To let textile firms hire & fire, Govt to change law, weave safety net for workers

To safeguard workers’ interests, the amendment also provides for employers to submit bank guarantees for a “separation compensation” of 90-day wages for each contract labourer for every year (that is 240 days) of service.

As stipulated under the Industrial Disputes Act, the severance compensation for workmen is presently 15 days’ average pay for each completed year of continuous service or any part thereof in excess of six months.

The rationale for the amendment is the cyclical nature of the textiles sector, especially garments, following the end of the quota regime in January 2005. With direct competition for global markets, there is uncertainty of jobwork and fabricators do not want to carry forward surplus staff when business is low.

Moreover, even after India’s opening of the textiles sector to FDI, not many foreign firms have come forward due to the archaic labour law which does not allow layoffs during a slump. Taking out textiles from the Act would, therefore, give firms the labour flexibility they so badly lack.

The employer’s bank guarantee would also remove intermediation by labour contractors and ensure that the contract is between employers and non-permanent workers alone. The enhanced compensation would also act as a deterrent on employers to take recourse to lay-offs, retrenchment and closure in a routine manner.

The Textiles Ministry has also said that renewed industrial growth would add 5 million jobs and let firms compete with China to wean away the garment business. The move to allow “hire and fire” has been in the offing since Budget 2001-02 when it was proposed to bring an amendment to facilitate outsourcing of activities without any restrictions as well as to offer contract appointments.