India’s new labour bills have huge ramifications for how workers can be hired and fired

Mixed feelings.
Mixed feelings.
Image: REUTERS/Anushree Fadnavis
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The Indian parliament’s most recent session cleared bills at an unprecedented speed. But that is not necessarily good news.

The monsoon session of parliament, which was delayed and thus shortened because of the Covid-19 pandemic, cleared three key labour bills on its last day on Sept. 23 with nearly no opposition. On Sept. 22, members of the opposition parties had boycotted the upper house of parliament, alleging that they were not being allowed to speak and these parliamentary proceedings were undemocratic.

In the absence of such MPs, Narendra Modi’s Bharatiya Janata Party-led government said “aye” to bills without much deliberation or scrutiny. The three labour codes that were passed, for instance, should have ideally been sent to a standing committee for consultation.

These bills have 411 clauses and 13 schedules, and run into over 300 pages, and affect every person in employment in India.

It is difficult to believe that members of parliament, who are attending parliament every day including weekends, have had the time to read and understand the implications of the various provisions of the bill,” MR Madhavan, president of Delhi-based think tank Centre for Policy Research (CPR), wrote in The Hindu newspaper. “After all, a complete revamp of labour laws should be done only after due deliberation.”

Others believe that these laws would be good for India’s manufacturing sector, which, according to the general perception, stands to benefit from an anti-China sentiment in India and elsewhere in the world. “India is at the cusp of significant growth potential in the manufacturing space. The new proposed labour codes will further enable states to draw more business and magnify India’s growth potential,” said Prashant Singh, business head for compliance & payroll outsourcing at TeamLease Services.

For these bills to work, simplification, rationalisation, and digitisation are key, according to Singh.

The speed at which these bills were passed is as remarkable as the sweeping changes that these bills propose to labour welfare in the country.

What the new labour bills propose

According to KR Shyam Sundar, XLRI-Xavier School of Management professor and labour economist, “The new laws are tilted substantially towards business.”

The first major change comes in the form of the freedom that employers will have to hire and fire workers. Currently, any establishment with over 100 workers needs permission from the government during any process of retrenchment. This threshold has now been increased to 300.

This means that industrial establishments with less than 300 workers need no standing order—a guideline document that supersedes even the employment contract—while laying off or retrenching staff. According to Madhavan of CPR, the 2019 version of these bills did not mention raising this limit to 300.

Nearly 90% of India’s workforce is in the informal sector, with headcounts way below 300.

“This is complete demolition of employment security,” Sundar told The Indian Express newspaper.

The industrial relations code, one of the three legislations passed in the upper house, also makes it near impossible for workers to strike. The new law would now require workers to hand in a 60-day notice before striking. In the case of pending proceedings before a legal tribunal, the strike can only happen after 60 days of the completion of such proceedings.

Earlier, a six-week notice period for labour strikes was required only by public utility industries such as water, gas, electricity, telephone, etc. The standing committee that had deliberated over the 2019 version of these new labour bills had recommended against expanding the notice-period rule beyond the public utilities establishments.

The third aspect of these bills relates to worker safety. The government, under these new bills, has the power to exempt any new establishment from any provisions of the law, including ensuring worker safety.

The code on occupational safety, health, and working conditions specifies the safety protocols and working hours for workers. But the new bills will allow the government to let any new establishment side-step these regulations if it means economic prosperity and employment generation.

“Given that every new factory would lead to incremental employment, this gives wide discretion to the state government to exempt new factories from basic safety and welfare norms. Note that the factories act permitted such exemption for a limited period of three months only during a ‘public emergency,'” Madhavan wrote in The Hindu.

Besides these alarming changes, the labour bills pay some attention to gig workers, too. The government has proposed setting up a national social security board, a body that will consult the central government to formulate suitable schemes for contract labour and inter-state migrants. An inter-state migrant is defined as someone who has relocated from their hometown and earns up to Rs18,000 a month.

Gig workers will now also pay 1-2% of their monthly turnover to the platforms for social security benefits.

These bills currently await the president’s assent to be codified as laws.