Success of labour codes depends on how rules are framed, implemented, says expert

The recent government regulation to subsume multiple labour laws into four codes is a major reform but the overall success of the labour codes would depend on how the rules are framed and implemented on the ground, says an expert. Parliament in its just-concluded session passed three labour code bills: the Industrial Relations (IR) Code, the Social Security Code, and the Occupational Safety, Health and Working Conditions Code (OSH).

The Wage Code Bill, 2019, was passed by Parliament last year.

"A delicate balance was needed to meet the needs of both employers and employees and the provisions in the Codes appear to have met that balance," said Vishal Grover, Practice Leader, Retirement Solutions, Aon India.

According to Grover, some of the big reforms impacting employers include flexibility to hire fixed-term employees, relaxation in rules around retrenchment, inability of unions to go on strike without giving sixty-day notice to the employer and single licensing norms for contractors.

From an employee's perspective, commitment to set up social security plans for unorganised, gig and platform workers is a step in the right direction considering the growth of aggregator platforms.

Moreover, women workers have been empowered by allowing their employment during night shifts subject to safety protocols being observed, mandating pay-parity for fixed-term employees and continuing with existing rules around 8 working hours a day and paid maternity leave of 26 weeks, he said.

"Overall, the success of the Codes would depend on how rules are framed and implemented on the ground over the next few months and how organisations adapt to these changes," he noted.

According to Grover, the flexibility to hire workers on a fixed-term basis without any restriction could be a game-changer as it would force organisations to review their employment models and could lead to a sharp increase in hiring of fixed-term employees - both white and blue-collared.

"It remains to be seen if an increase in fixed-term employees would be at the expense of the permanent workforce which would be a concern," he said.

He further noted that the long-term objective of the labour reforms should be to create more employment opportunities as India is expected to surpass China to become the most populous country in the next few years and would continue to add millions of new workforce to the economy every year making it critical for the country to create new jobs. Further, India would start losing the demographic dividend over the next couple of decades and senior citizens are estimated to constitute around 20 per cent of the population by 2050 and hence, a strong social security system is the need of the hour.

"Sustainable programs including life cover, health insurance, old-age protection, housing should be set up for unorganized, gig and platform workers as promised by the Code," he said.