SSB Lecturette Series: New Labor Reforms in India - Part 2

In previous part of this series we read about the background and other relevant details that why Labor law needs a change in India. Lets see whats the story ahead. It also considers the fact that, Archaic labor laws have strictly regulated hiring and firing, while an onerous "Inspector raj' or rule of inspectors has deluged employers with paperwork, discouraging them from expanding and taking on new staff. 

Fifty types of departments chase the companies. 50 types of forms have to be filled in. Hence, companies would now only need to fill a single forms online. Also, a new website, managed by the labor ministry, will allow companies to fill forms online and raise their grievances.

Click here for - SSB Lecturette Series: New Labor Reforms in India - Part 1
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It also gives companies greater flexibility in hiring and firing workers - reforms that economists and businesses say will help job creation and unleash more economic growth. Moreover, these changes would make it tougher for employees to form unions or to go on strike, but include measures to expand the social security net to the huge unorganized sector, which refers to India's millions of small, privately-owned businesses with uncertain legal status.

Also, It will ensure easier movement of accounts in the Provident Fund scheme by using a universal account number. The payroll-funded programme already has 80 million members. Inspection of businesses will be made more transparent, with a computer lottery being used to pick the enterprises to be inspected and officials required to upload a report within 72 hours. Right now, units for inspection are selected locally, without any objective criteria, allowing inspectors to harass unit owners and even exploit them in cases of violation of rules.

As part of the proposed revamp, a factory employing fewer than 300 workers would be allowed to lay off workers without government permission. Currently, factories employing 100 workers or more need approval for layoffs. But they will have to pay three times the current severance package. Companies have long been demanding an increase in the ceiling as governments rarely grant such permissions for layoffs, making it difficult to respond to business downturns and encouraging them to stay small.

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Why the Strike?

10 trade unions are demanding that the government dump plans to sell off stakes in state-run companies and shut down unproductive factories. Instead, the sick units should be revived, say unions.

Trade unions claim that if the government amends key laws - Factory Establishment Act, Bonus Act and Industrial relations - 75 per cent of the workforce will be out of the purview of labor laws.

The government plans to take small factories, which have up to 40 workers, out of the labor laws. Unions say this would take away the job security of most of the workforce.

The workers on strike are from the banking, manufacturing, construction and coal mining sectors. The new labor laws are expected to diminish the influence of trade unions and make the labor market more flexible. Hawkers, domestic workers and daily wage laborers have also joined the strike to demand an increase in the minimum wage.

Overall, the bill seems to be a step in the direction towards the growth of the country. It will ensure the ‘Ease of doing Business’ in the country and also protect the labor rights. But the challenge for the government is to pass it in the Rajya Sabha where it does not enjoy the majority.

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About the Author:  Pranav Nikam is an Electrical and Electronics engineer who is working in a renowned MNC in Chennai. He likes to work out in gym, do photography and play badminton. Through his articles he wants to spread awareness among other defence aspirants.