Government to make hiring and firing of workers easier for business

Finance minister Arun JaitleyThe National Democratic Alliance government has proposed to recast labour laws to make it easier for factories to hire and fire workers and make it tougher for workers to form unions.

In order to protect employee interest, the proposed changes will also include raising the severance package for workers by three times, labour minister Bandaru Dattatreya has said.

The draft proposes to allow companies hiring up to 300 workers to lay them off without seeking official sanction against the present limit of 100 workers.

However, it proposes to raise the notice period for establishments to fire employees or shut down a unit to be raised to three months from one month at present.

A retrenched workers will be paid an average salary of 45 days against 15 days at present.

Besides, a worker will be allowed to object to being laid off within three years, against no clear period specified in the law now.

Finance minister Arun Jaitley, while addressing foreign business interests in the US, also promised a globally compatible business climate in India, stating that the government is committed to reforms in the areas of land, labour and taxes to attract investors.

The proposed changes are intended to help factories to respond quickly to changes in demand, which will create more jobs for workers.

The proposals come at a time when factories across the country are deploying workers hired on contract and sometimes even without any agreed contract – a policy that will push even workers in the organised sector to the unorganised class and imperil economic and social security.

As part of the government's plans to make it easier to do business in the country, the labour ministry has drafted a bill to integrate three laws - Trade Unions Act, Industrial Disputes Act and Industrial Employment (Standing Orders) Act - into a single code for industrial relations, PTI quoted the minister as saying in an interview.

Besides this, the proposed Small Factories Bill offers to keep units employing less than 40 workers out of the purview of 14 labour laws, including EPF & MP Act 1951, ESI Act 1948 and Industrial Dispute Act 1947.

"Labour reforms are needed in the present context to make conducive environment for business to flourish and create harmonious atmosphere between industry and workers because our main purpose is that employability should be increased," he said.

The government is reported to have formed a ministerial committee headed by finance minister Arun Jaitley to undertake tripartite consultations to address issues raised by labour unions and to take them on board.

The bill is unlikely to come up in the ensuing monsoon session of Parliament next month as more consultations are needed.

Meanwhile major trade unions and even the international Labour Organisation (ILO) are unhappy with the proposals.

Trade unions have called for a day-long strike on 2 September.

Unions are also opposed to the Small Factories Bill, which seeks to deny benefits of all labour laws and social security benefits to employees.

About 9 per cent of Indian factories have up to 300 workers, while 17 per cent have more than 100 workers. The government says that many of large units are claiming to have fewer than 100 workers so that they can circumvent the law.

Dattatraya, however, said the government is trying to get everyone on board. Besides the tripartite consultations, the labour minister is also holding regional consultations in various cities to convince them that the proposed changes are not anti-worker.