India Inc hailed the proposed changes to labour laws, saying they would provide operational freedom to employers, although provisions related to universal social security and guaranteed minimum wages may substantially add to their cost of hiring.
The government introduced three separate labour codes – on industrial relations, occupational safety and health, and social security — in the Lok Sabha on Saturday, proposing significant changes to make them less rigid for industry, while strengthening the safety net of workers.
The Industrial Relations Code (IR Code, 2020) allows businesses with up to 300 workers to retrench and close establishments without government approval. The earlier limit was 100 employees, which means more businesses will have this freedom.
It also provides a legal framework for fixed-term employment and ease of firing of contract workers.
Industry body Assocham said empirical evidence showed that flexibility in hiring or firing led to net employment generation.
Increasing the threshold limit of contractor employees from 20 to 50 under the OSH Code, while opening up hiring of contract workers in all areas will ease compliance for employers.
Now, the principal employer can engage contractor labour through contractors in any core activity of the establishment under given conditions, which is favourable and will improve ease in doing business.
Companies are, however, apprehensive over the additional costs of providing universal social security under the Social Security Code to all workers, including the unorganised and gig and platform workers.
These together account for over 90% of India’s total estimated workforce of 450 million.
There has to be a limit to how much cost burden you would impose on small, fledgling enterprises through mandatory minimum wages and universal social security for all workers.
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