The government is set to introduce two important bills relating to wages and industrial relations in Parliament in March.
What is labour reform bill and why do we need it?
Over the years, business environment has revolutionized and has made existing labour laws archaic and obsolete. This is what grasped the minds of policy makers who in turn are moving to club around 40 Indian laws related to labour in four or five Acts that will act as guidance for shops, factories, small and large business entities.
Hereunder are tentative reforms the bills will bring after being cleared from the Parliament:
1. In the Wage Code Bill, an alternate option to Employees State Insurance health facilities, which will be health insurance/mediclaim for employees by employers, is set to be introduced giving more choice to the employers, better services and competitive pricing
2. Retrenchment provisions will be simplified by reducing unwanted regulations. This will positively impact the prevailing business sentiment, and hiring and removal of specialized and unproductive workers, respectively; will be not appear as herculean task
3. Benefiting women employees will be the provision where working night shifts shall now be permitted under Small Factories Bill, thus surging women participation in workforce
4. Shops can expect to see a law that will allow them to conduct business at all hours during the day and night under Shops and Establishments (Amendment) Bill
5. Hitherto compulsory Employees Provident Fund (EPF) is set to see a challenger in form of National Pension System (NPS), which means that an alternative will exist for those who want greater returns for comparatively greater risk in saving for future
Will the Indian economy benefit from these reforms?
The benefit to economy, owing to passage of these bills in the Parliament, will be multi-fold. Hereunder is a glimpse of these:
1. Easier compliance
Apart from reducing multiplicity and paving the way for uncomplicated compliance, this step will ensure wider enforcement. Businesses will not be required to register with multiple authorities; rather a single form will have to be filled for registering under various labour laws. Single window clearance for labour laws will also be in line with the government’s Digital India policy
2. Reduced costs
Reduction in compliances, red tapism and overbearing bureaucracy will significantly reduce costs and bring down cost of production. It would at the same time benefit the public account of India by reducing the cost of administration
3. Shift of sentiments to organized sector
Until now, organizations don’t get registered to save on the numerous compliances that have to be fulfilled otherwise, and thus remain a part of the unorganized sector of India, not accounted for in the GDP of the country. According to a data, over 90% of India’s workforce is occupied in the unorganized sector. Labour reforms will mark a shift of sentiments from unorganized to organized sector, where more and more enterprises will look to come under the ambit of organized sector, hence extend crucial benefits like provident fund, bonus and gratuity to their employees. Moreover, once under organized sector, enterprises are put on a better footing to compete with other big and international players.
4. Simplified procedures, ease of doing business
Ease of doing business is a component of Make in India drive. The World Bank’s Ease of Doing Business Report places India at a position where not many foreign investors view the country as a lucrative investment destination. Labour reforms will help India score much better in the Index, thus taking the ranking at a much reputable position.
5. An increase in job growth
Businesses deliberately keep number of employees low so as to avoid compliance under labour laws, which come into picture once workforce exceeds a defined threshold. Factories and other establishments thus remain under-employed, functioning at below capacity. It can be noted that 84 percent of Indian manufacturers employ less than 50 workers, a dismal figure. Easy compliance under new laws will change this by encouraging factories to hire more workers, thus function at full capacity.
Are there any hurdles in the way?
The only bone of contention that exists in the way of making India a more business friendly country with equal focus on workforce well-being is the resistance of labour unions and many left-inclined political thinkers who view labour reforms as a strategy to give unlimited powers in the h ands of management and by taking away legal rights of workers.
It is upon these unions and groups that they recognize the imperative need of labour reforms that will only enhance dem and for the workforce, thus kick-starting the much-needed employment growth. Also, with the reduction in the cost of production, the ultimate benefit will flow to the labour force, which is also the consumer of goods.
It can be hoped that the group of ministers formed under the Finance Minister by the government to tackle the issue will produce productive outcomes and a consensus will soon be found with trade union representatives and other criticizers. With the passage of 5 labour reform bills, the country will see a new dawn that will advantage both workers and industry likewise.
