India’s New Labour Codes

21-10-2020

 

The Indian Parliament passed three new Labour Codes on September 2020. The three Labour Codes are the Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and the Social Security Code.

The move seeks to simplify the labour laws and ease the compliance burden on firms. The three Codes replaced a total of 25 central labour laws and could potentially affect 500 million workers in the country.

Applicability

The Indian Government plans to implement the Codes soon. When implemented, the Codes on Wages and Industrial Relations will apply to all establishments, with limited exceptions.

Changes in Definitions

Under the old labour codes, there were multiple legal definitions for terms such as “employee”, “worker” and “factory”.  These definitions have been standardised across all three Labour Codes. By making legal definitions the same within the central labour laws, the government hopes to create more predictable labour conditions which are conducive to easing compliance for all businesses. The move would also lessen the burden on the country’s judicial system as a result of disambiguation of legal definitions.

The Codes also institutionalised several legal terms, including several new categories of workers such as “gig workers”, “platform workers” and “Fixed Term Employees”. In addition, the Codes also institutionalised unorganised workers and contract workers who were outside the purview of the labour laws.

Lastly, the Codes have expanded the definition of “inter-state workers” or migrant workers to include contract workers and self-employed workers from another state while the “hazardous activity" definition has been expanded to include all establishments where any hazardous activity is carried out regardless of the number of workers.

Greater Legal Coverage for Workers

The three Labour Codes extend the coverage of national insurance to new categories of workers. For example, the Employees' State Insurance Scheme (ESI), a social security and health insurance scheme for Indian workers, now covers gig workers, plantation workers, unorganised sector workers, and workers in hazardous occupations. Inter-state migrant workers will receive ESI and provident fund benefits available to other workers in the same workplace.

The government will set up social security funds for unorganised workers, gig workers and platform workers. For “Fixed Term Employees”, they are entitled to the same salary and benefits such as ESI, Medical Insurance, EPF, bonus, etc at par with regular employees who are doing work of the same or similar nature.

The Social Security Code required the National Social Security Board to provide recommendations to the Central Government for formulating suitable schemes for unorganised workers. In addition, the Code also constituted a “special purpose vehicle” to implement schemes for unorganised workers.

Concerns

Experts have voiced concerns that the Codes will make it easier for companies to fire their employees. For example, under the new Codes, companies with up to 300 employees will not require prior government approval before the retrenchment of their employees. In addition, many provisions which regulate the employment of inter-state migrant workers are only applicable to establishments employing 10 or more such workers, compared to five earlier.

Concerning provisions relating to “factory”, the threshold has been increased from 10 to 20 workers with power. This excludes many smaller factories from the purview of the Codes. Although much has been done to protect unorganised workers, unemployment protection for unorganised workers have not been addressed by the Codes. The Codes also do not specify minimum standards for occupational safety and health.

Between 2019 and 2020, India has passed four new Labour Codes which replaced multiple central labour laws. Code on Wages was passed by the Parliament in 2019. The four Codes are part of major labour reforms in India as the country looks to achieve its aspiration for greater economic growth and to propel India to one of the top spots in the Ease of Doing Business ranking.    

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More info: Overview of Labour Law Reforms

More info: Labour Code - amfori