Labour Policy | RBI Grade B Phase 2 Preparation - Bank Exams PDF Download

Introduction

The labour policy is based on the Directive Principles of State Policy in the Constitution of India. Article 43 aims to provide all workers, including agricultural and industrial, with work at living wages and good conditions for a decent life, full employment, and leisure for social and cultural activities.

Initially, the focus was on the organised labour force, but since 2005, there has been increased attention to the unorganised sector. Organised sector units are defined as those governed by legislation to protect workers' interests. The Ministry of Labour covers various establishments for compulsory notification of vacancies, including all public sector units and private non-agricultural establishments of certain sizes.

The Annual Survey of Industries collects data on factories registered under the Factories Act, 1948, covering those employing specific numbers of workers based on power usage. India's labour policy has evolved to meet the needs of planned economic development and social justice, reflecting diversification to fulfill constitutional Directive Principles. The goal of labour policy is to create a conducive environment for labour-management cooperation.

Labour Policy Before Independence in India

Before India gained independence, the Labour Policy was influenced by various factors and recommendations. In 1931, the Royal Commission on Labour, set up in 1929, submitted its report. At that time, the working class in India was not well-organized, and there were frequent strikes and lockouts causing tensions between employers and employees.

Recommendations of the Royal Commission:

• The Commission made several recommendations to improve the situation, including:
• Recognizing the trade unions' right to negotiate.
• Establishing Labour Welfare Officers, Wage Boards, and Works Committees.
• Introducing maternity benefit legislation.
• Providing housing facilities for workers.
• Creating a permanent statutory machinery to handle disputes.

Labour Policy During World War II:

• During World War II, there was a need to enhance labour conditions to increase production for the war effort.
• After the war, the focus shifted to improving the standard of living for workers and ensuring a steady supply of skilled labour for the growing industries in India.

Labour Investigation Committee, 1944:

• A significant development in labour policy was the establishment of the Labour Investigation Committee in 1944.
• The Committee was tasked with examining issues related to wages, employment, housing, and working conditions in factories.
• In its report submitted in 1946, the Committee made several important recommendations, including:
• Implementing safety measures to reduce workplace accidents.
• Providing state-funded insurance for employment injuries, occupational diseases, and maternity benefits.
• Linking dearness allowance (DA) to the cost of living index.
• Recognizing the role of trade unions.

Formulation of National Labour Policy:

• It became clear that industrial development in India was not possible without addressing the needs and concerns of the labour class.
• The Ministry of Labour developed a phased programme from 1947 to 1951 to establish basic labour standards regarding working conditions, health, welfare, and safety in industrial settings.
• The programme aimed to:
• Revise existing labour laws to reflect the changing circumstances.
• Control or eliminate contract labour.
• Extend employment opportunities and exchanges to all workers.
• Develop fair terms of service for workers.
• Establish wage standards in industries with low pay.
• Adjust dearness allowance rates to promote fair wages.
• Lay the groundwork for an industrial health insurance scheme.

Industrial Policy Statement of 1945:

• The industrial policy statement of 1945 highlighted the goal of securing fair wages, decent working conditions, and job security for industrial workers.

Labour Policy After Independence:

• After gaining independence, the Constitution of India, enacted in 1950, guaranteed decent living conditions, fair wages, and social security for workers.
• This laid the foundation for a comprehensive labour policy aimed at protecting and promoting the rights and welfare of workers in the country.

Labour Laws for Organised Sector

Labour welfare and regulation laws can be categorized into four main areas:

(A) Working Conditions; 
(B) Employee Relations; 
(C) Wages and Monetary Benefits; 
(D) Social Security.

Let's explore some of the key laws related to the organised sector, starting with those that govern Working Conditions.

1. The Factories Act, 1948:

• The Factories Act, 1948, defines a 'factory' as a place where a manufacturing process is conducted by a certain number of people, either using power or not.
• The Act requires factories meeting this definition to register and outlines provisions for various aspects of working conditions, including:
• Health precautions for workers
• Welfare and safety measures for workers
• Conditions under which women work
• Working hours for adults and children

2. The Plantation Labour Act, 1951:

• The Plantation Labour Act regulates the conditions of workers employed in plantations, including those producing coffee, rubber, and cinchona.
• The Act mandates the registration of all plantations and focuses on health and welfare measures for workers, such as:
• Access to drinking water
• Medical facilities
• Crèches for children
• Recreational facilities
• Educational facilities
• Housing for workers and their families

3. The Mines Act, 1952:

• The Mines Act addresses the health, safety, and welfare of workers employed in mining activities.
• A 'mine' is defined as any excavation operation conducted to obtain minerals.
• The Act stipulates various health and welfare provisions for mine workers, including the supply of drinking water and medical appliances.
• It also prohibits the employment of individuals under the age of eighteen in mines.

4. The Contract Labour (Regulation and Abolition) Act, 1970:

• The Contract Labour (Regulation and Abolition) Act aims to regulate the employment conditions of contract workers and provides for their abolition under specific circumstances.
• Employers hiring contract labour are required to register with the government-appointed registrar, and contractors must obtain a license from the authorities.
• The Act establishes health and welfare measures for contract labour as outlined in Chapter V of the legislation.

5. The Inter-state Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979:

• The Inter-state Migrant Workmen Act aims to protect migrant workers from exploitation in Indian industries.
• The Act sets minimum conditions of employment for inter-state migrant workers and issues passbooks detailing essential information such as:
• Employment details
• Displacement allowance
• Wages during travel
• Residential accommodation and medical facilities
• Protective clothing
• Equal pay for equal work, regardless of gender

6. Child Labour (Abolition and Regulation) Act, 1985: India is believed to have the highest number of child workers in the world. The Child Labour (Abolition and Regulation) Act (CLARA) prohibits the employment of children under the age of fourteen in factories and hazardous jobs. Hazardous employment includes industries such as glass and glassware, fireworks and match making, and carpet weaving. In situations where children are allowed to work, the Act regulates their working hours to ensure their safety and well-being.

Employee Relations

Employee relations in India are governed by three main laws:

• The Trade Unions Act, 1926 (TUA)
• The Industrial Employment (Standing Orders) Act, 1946
• The Industrial Disputes Act, 1947 (IDA)

The Trade Unions Act, 1926:

• The Trade Union Act allows for the registration of trade unions, empowering the working class by creating a countervailing force.
• It permits all employees in industry, including managers, to become members of trade unions.
• The Act grants immunity to registered trade unions and their members from certain civil and criminal acts.
• This immunity is intended to protect their right to withdraw labor and use work stoppage as leverage in bargaining.

The Industrial Employment (Standing Orders) Act, 1946:

• The Industrial Employment (Standing Orders) Act outlines work conditions for various categories of workers, making them aware of their employment rights.
• It applies to industrial establishments with 100 or more workers.

The Industrial Disputes Act, 1947:

• The Industrial Disputes Act (IDA) provides a framework for resolving industrial disputes through conciliation, adjudication, and arbitration.
• It applies to both individual and collective interests and rights.
• The process is sequential. if conciliation fails, the dispute moves to adjudication.
• Adjudicatory bodies include labour courts, industrial tribunals, and national tribunals.
• Arbitration is done by a mutually agreed arbitrator chosen by both parties.
• The IDA also allows state intervention in disputes, requiring employers to inform the labour commissioner before declaring a lockout or going on strike.
• For firms employing 100 or more workers, retrenching even a single worker requires state labour commissioner permission.
• An amendment in 1976 raised the employment ceiling to 300, but it was rolled back in 1982 to 100.
• This law makes it difficult for covered firms to retrench workers.

Wages and Monetary Benefits

The Payment of Wages Act, 1936:

• One of the earliest labour laws in colonial India.
• Aims to ensure timely payment of wages, payment in current coin, and prohibition of impermissible deductions.
• Applicable to factories, railways, and other establishments.

The Minimum Wages Act, 1948:

• Provides for fixation, review, revision, and enforcement of minimum wages in scheduled employment.
• Aims to prevent exploitation of workers, ensuring no discrimination between male and female workers.
• Minimum wages can be fixed as a time rate or piece rate, with guaranteed and overtime rates.
• Employers are mandated to pay minimum wages.
• Shortcomings include non-compliance by small units and exclusion of the agricultural sector, affecting rural enforcement.

The Payment of Bonus Act, 1965:

• Envisages sharing industrial gains between employers and employees.
• Applies to factories under the Factories Act, 1948, and establishments with twenty or more employees.

The Equal Remuneration Act, 1976:

• Applies to all public and private sector establishments.
• Mandates equal remuneration for men and women doing the same or similar work.

Social Security Laws

Social security refers to the protection that society offers to its members against economic and social hardships. It is primarily the responsibility of the state to develop suitable systems for safeguarding and assisting its workforce and their families.

Organised Sector:

In India, social security is considered a part of labour law. The main social security laws enacted include:

• The Workmen’s Compensation Act (WCA) 1923
• The Employees’ State Insurance Act (ESIA) 1948
• The Employee’ Provident Funds (and Miscellaneous Provisions) Act (EPFA) 1952 (including the Employees Pension Scheme (EPS) 1995)
• The Maternity Benefit Act (MBA) 1961
• The Payment of Gratuity Act (PGA) 1972

The Workmen’s Compensation Act (WPA) 1923:

• The WPA 1923 ensures compensation for workmen and their dependants in cases of injury, accident, or occupational diseases arising out of employment, leading to disability or death.
• It covers workers in factories, mines, plantations, and certain railway workers, as well as those in hazardous occupations like construction.
• Despite its importance, the Act faces challenges in implementation due to administrative difficulties.

The Employees’ State Insurance Act (ESIA) 1948:

• The ESIA 1948 is the primary social insurance legislation in India, applicable to workers in factories and, more recently, extended to shops, hotels, and other establishments.
• It establishes an employee state insurance scheme (ESIS) administered by the Employees State Insurance Corporation (ESIC), providing medical care and cash benefits to workers and their families in cases of death, permanent disability, or widowhood.

Employees’ Provident Funds (and Miscellaneous Provisions) Act (EPFA) 1952:

• The EPFA 1952 mandates a compulsory contributory provident fund, including pension and insurance, for employees in factories and establishments with 20 or more workers.
• It encompasses three schemes: the Employees’ Provident Funds Scheme, the Employees’ Deposit Linked Insurance Scheme, and the Employees’ Pension Scheme (EPS) 1995.
• The EPS 1995 aims to provide economic support in old age and for survivors, offering a pension of 50% of the last drawn salary upon retirement after 33 years of service.

Maternity Benefit Act (MBA) 1961:

• The MBA 1961 safeguards the earnings of women employees during a specified period before and after childbirth, covering situations like childbirth, miscarriage, and pregnancy-related illness.
• The Act places the responsibility on employers to provide maternity benefits, and it has been amended to extend provisions to women workers in various sectors.
• The 2017 amendment further expanded benefits to adoptive mothers, granting 12 weeks of maternity leave from the date of adoption.

The Payment of Gratuity Act (PGA) 1972:

• The PGA 1972 governs the payment of gratuity to employees upon retirement, serving as a protection for organized sector workers in factories, mines, plantations, and establishments with 20 or more employees.

Unorganised Sector:

• The unorganised sector in India is characterized by low earnings and high social insecurity, with only 8 percent of the labour force enjoying the social security benefits available in the organised sector.
• To address this issue, the Government of India established the National Commission for Enterprises in the Unorganised Sector (NCEUS) in 2004.
• Following the NCEUS recommendations, the Unorganised Workers Social Security Act was enacted in 2008. This Act mandates the formulation of welfare schemes for unorganised sector workers covering areas such as life and disability, health and maternity benefits, and old age pensions.
• Various welfare schemes have been introduced by the government for unorganised sector workers, including:
  • Indira Gandhi National Old Age Pension Scheme
  • National Family Benefit Scheme
  • Janani Suraksha Yojana
  • Aam Admi Bima Yojana
  • Rashtriya Swasthya Bima Yojana (a cashless health insurance scheme)
  • Janashree Bima Yojna
• Additionally, two social security schemes applicable to all citizens, including unorganised workers, have been launched:
  • Atal Pension Yojna
  • Pradhan Mantri Jeevan Jyoti Bima Yojana

Shops and Establishments Act (SEA). The schemes mentioned earlier are initiated by the central government, but there is also a 'Shops and Establishments' legislation in India. Each state has formulated its own laws regarding 'shops and establishments,' which are generally similar across states. Most workers employed in shops and establishments belong to the unorganised sector (or informal sector), although there are larger establishments like motor transport companies and insurance companies. The SEA applies to both larger and smaller shops and establishments.

Recent Labour Reform Measures

Background: Medium-sized formal sector manufacturing firms have identified labour regulations, particularly the dismissal norms under the Industrial Disputes Act and the complexity of compliance, as significant barriers to growth. The Economic Survey 2016-17 highlights the existence of 39 Central labour laws, which contribute to difficulties in industrial development and encourage rent-seeking behaviour.

Rajasthan's Labour Reforms: Rajasthan has implemented labour reforms aimed at simplifying regulations to attract investors. Key changes include:

• Industrial Disputes Act (IDA):
• Section 25 K: Government permission for retrenchment raised to 300 workers.
• Section 25 N: Modified to require 3 months' average pay as compensation for retrenchment, replacing the previous notice period requirement.
• Factories Act:
• Section 2: Redefined a factory as employing 20 or more persons if using power and 40 or more persons if not using power.
• Contract Labour Act (CLA):
• Definition of ‘establishment’: Raised the ceiling for applicability to establishments employing 50 or more contract workers, up from 20.

Central Government Initiatives: In addition to state-level reforms, the central government has initiated several labour reform measures, including:

• Apprenticeship Act: Amended to make it more responsive to industry needs and support for MSMEs in engaging apprentices.
• Unified Labour Portal: Launched the Shram Suvidha Portal for timely grievance redressal and creating a conducive environment for industrial development. Key features include:
• Unique Labour Identification Number (LIN).
• Simplified online return filing.
• Transparent labour inspection scheme.
• Digitisation of Services: Under the banner of Panchdeep, services to insured persons under the Employees' State Insurance Act (ESIA) are being digitised to reduce transaction costs and improve service delivery.
• Employees' Provident Fund (EPF) Digitisation: Subscribers are being allotted a Universal Account Number (UAN) for direct access to EPF accounts, facilitating online account management.
• Minimum Pension: Introduced a minimum pension of Rs. 1000 for pensioners under the Employees' Pension Scheme, 1995.
• National Council for Vocational Training-Management Information System (NCVT-MIS): Portal developed to streamline the functioning of Industrial Training Institutes (ITIs), Apprenticeship Scheme, and assessment/certification of NCVT training courses.
• National Career Service (NCS): Implemented as a mission mode project to transform the National Employment Service, providing job-related services such as online registration of job seekers and vacancies, career counselling, vocational guidance, and information on skill development courses, internships, and apprenticeships.