofGrievance Redressal Committeesfor companies with 20 or more workers and allows faster resolution through tribunals.
- Changes in EPF & gratuity:the Employee Provident Fund (EPF) and gratuity contributions are now applicable to both organised and unorganised sectors. Further, the codes permit a 1-year service for employees to collect gratuities from earlier 5 years.
- Gender Equality –The Code of Wages prohibits discrimination in remuneration and recruitment of employees for work of similar nature.
- Maternity benefits:the SS Code continues to ensure 26 weeks of paid maternity leave along with creche facilities funded by the employer.
## Demerits of Labour Codes:
- Lack of Uniformity Across States: Labour is a concurrent subject in India, this could lead to lack of uniformity in implementation across different regions.
- Delegated Legislation – Standing Committee on Labourhas noted that the Acts delegates various aspects for rule-making by the government. Eg- defining the entitlements
- Concerns about Gig and Informal Workers’ Security: the Code on Social Securitydoes not provide clear mechanisms for ensuring comprehensive coverage and enforcement.
- Impact on Trade Unions and Collective Bargaining: A requirement that 75% of workersin a company must vote for a strike before it is legally recognized candilute the role of trade unions
- Weakening of Workers’ Rights and Protections:The increased threshold for government permission for layoffsis criticized forpotentially weakening job security.
- Power to government to modify or reject tribunal awards –it raises the question ofconflict of interest, as government may modify an award made by the Tribunal in a disputes it is a party.
- Provisions on fixed term employment –unequal bargaining powers between the worker and employer could affect the rights of workers as the power to renew contracts lies with employer.
## Progress so far in this regard:
- Publication of draft rules:over 20 states have published draft rules, but final notifications are still awaited in most cases.
- Implementation:Implementation has been delayed due to state-level preparations and ongoing consultations with stakeholders.
- Centre has already enforced few provisions likeCentral Advisory Boardand establishment of an employee’s and his family members’ identities through respective Aadhaar numbers.
## Reasons For Delay
- Somestates are yet to publish rulesto set the codes in motion
- Talks between the Union labour ministry andunionshave stalled
- Centre is inclined totake all stakeholders on boardfor which there needs agreement on key provisions.
## Way Forward
- Labour Market Information System (LMIS):to pinpoint skill shortages, training needs, and disseminate new job opportunities.
- Comprehensive Economic Reforms:upgrading infrastructure, skilling the workforce, and maintaining a consistent export-import policy to bolster investment and job creation.
India can draw on Denmark’s “flexicurity” systemwhich combines labor market flexibility with comprehensive social security,to ensure ensure‘Ease of Doing Business’and realise target ofVIKSIT BHARAT 2047.
Click to Access Full Notes
