A major restructuring of India’s labour laws is underway. Over the next few months, the National Democratic Alliance government aims to merge over 30 labour laws into four statutes. The first of the proposed new laws, the Labour Code on Wages Bill 2015, is currently being finalised after the Ministry of Labour and Employment invited public suggestions on it last month.
Ministry officials claim that the changes are needed to reflect changes in technology and because they will help create more jobs. In addition to the laws on wages, other legislations on the cards relate to industrial relations, social security for workers and work conditions, these sofficials aid.
But several trade unions, including the Rashtriya Swayamsewak Sangh's Bhartiya Mazdoor Sangh, have opposed the thrust of the new laws, saying that they will undermine workers' rights.
That contention would seem to be borne out by the draft of the Labour Code on Wages, which replace four existing laws – the Minimum Wages Act 1948, the Payment of Wages Act 1936, the Payment of Bonus Act 1965, and the Equal Remuneration Act, 1976. While a single broad law that replaces multiple laws on the same subject may help rationalise contradictions in existing laws, several of which were framed before India's independence, what is being lost in the fine print?
States will fix minimum wage rates
Under the Minimum Wages Act 1948, both central and state government can fix minimum wage rates in various sectors, with 45 sectors in the central sphere and 1,679 areas under states' jurisdiction.
But the draft Labour Code on Wages Bill restricts the power to fix minimum wages to just the state governments.
In a submission on the draft Bill, the Working Peoples Charter Secretariat – a group of trade unionists, labour activists and lawyers – have questioned whether this will create a situation where central government employees in different states would end up with different minimum wages, which would violate the constitutional provisions on equality. The provision would drive down wages to workers' disadvantage, leading to a race to the bottom among states.
The law also skips over the most significant wage discussion of the last five years: establishing a statutory National Floor Level Minimum Wage. State governments would be free to set the minimum wage rate higher than this basic wage, but not lower than it. Those supporting a statutory national floor wage say this could help ensure universal minimum wage coverage.
“A statutory National Floor Level Minimum Wage has long been the practice even in industrialised countries such as the US,” said Dr Ravi Srivastava, an economist who was part of the National Commission for Enterprises in the Unorganised Sector, set up by the Congress-led government which recommended the implementation of a statutory national floor wage. A single floor rate all across the country would be understood by all and enforced better, he said. But since the wage boards of several states are in disarray. “It is not clear what will improve by placing the onus to set wage rates on states”, he said.
Virjesh Upadhyay, General Secretary of Bhartiya Mazdoor Sangh, RSS's trade union wing, said that if states are going to decide all wage rates, it makes little sense to have a national law at all. “If there are bad practices and non-compliance, the government cannot make them disappear by simply removing them from the ambit of the law,” said Upadhyay.
Tapan Sen, General Secretary of the Centre of Indian Trade Unions, affiliated with the Communist Party of India Marxist), saidthe draft bill should consider the recommendations of the Indian Labour Conference and Supreme Court orders to fix the minimum wage taking into consideration need-based criteria, including food, housing and clothing.
Weakening of Equal Remuneration Act
The Bill proposes to replace the Equal Remuneration Act, 1976 with a single provision prohibiting discrimination on ground of sex “in the matter of wages; under the same employer, in respect of work of same or similar nature”.
While this sounds good, there are concerns that the existing laws actually offer wider protection. The original Act prohibits discrimination not just in matter of wages, but in recruitment of workers on the basis of their gender. It also provides for an advisory committee, one half of which consists of women members, to advise governments on increasing work opportunities for women and allows governments to appoint labour officers for hearing complaints.
As a single line provision replaces the nine-page Act, all the above features are missing from the draft Bill.
No more Inspectors, only facilitators
In a first, the Labour Code on Wages Bill proposes to replace Labour Inspectors, often portrayed as a burdensome remnant of the Inspector Raj, with “Facilitators”. The Bill proposes their role will be to “supply information and advice to employers and workers concerning the most effective means of complying with the provisions of this code”.
Dheeraj Kumar, Joint Secretary in the Ministry of Labour and Employment, said that the Facilitators will work “to assist the work of industrial establishments and factories and to provide guidance to establishments”. Under the Payment of Wages Act, non-compliance with inspection norms, and failure to provide adequate facility for inspection is punishable through a fine. But the Labour Code on Wages Bill proposes that before initiating prosecution proceedings, the Facilitators will give an opportunity to establishments to comply with the law by issuing a written direction. If the employer complies with the direction within stipulated time, the Facilitator will not initiate prosecution.
This would seem to remove the ability of the law to deter offenders, legal expert Usha Ramanathan noted in a recent article. “The meek and gentle treatment of offenders is at least half a universe away from fostering respect for the law that is being mooted."
Further, the Working Peoples Charter Secretariat has pointed out that the Bill may weaken enforcement mechanisms. This is because the powers given to labour commissioners to exercise statutory powers have been replaced by “one or more authorities” without specifying the exact nature of these authorities.
Restricting rights of trade unions
The proposed law does away with Section 23(2) of the Payment of Bonus Act, 1965 which permits trade unions to legally access audited accounts and balance-sheets of employers. This leaves workers with no possibility of scrutinising the financial claims of the employer, according to the Working People's Charter.
Reduced scope of Payment of Bonus Act
The draft Bill expands the exemptions under section 16 of Payment of Bonus Act for newly set-up establishments. Establishments could forgo paying bonuses to employees merely by changing their location, management, name or ownership.
“This draft degrades existing labour standards, condones widespread violation of labour laws and wage theft. This will only exacerbate the poverty of the working people,” said Ashim Roy, vice-president National Trade Union Initiative and member, Working Peoples Charter Secretariat. “The draft undermines trade union powers’ right to information, and collective bargaining for profit-sharing that is essential for a democratic and just nation.”
Not surprisingly, industry has welcomed the Bill. The All India Organisation of Employers said that it has asked the Ministry not to link the amendments to the Payment of Bonus Act, 1965 with the other three Acts related to wages, stating that bonus is an annual payment linked to profits and is not linked directly to daily or monthly wages.
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Ministry officials claim that the changes are needed to reflect changes in technology and because they will help create more jobs. In addition to the laws on wages, other legislations on the cards relate to industrial relations, social security for workers and work conditions, these sofficials aid.
But several trade unions, including the Rashtriya Swayamsewak Sangh's Bhartiya Mazdoor Sangh, have opposed the thrust of the new laws, saying that they will undermine workers' rights.
That contention would seem to be borne out by the draft of the Labour Code on Wages, which replace four existing laws – the Minimum Wages Act 1948, the Payment of Wages Act 1936, the Payment of Bonus Act 1965, and the Equal Remuneration Act, 1976. While a single broad law that replaces multiple laws on the same subject may help rationalise contradictions in existing laws, several of which were framed before India's independence, what is being lost in the fine print?
States will fix minimum wage rates
Under the Minimum Wages Act 1948, both central and state government can fix minimum wage rates in various sectors, with 45 sectors in the central sphere and 1,679 areas under states' jurisdiction.
But the draft Labour Code on Wages Bill restricts the power to fix minimum wages to just the state governments.
In a submission on the draft Bill, the Working Peoples Charter Secretariat – a group of trade unionists, labour activists and lawyers – have questioned whether this will create a situation where central government employees in different states would end up with different minimum wages, which would violate the constitutional provisions on equality. The provision would drive down wages to workers' disadvantage, leading to a race to the bottom among states.
The law also skips over the most significant wage discussion of the last five years: establishing a statutory National Floor Level Minimum Wage. State governments would be free to set the minimum wage rate higher than this basic wage, but not lower than it. Those supporting a statutory national floor wage say this could help ensure universal minimum wage coverage.
“A statutory National Floor Level Minimum Wage has long been the practice even in industrialised countries such as the US,” said Dr Ravi Srivastava, an economist who was part of the National Commission for Enterprises in the Unorganised Sector, set up by the Congress-led government which recommended the implementation of a statutory national floor wage. A single floor rate all across the country would be understood by all and enforced better, he said. But since the wage boards of several states are in disarray. “It is not clear what will improve by placing the onus to set wage rates on states”, he said.
Virjesh Upadhyay, General Secretary of Bhartiya Mazdoor Sangh, RSS's trade union wing, said that if states are going to decide all wage rates, it makes little sense to have a national law at all. “If there are bad practices and non-compliance, the government cannot make them disappear by simply removing them from the ambit of the law,” said Upadhyay.
Tapan Sen, General Secretary of the Centre of Indian Trade Unions, affiliated with the Communist Party of India Marxist), saidthe draft bill should consider the recommendations of the Indian Labour Conference and Supreme Court orders to fix the minimum wage taking into consideration need-based criteria, including food, housing and clothing.
Weakening of Equal Remuneration Act
The Bill proposes to replace the Equal Remuneration Act, 1976 with a single provision prohibiting discrimination on ground of sex “in the matter of wages; under the same employer, in respect of work of same or similar nature”.
While this sounds good, there are concerns that the existing laws actually offer wider protection. The original Act prohibits discrimination not just in matter of wages, but in recruitment of workers on the basis of their gender. It also provides for an advisory committee, one half of which consists of women members, to advise governments on increasing work opportunities for women and allows governments to appoint labour officers for hearing complaints.
As a single line provision replaces the nine-page Act, all the above features are missing from the draft Bill.
No more Inspectors, only facilitators
In a first, the Labour Code on Wages Bill proposes to replace Labour Inspectors, often portrayed as a burdensome remnant of the Inspector Raj, with “Facilitators”. The Bill proposes their role will be to “supply information and advice to employers and workers concerning the most effective means of complying with the provisions of this code”.
Dheeraj Kumar, Joint Secretary in the Ministry of Labour and Employment, said that the Facilitators will work “to assist the work of industrial establishments and factories and to provide guidance to establishments”. Under the Payment of Wages Act, non-compliance with inspection norms, and failure to provide adequate facility for inspection is punishable through a fine. But the Labour Code on Wages Bill proposes that before initiating prosecution proceedings, the Facilitators will give an opportunity to establishments to comply with the law by issuing a written direction. If the employer complies with the direction within stipulated time, the Facilitator will not initiate prosecution.
This would seem to remove the ability of the law to deter offenders, legal expert Usha Ramanathan noted in a recent article. “The meek and gentle treatment of offenders is at least half a universe away from fostering respect for the law that is being mooted."
Further, the Working Peoples Charter Secretariat has pointed out that the Bill may weaken enforcement mechanisms. This is because the powers given to labour commissioners to exercise statutory powers have been replaced by “one or more authorities” without specifying the exact nature of these authorities.
Restricting rights of trade unions
The proposed law does away with Section 23(2) of the Payment of Bonus Act, 1965 which permits trade unions to legally access audited accounts and balance-sheets of employers. This leaves workers with no possibility of scrutinising the financial claims of the employer, according to the Working People's Charter.
Reduced scope of Payment of Bonus Act
The draft Bill expands the exemptions under section 16 of Payment of Bonus Act for newly set-up establishments. Establishments could forgo paying bonuses to employees merely by changing their location, management, name or ownership.
“This draft degrades existing labour standards, condones widespread violation of labour laws and wage theft. This will only exacerbate the poverty of the working people,” said Ashim Roy, vice-president National Trade Union Initiative and member, Working Peoples Charter Secretariat. “The draft undermines trade union powers’ right to information, and collective bargaining for profit-sharing that is essential for a democratic and just nation.”
Not surprisingly, industry has welcomed the Bill. The All India Organisation of Employers said that it has asked the Ministry not to link the amendments to the Payment of Bonus Act, 1965 with the other three Acts related to wages, stating that bonus is an annual payment linked to profits and is not linked directly to daily or monthly wages.
