Biggest Overhaul to India's Labour Laws Leaves the Business World Polarised

The Indian government has announced new labour rules, which seek to streamline labour laws while offering greater versatility for businesses in managing their staff and greater safeguards and benefits to employees. The new labour regulations are also likely to have an influence on the country's human resources (HR) technology. 

Labour Laws are divided in two broad categories:

Collective labour laws relates to the tripartite relationship between employees, employer and union.

Individual labour laws concern employees' rights at work and through contract work.

Labour Laws in India

Labour law, often known as employment law, is the set of regulations, administrative verdicts, and precedents that address workers' and their organisations' legal rights and limitations. In India, labour and employment law is generally recognised under the "Industrial Law." 

The dominant economic and social circumstances have significantly impacted the development of Indian labour regulation, which governs different elements of employment such as the number of hours worked, salaries, social security, and services offered.

The discussions of the successive Sessions of the Indian Labour Conference and the International Labour Conference have significantly impacted labour legislation. Labour laws have also been formed and modified by the conclusions and recommendations of various National Committees and Commissions, such as the First National Commission on Labour (1969) under the Chairmanship of Justice Gajendragadkar, National Commission on Rural Labour (1991), Second National Commission on Labour (2002) under the Chairmanship of Shri Ravindra Varma, and judicial rulings on labour-related issues, particularly minimum wages, bonded labours, child labours, contract labours and so on.

Labour is a concurrent list matter within the Indian Constitution, which means that both the Central and State Governments have the authority to pass laws.

The rules can be classified as follows:

Labour regulations are issued by the Central Government, with the Central Government having sole enforcement authority.

Central Government-enacted labour legislations are implemented by both the Central and State Governments.

Central Government-enacted labour legislations that are implemented by state governments.

State governments issued and implemented labour regulations that relate to their individual states.

New Labour Codes

The Payment of Wages Act of 1936, the Minimum Wage Act of 1948, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976 establish various key concepts like an employer, employee, category of employees, contractor, wages, essential additions and appropriate deductions from compensation, wage duration, time of payment of salaries, coverage for insurance, overtime, layoffs and so on. The 2019 Wage Code consolidates the aforementioned four Acts.

The updated regulations additionally address the perks offered to employees to protect them throughout their work, as well as their future and the future of their nominees in the case of an accident or fatality. Provident Fund, ESIC insurance, maternity benefit, gratuity, and particular incentives for building and other construction employees, as well as unorganised labourers, are examples of such benefits.

The Code on Social Security, 2020 consolidates the eight Acts that govern the above-mentioned.

Additionally, the Trade Unions Act, 1926, The Industrial Employment (Standing Orders) Act, 1946 and The Industrial Disputes Act, 1947 lay down rules and procedures which safeguard Employees from unfair labour practices, operations of a trade union, strikes/lockouts, layoffs, retrenchment, closures and grievance redressal mechanism for Employer and Employee.

These three Acts are being consolidated under The Industrial Relations Code, 2020.

The laws and rules about ensuring appropriate working conditions, maintenance of safety and health of employees while on the premises of the employer. Currently, about thirteen Acts define registration requirements, working hours, issuance of appointment letters, mandatory free health check-ups, benefits to inter-state migrant workers, flexibilities to be offered to women employees, appointment of safety officer, record keeping, and reporting of any hazards.

These thirteen Acts are consolidated into the Occupational Safety, Health and Working Conditions Code, 2020.

Benefits of New Labour Codes

Benefits for Employers

Employers will be able to recruit workers on fixed-term contracts under the new labour norms. This is intended to offer organisations with greater recruiting agility, allowing them to adjust their personnel based on their company's needs. These codes are also meant to make it easier for firms to keep accurate records of their employees' paychecks, hours of labour, and other benefits. Furthermore, numerous definitions are shared across new codes; this is one of the key changes that would reduce ambiguity.

Benefits for Workers

In principle, the new regulations are meant to give enhanced safety and benefits to employees, such as measures for basic salaries, social security, and complaint redressal processes. In addition, the regulations would establish a fresh social safety blanket for labourers, encompassing insurance and retirement benefits. 

Critics Oppose the Regulations

While many in the business world have welcomed the new regulations, several labour advocates have expressed worry that the updated rules might result in exploitation of employees, especially for those on contracts with fixed terms. They additionally shared their apprehension that the new laws may weaken labour rights and safeguards.

The implementation of the new labour rules is a big step forward for the Indian employment market. The new regulations are anticipated to give companies more flexibility and predictability while providing employees with stronger protection and benefits. 

However, labour activists' fears warn that the new standards' enforcement may be fraught with difficulties.