There can be a transformative impact of these labour codes on labour relations in India. Along with the ‘Code on Wages Act- 2019’, these can significantly ease the conduct of business by amalgamating a overabundance of Central and State laws on labour.
The Second National Commission on Labour (2002) recommended to adopt the labour codes, which suggested consolidating 100 State laws and 40 Central laws across industries, occupations and regions.
The COVID-19 pandemic has indicated the failures of India’s labour law framework. Despite having an wide network of legislation intended to protect the rights of workers, there has been little to no relief in the form of job security or economic buffers in these times of uncertainty. In an effort to contain the infection, there have been closures of factories, industries and workplaces. Despite clear government advisories requesting the maintenance of contractual workers, allowing sick leave, and payment of full wages; employers have still proceeded with retrenchment orders, resulting in one in four Indians being unemployed.
The steady relaxation of the lockdown has resulted in several State governments suspending labour laws for a few years. This has been done in the hope of attracting capital investments and reducing the socio-economic unrest linked with widespread unemployment. This is a knee-jerk response. Its constitutional dependability and economic efficiency in attracting long term capital and tumbling unemployment has not yet been established.
Before suspending the on hand labour law framework, governments should question whether and how a flexible labour regime would incentivize additional capital investment, creating more employment.
Empirically, it has been confirmed that flexibility in labour laws has no correlation with capital investments which create jobs. Simply diluting or removing worker rights does not appear to have a significant impact on unemployment rates. Conversely, there is evidence that a well-protected and creative workforce triggers capital inflows into new industries. In India, workplace protection has been through a system of government enforced-rights rather than by empowering labour collectives. The focus has been on a compliance framework, which has suffered from a lack of implementation.
Substantive changes are required to change the regulatory lens from rigid employer compliances in workplace infrastructure to empowering labour collectives and allowing them to negotiate for their wages and working conditions in a fair, flexible, and transparent manner. This could have the effect of allowing both employers and workers to engage to re-calibrate their terms of work in line with existing economic conditions in a manner best suited to both parties. Better working conditions, job security and a guarantee of wages would incentivise Indian workers to return to core manufacturing regions and thus provide the necessary long-term safety net, not just in times of crises, but also during business-as-usual.
There has been amendment in the four labour codes to facilitate free and fair negotiations between labour and investor collectives – thus spurring the creation of humane jobs. This amendment aims to incentivise investors to set up new factories.
The manner of drafting such amendments should align with India’s international labour law obligations. Particularly, India should meet the terms with Convention 144 (Tripartite Consultation) and involve all three stakeholders (governments, employers, and employees) in framing changes to the present labour regulation.
Though the exact contours of the rationalized legislation will depend on the results of the tripartite consultation, certain principles such as representative labour collectives, collective bargaining and equitable treatment of employers and employees can outline the foundation of the changes.
Benefits of Labour Codes
There has been consolidation and simplification of 25 central labour laws into three Codes simplify labour laws that have been on the table for at least 17 years.
It will enhance industry & employment and will reduce multiplicity of definition and multiplicity of authority for businesses.
The new labour codes provide for a single licensing mechanism. It will boost the industries by ushering in substantive reform in the licensing mechanism. Currently, industries have to apply for their licence under different laws.
The codes also simplify archaic laws dealing with industrial disputes and refurbish the adjudication process, which will pave the way for early resolution of disputes.
According to the some economists such reform shall increase investment and improve ease of doing business. It drastically reduces intricacy and internal contradictions, increases flexibility & modernizes regulations on safety/working conditions
The Periodic Labour Force Survey shows that 71% of regular wage/salaried workers in the non-agriculture sector did not have a written contract, and 50% were without social security cover. The new laws, simplify agreement, should create an incentive for workforce formalisation.
The new labour codes will help in mounting the pace of generating good quality jobs to cater to the growing workforce, their growing aspirations and to absorb out-migration of labour from agriculture. This way India can fully be able to capitalize on its skill cost and inherent labour and help a fast economic recovery especially post Covid-19.