The labour codes are transformational, but they don’t favour workers

Despite the claim that unorganised sector workers would get social security for the first time, there are no explicit entitlements or commitments to this end in the Social Security (SS) Code. Section 109 of the SS Code states that the central and state governments “shall frame and notify, from time to time, suitable welfare schemes for unorganised workers”. The same applies to gig and platform workers in Section 114. That is, entitlements have been left to the discretion of successive governments rather than being encoded in the law, which constitutes a “schemification” of workers’ rights. Moreover, it is not clear how these schemes will be funded. A statutory, centralised Social Security Fund has been created for this purpose, but the sources of funding are left vague, with the suggestion that they may come from government budgets, employer contributions or CSR funds. Previous attempts by the UPA and the NDA governments in creating and utilising such funds have been non-starters. Only in the case of gig and platform workers, aggregators will be required to contribute between 1-2 per cent of their annual turnover to the schemes, subject to a ceiling of 5 per cent. This is the right approach because employer contributions make schemes such as the Employees’ Provident Fund and Employees’ State Insurance sustainable and viable. They do not rely on large budgetary allocations. Policy should move in this direction for all unorganised sector workers.

The second claim is that the Codes will empower workers and lead to an improvement in labour standards. However, the Industrial Relations Code (IRC) makes it more difficult for unions to stay registered and limits the right to strike, which represents a further retreat from the fundamental rights embodied in the ILO’s conventions on the freedom of association and the right to organise that India has not ratified. The Registrar of Trade Unions has now been given enormous powers to unilaterally deregister unions. For example, Section 9.5 (ii) allows the registrar to cancel union registration based “on the information received by him regarding the contravention by the Trade Union of the provisions of this Code or the rules made thereunder or its constitution or rules,” which leaves the field wide open for interpretation and puts the burden of proof on the union. Strikes and lockouts are now prohibited in all industrial establishments without a 14-day notice valid for a 60-day period, which applied only to public utilities earlier. This gives employers a chance to potentially interfere and derail planned strikes, given the vast disparity in bargaining power between workers and employers. Deregistering a union automatically makes a strike illegal, and the wide powers of the registrar can also be brought to restrain the striking unions.

The third claim is that the Codes formalise employment by requiring mandatory appointment letters for all employees. While Section 6(f) of the Occupational Safety, Health and Working Conditions Code does formally oblige employers to issue appointment letters, which is a step in the right direction, the absence of a compliance mechanism or penalties for violations suggests it is likely to remain symbolic. The question is not just about the issuance of appointment letters but what rights and benefits they contain. In that respect, a related clause of the IRC in fact risks formalising informality. The new category of fixed-term employment (FTE) allows businesses to hire workers for a limited term who are entitled to the same rights and benefits as permanent workers but cannot claim retrenchment compensation. The FTE category was first introduced to allow for seasonal work in the apparel industry in 2016 and then expanded to cover the manufacturing sector in 2018. Now it has become a universal category of employment that allows the indefinite use of successive fixed-term contracts without restricting the scope of work. According to the ILO, most countries for which data is available restrict fixed-term work to activities of a temporary nature. Giving FTE such a wide berth means that permanent employment in India is likely to shrink even further. Fixed-term employees will also be dissuaded from joining unions or participating in strikes due to the threat of non-renewal of their contracts, with further consequences for unions and the labour movement. In that sense, the law tilts the balance to a much greater degree towards business and away from labour.

The Codes will be transformational but not quite in the way the government has suggested. They represent a serious rollback of workers’ rights and advance long-standing demands of industry on issues such as labour flexibility and minimising statutory obligations.

The writer is an economist and Senior Lecturer of International Development, Department of International Development, King’s College, London