Industry And Cluster | News & Insights

Explained: In labour codes, what changes for workers and hirers?

Published: September 23, 2020

The Lok Sabha Tuesday cleared new versions of three labour codes — Industrial Relations Code Bill, 2020, Code on Social Security Bill, 2020 and Occupational Safety, Health and Working Conditions Code Bill, 2020.

While the government proposes to increase the ambit of social security by including gig workers and inter-state migrant workers, it has also proposed measures that will provide greater flexibility to employers to hire and fire workers without government permission.

What are the key proposals?

In the Industrial Relations Code Bill, 2020, the government has proposed to introduce more conditions restricting the rights of workers to strike, alongside an increase in the threshold relating to layoffs and retrenchment in industrial establishments having 300 workers from 100 workers or more at present — steps that are likely to provide more flexibility to employers for hiring and firing workers without government permission.

The Industrial Relations Code has raised the threshold for requirement of a standing order — rules of conduct for workmen employed in industrial establishments — to over 300 workers. This implies industrial establishments with up to 300 workers will not be required to furnish a standing order, a move which experts say would enable companies to introduce arbitrary service conditions for workers.

The Standing Committee on Labour, in its report submitted in April, had also suggested hiking the threshold to 300 workers, noting that some state governments like Rajasthan had already increased the threshold and which, according to the Labour Ministry, has resulted in “an increase in employment and decrease in retrenchment”. “The Committee desires that the threshold be increased accordingly in the Code itself and the words “as may be notified by the Appropriate Government” be removed because reform of labour laws through the executive route is undesirable and should be avoided to the extent possible,” it had said.

The Industrial Relations Code states that the provision for standing order will be applicable for “every industrial establishment wherein three hundred or more than three hundred workers, are employed, or were employed on any day of the preceding twelve months”.

What are the concerns raised over the new labour codes?

Analysts say the increase in the threshold for standing orders will water down the labour rights for workers in small establishments having less than 300 workers. “The increase in the threshold for standing orders from the existing 100 to 300 is uncalled for and shows the government is very keen to give tremendous amounts of flexibility to the employers in terms of hiring and firing…dismissal for alleged misconduct and retrenchment for economic reasons will be completely possible for all the industrial establishments employing less than 300 workers. This is complete demolition of employment security,” XLRI professor and labour economist KR Shyam Sundar said.

The Industrial Relations Code also introduces new conditions for carrying out a legal strike. The time period for arbitration proceedings has been included in the conditions for workers before going on a legal strike as against only the time for conciliation at present.

For instance, the IR Code proposes that no person employed in an industrial establishment shall go on strike without a 60-day notice and during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings. Thus, elongating the legally permissible time frame before the workers can go on a legal strike, making a legal strike well-nigh impossible.

The IR code has expanded to cover all industrial establishments for the required notice period and other conditions for a legal strike. The Standing Committee on Labour had recommended against the expansion of the required notice period for strike beyond the public utility services like water, electricity, natural gas, telephone and other essential services.

At present, a person employed in a public utility service cannot go on strike unless he gives notice for a strike within six weeks before going on strike or within fourteen days of giving such notice, which the IR Code now proposes to apply for all the industrial establishments.

What are the other proposals for workers?

The IR Code Bill has also proposed a worker re-skilling fund, though the contributions for the fund are only detailed from the employer of an industrial establishment amounting to fifteen days wages last drawn by the worker immediately before the retrenchment along with the contribution from such other sources. The mention of ‘other sources’ for funding the re-skilling fund, experts said, is vague.

The other two codes have also proposed changes for expanding social security and inclusion of inter-state migrant workers in the definition of workers. The Social Security Code proposes a National Social Security Board which shall recommend to the central government for formulating suitable schemes for different sections of unorganised workers, gig workers and platform workers. Also, aggregators employing gig workers will have to contribute 1-2 per cent of their annual turnover for social security, with the total contribution not exceeding 5 per cent of the amount payable by the aggregator to gig and platform workers.

The Occupational Safety, Health and Working Conditions Code has defined inter-state migrant workers as the worker who has come on his own from one state and obtained employment in another state, earning up to Rs 18,000 a month. The proposed definition makes a distinction from the present definition of only contractual employment.

The Code, however, has dropped the earlier provision for temporary accommodation for workers near the worksites. It has though proposed a journey allowance — a lump sum amount of fare to be paid by the employer for to and fro journey of the worker to his/her native place from the place of his/her employment.

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