Opinion

Revisit labour codes

Ram Rastogi | Updated on October 13, 2021

Some provisions don’t support job creation

The four labour codes are pieces of legislation that have been a long time coming. The existing labour laws have over 40 separate legislation, making compliance tedious and burdensome for businesses.

The new labour codes make both implementation and enforcement a lot easier. However, Covid-19 has wreaked havoc on businesses. For the past one-and-a-half years, revenues have fallen significantly and many businesses have incurred massive losses and shut down. The country is already facing the largest unemployment rate in the modern era.

After any major economic crisis, what encourages a return to normalcy is more liberal labour policies that encourage entrepreneurs to push up investments and take risks. There is a creeping doubt that the new labour codes would prevent that.

The pandemic has given rise to uncertainty of payments across all levels of business — from manufacturing and distribution to retail. Having wage laws that are streamlined and benefit employees is a good thing. However, in the current pandemic, with so many jobs lost, job creation should be paramount. At such a time, encouraging contractual labour with tougher standards on pay and social security will encourage entrepreneurs to take risks for business expansion.

Gig workers

The pandemic has given a leg up to the gig economy. Platforms like Amazon, Uber, Flipkart, Myntra, Ajio, BigBasket, Swiggy and PharmEasy have provided jobs to lakhs of people, especially in the online delivery sector. While these are not full-time jobs, they help a lot of people who lost their livelihood during the pandemic find a source of income to keep their households running.

Gig work has been beneficial to both businesses and freelancers looking for work. It helps businesses hire people depending upon supply and demand with less than usual compliances as are required for full-time employees.

Shops and establishment jobs require flexibility for all parties involved. The work hours provisions for regular workers do not provide flexibility to fix work hours beyond eight hours a day. The provisions are regressive, especially when countries are transitioning from 5-day to 4-day work-week. The codes have also missed laying down uniform provisions for part-time employees.

The labour codes also chalk out fines on businesses for non-compliance of provisions, second offences and officer-in-default. The fines can range from ₹10,000 to ₹1 lakh. While the list of compliances has decreased overall, this needs to be propagated to businesses across the country. While these provisions might not affect big companies that have both resources and manpower to tackle these problems, they will be hard on SMEs. In the current pandemic situation, a majority of small businesses are in no position to adopt and implement the labour code changes. Any failure to comply will invariably lead to the imposition of fines and penalties on both businesses and their respective representatives. And this will affect job creation.

There are also provisions that impact employee wages. The code seeks to cap allowances at 50 per cent, which means basic pay has to be at least 50 per cent of CTC. While it will increase social security benefits, the take-home salary will reduce. Also, employers will need to contribute more to EPF and other perks. The code should not be implemented in a hurry as certain provisions need to be revisited.

The writer is a digital transformation strategist and digital payment advisor

Published on October 13, 2021

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