Bills and Acts- Industrial laws | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Highlights and Significance Labour Law Reforms

• The Indian Parliament has passed four Labour codes, namely The Code on Wages, The Industrial Relations Code, The Code on Social Security, and The Code on Occupational Safety, Health and Working Conditions, with the aim of modernizing labour regulation and making it more straightforward. In a globalized economy, it is necessary to maintain a competitive edge in terms of pricing, which depends on the high production and low cost of labour.
• The biggest challenge in labour reforms is to balance employment growth and workers' rights. Debates around labour reform are related to small firms' coverage, deciding on thresholds for prior permission for retrenchment, reinforcing labour enforcement, allowing flexible forms of labour, and promoting collective bargaining.
• Labour laws generally apply to larger establishments, and some Codes maintain size-based thresholds. Establishments hiring 100 or more workers need government permission for closure, layoffs, or retrenchments. This creates an exit barrier for firms, affecting their ability to adjust their workforce to production demands. The Industrial Relations Code increases the limit to 300 workers and allows the government to increase it further by notification.
• The multiplicity of labour laws has resulted in different compliances, creating a burden for firms. Additionally, the enforcement machinery has been ineffective due to poor enforcement, inadequate penalties, and rent-seeking behavior of inspectors. The Codes address some of these aspects. Contract labour has become more prevalent due to labour compliances and economic considerations, but they lack basic protections such as assured wages. The Codes do not fully address these concerns, but the Industrial Relations Code introduces a new form of short-term labour called fixed-term employment.
• Several trade unions are registered, but there are no criteria for recognizing unions that can formally negotiate with employers. The Industrial Relations Code creates provisions for union recognition. The Codes simplify labour laws but fall short in some respects. The Code on Social Security enables the notification of schemes for "gig" and "platform" workers, but there is a lack of clarity in these definitions.

Help to labour workforce:

• The public generally has a lack of interest in labor laws.
• Significant improvements could result if the laws are implemented properly.
• Employers often oppose setting up new businesses due to their aversion to labor laws and regulations.
• The purpose of the new codes is to promote employment by creating a favorable environment.
• Implementation of the previous 44 laws was challenging.
• The new code aims to simplify the laws, eliminate discrepancies in definitions, and provide workers with protection, welfare benefits, and incentives.

From economic point of view, how important is it to come out of this old archaic laws

• The labor markets are fragmented, both in terms of geography and employment. However, despite the new code, some of this fragmentation remains in place. 
• The code has separate provisions for organized and unorganized workers, which creates a significant level of distinction and contributes to the persistence of informalization.

Concerns Raised

• The proposed increase in the threshold for standing orders from 100 to 300 will give employers too much flexibility in hiring and firing. The Industrial Relations Code also introduces new conditions for legal strikes, including the inclusion of the time period for arbitration proceedings as a condition for workers before they can go on a legal strike. This effectively elongates the legally permissible time frame for workers to go on strike, making it nearly impossible. 
• The IR Code expands to cover all industrial establishments for the required notice period and other conditions for a legal strike, despite recommendations against such an expansion from the Standing Committee on Labour. Currently, a person employed in a public utility service cannot go on strike without providing notice within six weeks or fourteen days, which the IR Code proposes to apply to all industrial establishments.