In a significant move aimed at revitalizing the country’s labour landscape, India has recently introduced a series of reforms that promise to bring substantial changes to how businesses and workers interact. These reforms, which have been long-awaited and debated, mark a crucial step towards aligning India’s labour laws with the demands of a modern economy. Let’s delve into the key aspects and implications of these new reforms.
Background and Context
India’s previous labour laws were often criticized for their complexity, rigidity, and outdated nature, which hindered economic growth and job creation. The reforms were envisioned to streamline regulations, improve ease of doing business, and provide flexibility for employers while safeguarding the rights and interests of workers.
Key Reforms Introduced
- Consolidation of Labour Codes: One of the most significant changes is the consolidation of numerous labour laws into four Labour Codes:
○ Code on Wages: The Code on Wages Bill was passed by the Parliament in 2019.This code replaces the following laws:
i. Minimum Wages Act, 1948
ii. Payment of Wages Act, 1936
iii. Payment of Bonus Act, 1965
iv. Equal Remuneration Act, 1976
The Code specifies penalties for offences committed by an employer.
● Contravention of any provision of the Code
● Paying less than the minimum wage
● The maximum punishment is three-month imprisonment along with a fine of Rs. 1 lakh
Cons
- There is no clarity on the formula for fixing the minimum wage and also on the particular authority designated for setting the minimum wages.
- The fixing of minimum wages on the basis on geography, skill and difficulty levels of the work, etc. might bring in a lot of discretionary power to the hands of the administrators since many of these factors are not easy to measure. This might lead to adverse effects like lobbying.
- The clause for the deduction of wages seems arbitrary and it might prevent workers from unionising in fear of a deduction in wages.
- The Code omits the principal employer’s liability to pay wages if the labour contractor had failed to do so. The principal employer is defined broadly in the Code making it difficult to pinpoint responsibility for payment of wages. This is a major issue since, in India, a majority of the workers are contract labourers.
- The Code also takes away the jurisdiction of courts in providing justice to workers who have faced violations with respect to their wages. This means that workers can no longer access courts to contest the wages paid to them by their employers, but can only approach the quasi-judicial body and appellate authority set up under the provisions of the Wage Code.
- Inclusion of Informal Sector Workers: Efforts to extend social security benefits and protections to workers in the informal sector, who constitute a significant portion of India’s workforce, are a crucial aspect of the reforms.
- Ease of Compliance: Simplified registration, filing, and compliance procedures are expected to reduce bureaucratic hurdles for businesses, encouraging formalization and contributing to economic growth.