Greater labour flexibility also demands the strengthening of social security to workers; both in terms of its applicability and in its quantum.

Stated bluntly, there is a widespread perception that the three recently enacted labour codes, along with the Code on Wages in 2019, have tipped the scale in the favour of employers. Many employers’ decades-long demand for making countrywide “hiring and firing” decisions easier has now been conceded. Fixed time contracts have been freely permitted and accorded a statutory basis. Workers’ bargaining power stands impacted without a minimum national wage rate being determined. The new laws also do not preclude the further tightening of such regulations through outright revisions or rule-making by the provincial governments.
Conversely, workers now have the assurance that contract labour will be illegal in all core functions of an establishment. Simultaneously, there is the removal of prohibition against engaging a class of workers for any type of work, including the employment of women. By and large, workers now have a greater prospect of getting employment, albeit on a fixed term basis. The existing social security measures also stand extended to the gig economy and platform workers.
The statutory changes made by the Union Government are well within its purview, labour being a Concurrent List subject. Once the rules under the new legislations are notified, the Codes would take effect. Given recanting of any of the provisions of the new laws as being hoped for by a few labour bodies seems out of the realm of possibility, the available window of opportunity to rebalance the interests of employers and workers is in rule making. This is where suggestions must be concentrated, and concrete proposals worked into new rules. The Union Government could establish its neutrality by withholding the notification of the new Codes, or certain contentious sections thereof, until such time as the workers have been fully heard and their genuine grievances addressed.
The draft rules under IRC provide for rule-making by states on trade unions, and the IRC law itself permits the appropriate governments to exempt an establishment or a class of establishments from the provisions regarding trade unions on the grounds of public interest. Both these aspects have led to apprehensions about the possibility of further constraints on the bargaining mechanisms of workers. Given this, the Centre would do well to delay notifying this statutory provision till the pro-labour measures being discussed here are fully explored and through the rules let the states have only the procedural powers of supervising trade unions, rather than enabling them to impose limitations on their role and scope.
The new Wage Code, 2019 had talked about a national minimum wage rate, with the rules required to spell it out to come in the future. This has yet to be done. These rates would be applicable to national programmes like MGNREGS (the rural employment guarantee scheme), PMAY (the national affordable housing scheme, both rural and urban) and PMGSY (the national scheme for rural road connectivity) etc which together employ several lakhs of skilled and unskilled workers, particularly in rural areas. In addition, the labour force engaged in all entities of Central public sector undertakings, airports, port trusts, national highways, etc., would then get paid at these rates. If fairly determined, this would surely be higher than the existing rates under MGNREGS of Rs 203 per day for eight hours of unskilled work, even after the hike of Rs 20 effected during the ongoing pandemic. A national rate would also influence state level minimum wages. Undoubtedly, this may cause an uptick in the share of wages in GDP, but at a time when uncertainty in job tenures is being increased by making labour firing easier, this may be unavoidable.
Greater labour flexibility also demands the strengthening of social security to workers; both in terms of its applicability and in its quantum. In India, it is currently being primarily extended through the Employees’ Provident Fund Organisation (EPFO) and the Employees’ State Insurance Corporation (ESIC). Compared to the estimated national labour force of 500 mn, the PF coverage at present is about 60 mn, while the ESI facility is given to 35 mn employees. Through the exclusion provisions available in their respective statutes, their benefits have been kept away from over 85% of the country’s aggregate workforce, providing no relief for those engaged mainly in agriculture, plantations, mining, construction, transportation, retail trade, household work, or housewives and the self-employed.
Even in the “eligible vocations”, in the remote regions of the Northeast, J&K, Rajasthan and villages far away from towns in the other states, workers are not covered for the benefits of sickness compensation, medical care and unemployment available under ESI. The threshold limits of the EPFO scheme are establishments with 20 or more workers, while it is 10 or more for ESIC. Within these upper limits, the PF facility is accorded to those earning less than Rs 15,000, while the insurance scheme is extended to only those with a monthly income up to Rs 21,000. These excluding features have hitherto effectively limited the number of organised workers eligible to seek the facilities of these two statutory organisations, and have kept the huge informal sector workers away from them.
While most of the facilities available from EPFO and ESIC can be termed fairly adequate, the retrenchment compensation offered hitherto was grossly inadequate. Recently, under the rechristened Atal Beemit Vyakti Kalyan Yojana (ABVKY) of ESIC, it has been liberalised and raised to 50% of the average salary drawn during the preceding year and made available for six months. The benefit is now available to all laid-off workers (earlier it was restricted to only those whose establishments had actually closed down) who have made their bi-yearly insurance contributions for at least 78 days during each of the two preceding two sessions of six months, i.e., the employee has been working for one year instead of the earlier two. In addition, the payment is now no longer subject to a certification of retrenchment by the ex-employer and the filing of an affidavit by the claimant; instead, upon an online request, the claim is processed and paid into the designated bank account.
The forthcoming flexibility in terminating employment with permission of the concerned authorities in establishments employing up to 300 people, however, now calls for further augmentation of ABVKY. Besides raising the financial compensation to 75% of the average wage for the first six months, and giving the allowance for up to one year, there is the additional need to continue the medical care facilities to laid off employees and their families without the insistence of insurance contribution payment of 4%. It is worthwhile to recall that ESIC is sitting on a pile of unspent insurance premia collected by it over the years from employees, and that it has adequate funds to run such enhanced worker welfare schemes. Furthermore, EPFO needs to not only permit an employee from not making any monthly contribution, but also allow the employee to make non-refundable withdrawals from a PF account during the laid-off period.
ESIC, in conjunction with the Directorate General of Employment and Training of the Union Ministry of Labour & Employment and the Ministry of Skills Development, also needs to devise extensive arrangements for the free training and reskilling of laid-off workers. From a financial and social point of view, making people re-employable at the earliest and assisting them in finding opportunities for new jobs is as much in ESIC’s own interest as of the insured workers. Collaborating with established agencies to identify and upgrade a candidate’s skills, with ESIC providing the funding to do so is the way forward for a cash rich and prudent insurer.
Another major constraint so far for extending ESIC coverage has been the location and capacity of its medical facilities. Now that a parallel and more extensive healthcare infrastructure is being identified and reinforced by the newly set up Ayushman Bharat under the PMJAY, it will do well to enter into collaborative arrangements with the National Health Authority administering it. This should help it in rapidly extending itself to the areas and sections of workers hitherto excluded.
The creation and advancement of a safety net composed of financial support, medical care, training and reskilling is a prerequisite for the effective, harmonious and convivial way of ushering in the newly enacted Labour Codes. In fact, several other statutory provisions, particularly at the state level, have to be similarly revisited and drastically reduced in number and complexity. Of the 463 labour related Central and State legislations, most of which are archaic and entail over three thousand compliance filings a year, only 44 Central legislations have been merged into these four codes. Much tidying up remains, and reducing the burden on compliance is as much a reform measure as modifying the underlying provisions.
Dr Ajay Dua, a public policy specialist and a developmental economist by training is the former DG ESIC and a Union Secretary, Commerce and Industry.