‘Labour Codes have missed opportunity for real reform’

Civil Society News, New Delhi

Relations between employers and workers in India have for the longest time been governed by a bundle of opaque laws. Neither side has benefitted. Both have wished for more rational regulation.

Recently, the Narendra Modi government introduced four Labour Codes to simplify things. Investors needed to be reassured that entering and exiting from a business wouldn’t be needlessly complicated.

But the Labour Codes do little for the interests and aspirations of workers, who in India are largely unorganized and vulnerable. An opportunity has been missed for some real reform which could lead to the shaping of modern workplaces on a par with other economies.

We spoke to Rajiv Khandelwal, co-founder and executive director of the Aajeevika Bureau, which helps workers protect their interests in dealings with employers.

   

Q: What is your assessment of the four Labour Codes the BJP-led government is planning to implement?

In my view the Labour Codes are a wasted opportunity for protecting and improving the condition of the Indian workforce. They privilege employers’ interests and weaken the many rights that were available to workers to remain equal participants in the market economy.

You know, the Labour Codes came from the idea that we have a very complex network and architecture of labour legislation. There were 44 laws with different kinds of rules, compliances and provisions.

Codification of these different laws into four codes could have been a good opportunity to bring sense and coherence across laws, along with some universality as well as standardization of definitions of protections and thresholds across laws.

On that front, the codes fall short. What is really important is that the codes are failing to address the reality of the labour market in this country. Predominantly, our labour market is informal. It is unorganized. It is made up of casual workers who do not have formal employment status. They’re largely contract workers or home-based workers or care workers with no documentation. Primarily, 55 percent of our labour force is self-employed. They’re not even part of the labour codes because they are not employed workers. And that self-employed definition includes street hawkers, sanitation workers, rag pickers, sex workers… You know, there’s this whole large swath of India’s workforce that is not even in a formal work arrangement. This was a chance to think about work and workers more comprehensively, and not just tokenize it.

 

Q: Wouldn’t that be attempting too much? The idea was to promote manufacturing through more rational systems of employing people and benefitting them. Is that then a fair comment?

That aspiration is a fair one, I think. This is what the codes attempted to address but fell short on many fronts. Let’s go a little deeper into where they are falling short.

First, as I have said before, there’s a problem in the way the codes just cover a fraction of the Indian workforce. Let’s also keep in mind that jobs grow not by deregulation of labour laws. They grow if there is good infrastructure, good protection and highest standards of safety for workers. India actually has significantly lower wage rates than China. But China grows because it scores better on all these fronts.

What the laws are trying to do here is to deregulate labour laws to make it easier for industry to employ and let go of workers in a way that suits their seasonal market cycles. When you legitimize easy entry, easy exit, it actually fragments the economy, not strengthens it.

In the revised thresholds in the Labour Code of what a factory is, it has been increased from 100 to 300 employees. This means that if an employer has less than 300 employees, he or she can retrench them at will. It gives employers an incentive to keep the number below 300.  They will keep fragmenting their production processes, ensuring that they never cross 300 employees.

Look at contract workers. I’m speaking here of the manufacturing sector. Most industry has barely 10 to 15 percent of workers on their payroll. Everybody else is on contract. They’re all workers outsourced to contractors. And compliances by the contractors are very thin and meagre.

Currently, the threshold for what applies by way of law to contract workers has been increased. Only if you employ more than 50 workers will contract labour regulation start applying to you. This means a very large part of the contract workforce will remain outside the ambit of law. These are the realities of our recruitment and industrial practices which have not been addressed.

Then there’s this whole thing about securing a minimum wage. What the wage code is doing is announcing a national floor wage below which minimum wages will not fall. Typically, the floor wage that has been announced is significantly lower than the minimum wages in states.

For example, the last time the floor wage was announced, it was some ridiculous figure like `178 per day while the minimum wages were operating between `250 and `350 per day. This was about six years ago. Now, when you mandate or legitimize a floor wage and you say that wages will not fall below that, wages will actually stagnate at minimum wage level. Because even if you pay less than minimum wages, it will still be above the floor wage. In any case, 58 percent of the Indian workforce is not paid minimum wages. In effect we are legitimizing very low wages.

 

Q: You feel these codes are not realistic enough?

What they’ve done is they have addressed a small part of the formal economy. They’ve certainly reduced the compliance burden on industry and employers. And made changes which will work very well in the interests of big firms.

It’s going to become virtually impossible to call any strikes now because unions have to issue a 60-day notice period before calling a strike. You cannot strike during the notice period when conciliation talks are going on. All kinds of different provisions are going to apply under which a strike can be held. So strikes will become very difficult.

One big failure in the formulation of these codes is that they have been passed by fiat. The codes would have made sense if tripartite consultations had taken place.  The Indian Labour Conference (ILC) was not convened for a discussion on the codes. There was no tripartite discussion between trade unions, employers, and the government. Such talks are the very basis of how labour reforms and labour laws should be drafted. But the ILC has not been convened since 2002. The consultations that have taken place have been very cosmetic.

For example, take the Social Security code. It subsumes nine laws. Eight of those laws apply to formal sector workers. Only one, which is the unorganized workers (social security) law, is part of the code. And it only spells out the basis on which schemes will be formulated. It does mention gig workers and platform workers. So, there’s a lot of celebration around that. But if you read the text carefully, none of that is law. It is actually an advisory to state governments to create new schemes for these segments of workers. Benefits such as ESIC (Employees’ State Insurance Corporation), PF (Provident Fund), EPFO (Employees’ Provident Fund Organization) apply only to formal sector workers.

 

Q: Do you think that the framers of these codes and the rules should have worked much more closely with the informal sector, the unorganized part of the economy?

Yes, absolutely. Ninety percent of the entire workforce is informally employed. The formal sector is barely eight percent. You have these Labour Codes that are addressing that eight percent and then making some cosmetic offers to this 92 percent. Basically, they have been left out.

Consider home-based workers. In most industrial supply chains, there are a large number of women in the last mile of the supply chain. They’re not workers. They’re just people who have been given work in the garment sector, for example. There are women who stitch apparel at home, sew buttons, work for four hours, maybe eight hours, and get paid `150.

They don’t have a formal relationship with the employer but they are a critical part of the supply chain. They should have been recognized as workers. The codes don’t say this.

 

Q: Industry has essentially welcomed the codes?

Industry is really celebrating the reduction in compliance load. They are saying the industrial relations bill has become more favourable, that it is good for workers because everybody will receive gratuity. They’re celebrating fixed term employment since it is now perfectly fine to employ people for only a year. It suits them.

Look at the occupational safety code or OSH Code (Occupational Safety, Health and Working Conditions Code). Very important legislations have been brought into this. For example, even the Factories Act is now part of the OSH Code. The definition of what is a factory will change.

Earlier, if you had 10 or 20 workers, with power or without power, you came under the Factories Act. Now the legislation applies only if you employ 20 to 40 workers. This means an enormous number of units, small establishments, your retail store, all of them get left out. These are not factories. None of those laws will then apply. You’re creating more precarity and actually legitimizing lack of safety for many, many workers.

 

Q: Would a segmented approach have been better? Big industry has its concerns. The informal sector has its own concerns. Do you think that the whole approach needed to be more segmented to actually deliver benefits to employers and employees and build a more modern society?

Absolutely. Because you needed to recognize that there are large swaths of workers in highly precarious jobs that do not fall into the ambit of formal employment. Everything is now scheme-based. We have a scheme for sanitation workers. A scheme for construction workers. A scheme for this and that. Instead of scheme-based make it rights-based. The rights of workers in highly precarious jobs, their wages and safety, should be legally protected.

 

Q: Do the codes help migrant workers?

There is a chapter in the OSH Code that says the portability of the ration  card will be ensured and schemes will be announced. What does it mean?

We are one of the most unsafe places of work in the world. And lack of safety does not occur in big firms or big industrial establishments. They occur in downstream industries, in little units in Manesar where Safe In India works or in the kind of units that we work with in Ahmedabad, in textile supply chains and so on. Now, if they are not even part of the factory purview, it means there will be no inspection, no regulation. Then you are basically leaving such units open to violation of safety laws without any punitive action possible.

Such violations were not compoundable which means that you could not have a settlement. They would face legal action. But now they become compoundable, which means you can also settle, there is no fine, no penalty.

A lot of inspection is now becoming facilitation. Inspectors cannot come into your premises without notice anymore. Do you know what that means? Anyway, they were not coming. But this means basically everything will be sorted out.