Govt takes first towards labour law reforms
The government takes the first step on the long and tortuous road to labour law reforms.
What's proposed: Recently, a working group on labour laws and regulations headed by Labour Secretary Prabhat Chaturvedi held its first meeting, signalling the United Progressive Alliance government's intention to push ahead with long overdue labour law reforms. The group, which will review 44 Central labour laws, including the Industrial Disputes Act, 1947 and the Factories Act, 1948, is expected to submit its recommendations by the end of July. Specifically, it will look into issues such as job creation in Special Economic Zones, use of contract labour, or the applicability and enforcement of laws in the unorganised sector. At present, for instance, the business process outsourcing and construction sectors are not covered by labour laws, while there is a minimum salary stipulation of Rs 6,500 a month for workers to be eligible for membership of the Employees Provident Fund.
Labour laws are also being studied by a working group on regulatory framework for businesses led by Planning Commission member Arun Maira. The Chaturvedi panel's recommendations will be vetted by the steering committee on labour, employment and skill development, led by Planning Commission member Narender Jadhav, as part of the Plan panel's objective of achieving convergence between the reports of the two groups before finalising its strategy.
What will change: Many of India's labour laws have not been revised since Independence, even as the dynamics of the Indian economy have changed dramatically. Reforms will make them relevant to the times. Says Ashish Bhagat, a corporate lawyer: "The government has to take into account the next 30 years. It should know that gradually it will be dealing with a literate labour force. It will have to do away with the 'inspector raj', and provide welfare committees and governing councils."
Moving to a complaint-based inspection of factories, for instance, instead of mandatory ones, is another muchneeded reform. Bhagat suggests tax incentives for better compliance with labour laws. He adds that merely changing laws will not do - labour reform should be incentive-driven.
Says Vineet Agarwal, Director of Tax and Regulatory Services at KPMG: "The Provident Fund Act and the Payment of Bonus Act need to be looked at again." Amendments to these and other laws such as the Minimum Wages Act will allow millions of workers - most of them in the unorganised sector which makes up 90 per cent of the workforce - to avail of several benefits.
Challenges: "There is no room for any dilution of proper wages, social security and safety of workers," says Chaturvedi. "These are non-negotiable." Still, the working group has a daunting task ahead. Considering the number of stakeholders involved, including state governments, industry, trade unions and various Union ministries, building consensus around any kind of change will be a challenge, says Chaturvedi.
Viewpoints vary widely: typically, trade unions complain labour laws are being violated and penalties are too small to be effective deterrents, while industry wants self-regulation and an end to 'inspector raj'. Another key priority will be to see how the numerous existing Acts relating to labour can be amalgamated into one. Experts note that apart from the 44 Central laws, there are also over 100 state laws relating to labour, some of them contradictory.
Labour laws are also being studied by a working group on regulatory framework for businesses led by Planning Commission member Arun Maira. The Chaturvedi panel's recommendations will be vetted by the steering committee on labour, employment and skill development, led by Planning Commission member Narender Jadhav, as part of the Plan panel's objective of achieving convergence between the reports of the two groups before finalising its strategy.
What will change: Many of India's labour laws have not been revised since Independence, even as the dynamics of the Indian economy have changed dramatically. Reforms will make them relevant to the times. Says Ashish Bhagat, a corporate lawyer: "The government has to take into account the next 30 years. It should know that gradually it will be dealing with a literate labour force. It will have to do away with the 'inspector raj', and provide welfare committees and governing councils."
Moving to a complaint-based inspection of factories, for instance, instead of mandatory ones, is another muchneeded reform. Bhagat suggests tax incentives for better compliance with labour laws. He adds that merely changing laws will not do - labour reform should be incentive-driven.
Says Vineet Agarwal, Director of Tax and Regulatory Services at KPMG: "The Provident Fund Act and the Payment of Bonus Act need to be looked at again." Amendments to these and other laws such as the Minimum Wages Act will allow millions of workers - most of them in the unorganised sector which makes up 90 per cent of the workforce - to avail of several benefits.
Challenges: "There is no room for any dilution of proper wages, social security and safety of workers," says Chaturvedi. "These are non-negotiable." Still, the working group has a daunting task ahead. Considering the number of stakeholders involved, including state governments, industry, trade unions and various Union ministries, building consensus around any kind of change will be a challenge, says Chaturvedi.
Viewpoints vary widely: typically, trade unions complain labour laws are being violated and penalties are too small to be effective deterrents, while industry wants self-regulation and an end to 'inspector raj'. Another key priority will be to see how the numerous existing Acts relating to labour can be amalgamated into one. Experts note that apart from the 44 Central laws, there are also over 100 state laws relating to labour, some of them contradictory.
