Wednesday, Dec 07, 2022

Labour reforms: On track, but tough job ahead

Niggling procedural hassles stymie efforts to modernise antiquated labour regulations.

Factories Act, Industrial Disputes Act, IDA India, Trade Unions Act, labour wage, Minimuum labour wage As it completes one year in office, the NDA government seems to have finally bit the bullet and taken up the controversial Industrial Disputes Act, 1947, for amendments that would allow easier retrenchment and closure norms for firms with up to 300 workers though ensuring that the employees get higher compensation in return.

As it completes one year in office, the NDA government seems to have finally bit the bullet and taken up the controversial Industrial Disputes Act, 1947, for amendments that would allow easier retrenchment and closure norms for firms with up to 300 workers though ensuring that the employees get higher compensation in return.

The draft code on industrial relations has also made it tougher to form trade unions and has proposed that at least 10 per cent of workers employed by a firm or a minimum of 100 workers would be required to set up a trade union.

The changes are part of an overall proposal to codify the Central labour law architecture wherein the labour ministry plans to merge all 44 Central legislations into four codes on labour laws — one each on wages, industrial relations, social security and safety & welfare. Apart from industrial relations and wages, other codes are likely to be released during the course of the year.

The move, which is also a long-standing demand of industry that has complained about the plethora of labour laws it needs to comply with including nearly 100 labour legislations of various states, comes over a decade after a similar recommendation by the National Commission on Labour in 2002 to rationalise and group labour laws into functional categories.

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“The demand for simplification and codification has, therefore, come from all sides. There is a growing volume of opinion which demands simple and transparent laws that are part of one comprehensive code, laws which can be easily understood by the common worker, as well as those who run small industries,” the Commission had noted in its over 1,700-page report.

The labour ministry had in March also drafted a similar labour code on wages that would merge four wage-related legislation in order to come out with a single definition of wages, replacing the more than half-a- dozen definitions spread across various laws.

Most reform measures such as the amendments to the Apprentices Act, the proposed umbrella legislation for small and medium enterprises and an online filing system with simplified forms for labour returns that has done away with the infamous labour inspections have been welcomed by the industry but experts stress that along with big ticket amendments, smaller provisions in the laws need to be reviewed as they create problems in compliance on a day-to-day basis. “The Small Factories Regulation Bill would be very helpful to small and medium enterprises, especially small businesses as any effort to simplify procedures and leave out forms would make doing business much easier for them,” said Sushanta Sen, principal adviser, CII.


Agreed Rituparna Chakraborty, senior vice president and co-founder, Teamlease Services, who said that the new portal for filing returns is a big help to employers but also stressed that many small irritants need to
be reviewed.

“The amendments being brought about by the government are very important. But from the very beginning, we have said that there are low hanging provisions that can be addressed. These are small niggling issues but can make work difficult for establishments,” she said.

The removal of procedural challenges was also underlined by Prime Minister Narendra Modi as part of the ‘Make in India’ campaign under which the government would help lessen compliance procedures to boost manufacturing. For instance, the proposed draft code on industrial relations that would merge three Central labour statutes on the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947, has a number of proposals that would require a re-look, according to experts.


The draft code makes no mention of a bargaining agent for trade unions. It has also suggested that unions should maintain physical copies of their accounts and records. Some of the provisions on Standing Orders also require more clarity. “The proposed code on industrial relations seems to be a cut and paste job and could create more confusion,” said Michael Dias, secretary of the Employers’ Association in Delhi, adding that issues such as applicability of the Standing Orders on all employees of a factory and definition of misconduct need more clarity.

“For example, sexual harassment of a female worker is included in the definition of misconduct in the Chapter of Standing Orders that will be inquired into by an enquiry officer. But the Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, calls for the setting up of an Internal Complaints Committee to investigate such complaints,” Dias pointed out.

Similarly, the proposed code on wages would merge the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. While it provides a comprehensive definition of what comprises wages, it has no mention of terms such as “cost to company” that is used by most firms in the country.

“These draft codes are still in the process of being discussed and reviewed and all suggestions would be taken up for consideration,” said a labour ministry official.

The ministry has sought public comments on both the proposed codes and labour minister Bandaru Dattatreya has also called a tripartite meeting with representatives of employees and employer unions on May 6 to discuss the draft code on industrial relations. Another moot point for the industry has been some of the provisions in the landmark Factories (Amendment) Bill, 2014.


The Bill, which is pending with Parliament, seeks to enhance health and welfare conditions of workers and lower compliance burden on firms by doubling the threshold of workers employed in a unit for its classification as a factory, it continues to have provisions from the original Bill of 1948 that includes provision for out-dated facilities such as spittoons.

Compoundable offences for employers include provisions such as not providing spittoons and facilities for washing, storing and drying of wet clothes. On the other side of the spectrum, trade unions, too, are predictably upset by the labour law reforms and all Central trade unions are planning a national demonstration on May 26 — the one year anniversary of the NDA government.


“The government is going ahead with whatever it wants to do without listening to views expressed in tripartite meetings,” said AK Padmanabhan, president, CITU, adding that the draft code on industrial relations is anti-labour.

First published on: 05-05-2015 at 04:20:47 am
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