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Industrial relations code a leg-up for ease of doing biz, but can breed unrest

Chandrakant Salunkhe, owner of Salunkhe Packaging Pvt. Ltd in Maharashtra, has three demands from the government—give access to more finance, reduce labour compliance and remove statutory social security deductions on companies with a headcount of up to 50.


Salunkhe feels that unless business environment improves further and entrepreneurs are supported, the economy will not grow faster. “Ease of doing business is a necessity and an enabling business environment will allow companies to grow faster thus creating more employment," he added.


Contrast his statement with that of Amarjeet Kaur, general secretary of the All India Trade Union Congress (AITUC). “Indian workers are perhaps facing the toughest time in decades with government siding with corporates at the cost of workers. People are losing jobs across sectors...labour reforms are for whom—employees or employers?" she asked.


And that’s the dilemma the Union government is facing as it accelerates the labour reform process. Notwithstanding the dilemma, the Industrial Relations (IR) Code Bill, 2019, recently tabled in Parliament has given a leg-up to the ease of doing business. The bill merges the Trade Unions Act, 1926; the Industrial Employment Act, 1946; and the Industrial Disputes Act, 1947. Once passed, it will provide a legal framework for fixed-term employment enabling companies to hire more employees on contract, offer flexibility in hiring and firing of employees, and closure of units. But it could be resisted by unions and spur industrial unrest as the proposed law puts workers in the spotlight and restricts their power of collective bargaining, job safety and right to resent.


“The bill shows the government’s resolve to improve ease of doing business and offers clarity in labour policy in sync with the new realities in workspace," said Manish Sabharwal, founder and managing director of TeamLease Services Ltd, a staffing and training company. “I think, the provisions related to fixed-term employment and making the 100 workers threshold flexible are most forward looking."


The code has retained the employee threshold at 100 for firing employees or closing an industrial unit without prior approval. It, however, has a provision to change this threshold through executive orders without amending the Act. It also protects states like Rajasthan, Madhya Pradesh, Andhra Pradesh, Uttarkhand, Haryana and Maharashtra, who have increased the threshold to 300. The code says that “mass casual leave" will be treated as strike and makes it mandatory for a notice of 14 days for strikes and lockouts in any establishment. To help employers check constant unionism, the bill introduces a feature of “recognition of negotiating union" under which a trade union will be recognized as a sole “negotiating union" if it has the support of 75% or more of the workers on the rolls of an establishment. As several trade unions are active in companies, it will be tough for any one group to manage 75% support, hence taking away their negotiating rights. In such a case, a negotiating council will be constituted for negotiation, says the bill.


“(The IR code) will create a battleground in industrial sector...the provisions prohibiting strike will make industrial sector a conflict zone destroying industrial peace," said Bharatiya Mazdoor Sangh, a trade union affiliated to the Rashtriya Swayamsevak Sangh.


In the last two years, strikes at the national level have seen a sharp increase. While the first half of 2018 saw 20 strikes at the national level, it increased to 33 strikes in the same period in 2019, according to data from the labour bureau.


AITUC’s Kaur said official data shows a far rosier picture than the reality and that there is growing unrest in industrial belts. Central trade unions have called for a nationwide strike in January 2020 against accelerated labour reforms and attempts to curb labour welfare.


Industry federations, however, feel that the IR code will improve labour productivity. “The introduction of fixed term employment in the code and the provision for changing retrenchment thresholds will certainly enhance labour productivity and stipulate industrial growth in the economy," said M.S. Unnikrishnan, chairman of the Confederation of Indian Industry’s National Committee on Industrial Relations, and managing director of Thermax Ltd.


The Indian Staffing Federation added: “Sectors that are looking at temporary staff as a strategic growth driver are e-commerce, IT, telecom, healthcare, retail, trade, FMCG and hospitality." Sabharwal of TeamLease said: “The IR code bill will tell the world that India is welcoming investment and reducing obstacles". G.R. Senthilvel, owner of Tremendouss Exports, a textile firm in Tirupur, said: “Corporates say it’s employers who should get maximum benefit, you won’t find a single example where employers grow without good employees."

Source: livemint