Labour economists state that the new labour codes, along with the Code on Wages, approved last year by the Parliament, are likely to result in a higher number of jobs, though precarious and of lower quality.
With the government kickstarting the rule-framing process for the four labour codes to enable their implementation from April 1 next year, a move towards higher short-term and contractual employment and less regulations are being flagged as some of the main concerns. On the other hand, the industry is citing the possibility of a shift towards bigger-sized establishments along with ease of doing business and a major churn in the labour market as the favourable outcomes.
Labour economists state that the new labour codes — Industrial Relations Code, Code on Social Security and Occupational Safety, Health and Working Conditions Code — along with the Code on Wages, approved last year by the Parliament, are likely to result in a higher number of jobs, though precarious and of lower quality. Also, the actual benefits accruing from an expected increase in investment flows due to the relaxation in compliance and regulation criteria under the new labour codes are unlikely to be immediate and need to be seen over of at least the next five years.
“The liberalisations provided in the labour codes would definitely create a number of jobs which are of low quality, that is, of short term, with no employment security, and probably other related securities will also be diluted. So, we will witness a labour market in the post-code scenario, preponderance of precarious but rising jobs. And these jobs would be designed in such a manner to lower the labour cost. Together, these two, according to the research evidence, will not result in productive, benevolent economic outcomes. These changes would mean that the standard labour-oriented market would become precarious but it would be a high employment market. In other words, there could be short-term unemployment and the unemployment between two jobs would increase,” XLRI professor and labour economist KR Shyam Sundar said.
Incentives for greater contractual and fixed-term employment is a concern that trade unions have also flagged. “In the private sector, these codes will help in replacing regular employment with fixed-term employment. Fixed-term employment means contract employment and no job security, no situation of continuity of job later on. You don’t have rights of social security, cannot struggle for wage increase or allowance increase. This whole process will lead to more contract employment, casualisation and outsourcing. We have to go by present experience which shows that casual, contract, or outsourced labour through contract is not protected at all by any labour law. They are changing the limit for contractors from 20 to 50, which means, say, in a family of four, each supplying 48 or 49 workers means no workers under that system will be protected either for wages or for job security or for social security or for occupational safety,” Amarjeet Kaur, the general secretary of the All-India Trade Union Congress (AITUC) said.
Government officials, however, see fixed-term employment as a game changer, and state that no cap on fixed-term employment would give a boost to seasonal employment. “Fixed term employment will be a game changer. Say, for the festive season, more workers are needed, then earlier they couldn’t be fired later on but now that will change. Seasonal employment will get a boost and it will make a huge difference,” a senior labour ministry official said.
The official also said that concerns about conversion of existing permanent jobs to contractual employment or retrenchment will not happen as mass-scale layoffs still require government permission. “There can’t be mass scale retrenchment or layoffs. That would require permission even now. Even employers would want permanence, revolving roles do not make sense,” the official told The Indian Express.
Industry voices state that the greater flexibility for hiring and firing will result in more investments in sectors which would benefit blue and grey collar workers. “Law after law basically prevented entrepreneurs to look at India as a destination for investment. Overseas investment has been coming mostly in white collar economy. But the minute it was for jobs for blue collar and grey collar workers, all the entrepreneurs were very scared to invest in the Indian market because of this typical overhang that you cannot have flexibility when it comes to blue and grey collar workers,” Lohit Bhatia, president, Indian Staffing Federation (ISF), a federation of staffing companies, said.
The changes in labour codes, along with the revised thresholds for MSMEs, are expected to provide incentives to expand to those factory owners who were earlier splitting their businesses to avail incentives and escape regulation, industry experts said. “If you were an MSME, where you knew you had sustenance of orders year after year, then you were told that if you remain small, you will have status of MSME. So whenever you got more orders, what the members in the family would do was that they would keep making factory after factory adjacent to each other. They would create ten factories, all registered under different entrepreneurs, all of them which will have small machinery, which will have only 5 or 10 workers and they would keep the factories small because the fear was that if you grow one of the factories also, you will automatically come out of the MSME category and your benefits will go away. So people didn’t want to lose those benefits. The current MSME thresholds will help in merging of those 10 factories of the same family, they can get better machinery, they can hire more workers instead of having only 10 or 15 or 20 workers in one factory. And with this ability to do hiring and firing up to 300, they will not hesitate to hire more people,” Bhatia said.
In times of economic uncertainty, especially amid the pandemic, industry is of the view that businesses might not be able to survive and that should not be viewed as an anti-labour outcome. “Job loss is not in the hands of the employer anymore. It is the global economy which will impact the Indian economy and which will impact Indian companies. There how do you ensure that there is a net available for fallback for them. Employment will go up in the country but it will also depend on other economic factors especially demand related. Currently demand is suppressed so you cannot blame it on labour factors. Also the capacities are under-utilised. Life becomes normal post the pandemic, then capacities will get used a lot more and as the capacities are going to be evolving, India will find a better development in these new labour codes. Government has provided for greater social security benefits. The role of middlemen and contractors will get curtailed, which will ensure benefits reach the workers directly,” M S Unnikrishnan, chairman, CII National Committee on Industrial Relations said.
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