Govt likely to go slow on labour reforms

Due to protest from workers and the middle class, the labour ministry may changed narrative of labour reform from employer-centric to employee-centric


Labour minister Bandaru Dattatreya says the objective of labour reforms for his ministry is to achieve social security, jobs and reasonable wages. Photo: Priyanka Parashar/Mint
Labour minister Bandaru Dattatreya says the objective of labour reforms for his ministry is to achieve social security, jobs and reasonable wages. Photo: Priyanka Parashar/Mint

New Delhi: In the face of growing protest from workers and the middle class, the Union labour ministry on Tuesday indicated it will go slow on labour reforms and changed the narrative of labour reform from employer-centric to employee-centric.

Addressing reporters in New Delhi, labour minister Bandaru Dattatreya talked mostly about the government’s pro-people initiatives, without mentioning the industry-friendly labour reforms it has spoken of in the last two years.

“We are working for workers, for their better wage, for their security. We shall take everybody along and hold discussions with everyone” the minister said. He said the objective of labour reforms for his ministry is to achieve social security, jobs and reasonable wages.

Labour secretary Shankar Aggarwal was more forthcoming though. “Labour law reforms are complex and take time to change the world over. We have a Herculean task at hand and we have to move carefully by maintaining a fine balance,” Aggarwal said.

A government official, requesting anonymity, said that with trade unions and workers upset over labour-related issues, the ministry has been asked to “maintain caution”. “Labour reforms will happen, but carefully. You can call it slow growth on labour reform,” said the official, who declined to be named.

On Monday, the labour minister and the secretary had met finance minister Arun Jaitley, who also heads a group of ministers dealing with labour reforms. “The bigger message from the top is that let’s keep a watch and not hurt the sentiments of the middle class. The EPFO (Employees’ Provident Fund Organisation) controversy in the last three months had given enough bad name to the government,” said another government official with the knowledge of the development, who did not want to be identified.

The Union government withdrew three decisions related to EPFO—on tax, on interest rate and on withdrawal age—following widespread protest from the salaried middle class since February.

The first unidentified government official said that even if “we get a go-ahead from the cabinet, it will face challenges in Rajya Sabha. Till the time a conducive political environment is created, it is better to go relatively slow”.

The labour ministry is almost ready with four labour codes that subsume 44 central labour laws, that allow industries more power to hire and fire depending on the economic situation, allow more overtime payments to workers and reduce trade union influence in factories.

On Tuesday, the labour minister said his ministry is now planning to allow trade union registration within 60 days of an application and if the registration is not granted within the stipulated time, it shall be deemed approved. “This will give more bargaining power to workers,” the minister said.

Earlier, the government was essentially looking to make labour laws “flexible to aid the manufacturing sector” and improve job creation. Some analysts and industries believe that India’s labour laws are rigid and archaic, which restrict industrial growth by curbing freedom to retrench workers and impede job creation.

The unions counter that industries are already flouting labour regulations and any dilution of the existing laws will compromise employees’ welfare.

Dattatreya said his government has kept aside Rs.1,000 crore to pay the employers’ share of the employees pension scheme to new recruits earning less than Rs.15,000 a month.

Allaying concerns that industries may fire older staff to hire freshers to take advantage of this, Aggarwal said the scheme will not lead to contractualization or retrenchment of old workers. “We will pay to industries for net addition to workforce, not for firing and then hiring new people,” he said.

The minister and his officers said the labour ministry is striving to create more jobs but did not elaborate how, as without significant labour reform, job creation in labour-intensive manufacturing sector may not happen faster.

“In the last two years, corporate houses were looking to see the changes on ground. There is no doubt on the intention, but reforms must be visible on ground. Jobs have grown to some extent, but are they enough? I cannot say so. You have to realise that 12 million youths are entering the job market every year,” said Rituparna Chakraborty, senior vice-president at staffing company Teamlease services. “Labour reforms are a must if you want to aid manufacturing and thus job creation,” she added.

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