The shaky foundation of the labour law reforms

Context:

It could be a long wait before employers and workers enjoy the so-called benefits extended by the labour codes: Code on Wages, Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and Code on Social Security (CSS).

Relevance:

GS-II: Social Justice and Governance (Government Interventions and Policies, Issues arising out of the design and implementation of Government Policies), GS-III: Indian Economy (Human Resource)

Dimensions of the Article:

1. Code on Wages Act, 2019

1. Industrial Relations Code Bill 2020
2. Occupational Safety, Health and Working Conditions Code Bill, 2020
3. Code on Social Security Bill, 2020
4. Concerns regarding the implementation of the codes (labour law reforms)
5. Concerns with the Code on Wages, 2019
6. Concerns with the Code on Social Security Bill, 2020

Code on Wages Act, 2019

• The new wage code removes the multiplicity of wage definitions, which can significantly reduce litigation as well as compliance cost for employers.
• It links minimum wage across the country to the skills of the employee and the place of employment.
• It seeks to universalise the provisions of minimum wages and their timely payment to all employees irrespective of the sector and wage ceiling.
• It seeks to ensure Right to Sustenance for every worker and intends to increase the legislative protection of minimum wage.
• A National Floor Level Minimum Wage will be set by the Centre and will be revised every five years, while states will fix minimum wages for their regions, which cannot be lower than the floor wage.
• It subsumes the following four labour laws:
  1. Payment of Wages Act, 1936
  2. Minimum Wages Act, 1948
  3. Payment of Bonus Act, 1965
  4. Equal Remuneration Act, 1976

Industrial Relations Code Bill 2020

• The code, among its important provisions, makes it easier for companies to hire and fire workers.
• Companies employing upto 300 workers will not be required to frame rules of conduct for workmen employed in industrial establishments. Presently, it is compulsory for firms employing upto 100 workers.
• It proposes that workers in factories will have to give a notice at least 14 days in advance to employers if they want to go on strike.
• Presently, only workers in public utility services are required to give notices to hold strikes.
• Besides, every industrial establishment employing 20 or more workers will have one or more Grievance Redressal Committees for resolution of disputes arising out of employees’ grievances.
• The code also proposes setting up of a reskilling fund to help skill retrenched workers.

Occupational Safety, Health and Working Conditions Code Bill, 2020

• It spells out duties of employers and employees, and envisages safety standards for different sectors, focusing on the health and working condition of workers, hours of work, leaves, etc.
• The code also recognises the right of contractual workers.
• The code provides employers the flexibility to employ workers on a fixed-term basis, on the basis of requirement and without restriction in any sector.
• More importantly, it also provides for statutory benefits like social security and wages to fixed-term employees at par with their permanent counterparts.
• It also mandates that no worker will be allowed to work in any establishment for more than 8 hours a day or more than 6 days in a week.
• In case of an overtime, an employee should be paid twice the rate of his/her wage. It will be applicable to even small establishments, which have upto 10 workers.
• The code also brings in gender equality and empowers the women workforce. Women will be entitled to be employed in all establishments for all types of work and, with consent can work before 6 am and beyond 7 pm subject to such conditions relating to safety, holidays and working hours.
• For the first time, the labour code also recognises the rights of transgenders. It makes it mandatory for industrial establishments to provide washrooms, bathing places and locker rooms for male, female and transgender employees.

Code on Social Security Bill, 2020

• This will replace nine social security laws, including Maternity Benefit Act, Employees’ Provident Fund Act, Employees’ Pension Scheme, Employees’ Compensation Act, among others.
• The code universalizes social security coverage to those working in the unorganised sector, such as migrant workers, gig workers and platform workers.
• For the first time, provisions of social security will also be extended to agricultural workers also.
• The code also reduces the time limit for receiving gratuity payment from the continuous service of five years to one year for all kinds of employees, including fixed-term employees, contract labour, daily and monthly wage workers.

Concerns regarding the implementation of the codes (labour law reforms)

• The Government announced its intentions of implementing the Codes from April 2021 even as State governments were completely unprepared with the rules. Further, the major political parties reallocated their energies to regional elections rather than the implementation of codes.
• The central government has deferred the possible date of implementation to October 2021, while the Supreme Court of India has exerted pressure on both the central and the State governments to implement a ‘one nation, one ration card’ (ONOR) scheme (which is essential alongside the implementation of the labour law reforms) and register all the unorganised workers under the National Database for Unorganized Workers (NDUW), which was to have been done by July 2021. Hence, Government agencies are rushing to comply with both the directives.

Concerns with the Code on Wages, 2019

• The Code on Wages, 2019 seeks to consolidate and simplify four pieces of legislation into a single code. However, while the previous four pieces of legislation had a total of 119 sections, the new Code has 69 sections.
• The central government will have the power to fix a “floor wage”. Once it is fixed, State governments cannot fix any minimum wage less than the “floor wage”.  The concept should be for a binding minimum wage and not have dual wage rates — a binding floor wage and a non-binding minimum wage.
• Neither the Code nor the Rules (presently, draft Rules) prescribe the qualifications and experience required for appointment of competent authority.

Concerns with the Code on Social Security Bill, 2020

1. For Organised sector only: The SS Code does not have free basic curative health care in its scope. Of the 8 existing central labour laws that the SS Code 2020 amalgamates, employees provident fund, employees state insurance (ESI), maternity benefit, gratuity are entirely for organised sector workers. – This has remained so even in the new scheme of things.
2. Ambiguity: For employees’ state insurance, the existing employee threshold has been withdrawn and now the central government can extend ESI benefits to any organisation irrespective of the number of workers employed therein. However, there are areas of ambiguity and overlapping too. The SS Code proposes that both the central and State governments will formulate schemes for unorganised workers.
3. Need for registration: The legal framework as proposed in the Code and Rules, implies that the basic onus lies on informal workers registering as beneficiaries. Registration is a prerequisite for universal coverage. To avail social security, an informal worker must register herself on the specified online portal to be developed by the central government.
4. Further complications due to existing norms: Similar provisions are already there in existing social security schemes run by State governments under the Unorganized Workers’ Social Security Act, 2008. Still, a large number of informal workers are outside the ambit of any social security even after 13 years. The absence of definite and unambiguous provisions in the present code would further complicate achievement of universal registration.
5. Lack of awareness: Also, experience shows that there is an awful lack of awareness among informal workers regarding social security schemes. Online registration places a further challenge as most informal workers lack digital literacy and connectivity (already demonstrated by a similar registration requirement for COVID-19 vaccines under CoWIN, the government app).
6. Lack of Documents: Informal workers also find it difficult to furnish all documentary papers required as part of the registration process. Most informal workers are footloose casual workers (26% of all workers) and self-employed (46% of all). They move from one place to another in search of livelihoods. Furnishing proof of livelihood and income details in the absence of tangible employer-employee relations is very difficult.
7. Lack of Provisions regarding cooperation: Further, as unorganised workers are spread across the length and breadth of India, inter-State arrangement and cooperation becomes imperative. The code does not provide for such eventualities.
8. Lost Opportunity in Maternity benefit: Under the SS Code, the provision of maternity benefit has not been made universal. Maternity benefit is presently applicable for establishments employing 10 workers or more. The definition of ‘Establishment’ in the proposed code did not include the unorganised sector. Hence, women engaged in the unorganised sector would remain outside the purview of maternity benefit.
9. Lost Opportunity in Employees Provident Fund: The SS Code maintains that the Employees’ Provident Fund Scheme will remain applicable, as before, to every establishment in which 20 or more employees are employed. Thus, for informal sector workers, access to employees’ provident fund remains unfulfilled too in the new code.
10. Lost Opportunity in Payment of gratuity: Gratuity shall be payable to eligible employees by every shop or establishment in which 10 or more employees are employed, or were employed, on any day of the preceding 12 months. But although payment of gratuity was expanded in the new Code, it still remains inaccessible for a vast majority of informal workers.

-Source: The Hindu