Draft Paper Prepared for RDW Conference, Geneva, 2015. Please do not cite without permission
THE FORMAL REGULATION OF NON-STANDARD FORMS OF EMPLOYMENT IN INDIA, INDONESIA AND VIET NAM
Ingrid Landau, Petra Mahy and Richard Mitchell
1. Introduction
This paper is drawn from a Study by the authors of the legal regulation of non-standard work in three Asian countries: India, Indonesia and Viet Nam.[1] Over recent decades, internationally significant developments such aseconomic globalisation, labour migration, changing production systems and so on,have caused or induced serious change in labour market and workplace organisation and employment relations systems and regulation in many parts of the world, including most industrialised nations. These developments have given rise to considerable debate and concern about the future of work and employment,[2]and, most importantly, about the social and economic security of workers and their dependants.[3] More recently a body of literature has begun to emerge about the relevance and importance of these kinds of matters in newly developing or industrialising countries, including countries of the South, and South-East Asian regions, with which this project was more directly concerned.[4]
Our immediate goal was fundamentally a fact-finding exercise, and for that reason what we are reporting on here is basically what we have discovered in terms of the subject matter as indicated by the Study’s title. Consequently the paper addresses mainly technical and regulatory issues rather than broader themes. For example we draw no major conclusions concerning any desirable direction for regulatory reform in relation to the organisation of labour relations or arrangements concerning employment relationships. On the other hand, we are of the view that the work undertaken and the information revealed does throw up some important questions and issues. For example one matter concerns the historical evolution of labour law in the Asian region as a longer term issue relating to traditional forms of labour control and organisation. Another is the extent to which, and in what ways, the organisation of labour and employment relationships and contracts are now being impacted upon by the kind of industrial and socio-economic changes outlined earlier.
2. The Subject Matter and Approach of the Study
The study of non-standard employment in Asian countries potentially gives rise to major questions concerning not merely the development of recent industrial and employment practices but also of historical practice, by virtue of the contemporary overlapping or intermingling of traditional and modern forms of employment and regulation. Hence a consideration of ‘non-standard’ forms of employment (or work) might form part of a study of historically-longstanding work arrangements and thereby involve a consideration of various forms of social and economic organisation and traditional/informal regulation.[5]
For the present Study, however, we focussed on three core questions, and confined these largely, though not exclusively, to matters concerning formal legal regulation; that is to say, we have investigated how formal law - in the form of legislation, judicial decisions and other state-based forms of regulation (for example collective agreements or arbitrated settlements) - relates to non-standard work relationships.[6]
The three questions addressed were as follows. First, what was the nature and incidence of ‘non-standard’ employment and its evolution in the three countries examined? Second, how was‘non-standard’ employment regulated in these countries? And third, what had been the impact of ‘non-standard’ employment, and the impact of the regulation of ‘non-standard’ employment, on the workforces of those countries?
Not surprisingly, one of the major issues to arise was the definition of ‘non-standard employment (or work)’ itself.‘Non-standard’ employment (sometimes also labelled ‘irregular’ or ‘atypical’ work) has no fixed meaning and varies across countries and legal systems. The definition used here has included various forms of temporary employment (such as casual, fixed-term, project-based and so on), part-time employment, home-work/outwork, and work organised through agency arrangements or forms of independent status. Importantly, for our Study, while ‘non-standard’ employment is often regulated through formal law in many industrialised countries, in many newly- industrialising countries labour regulation is usually very limited in respect of‘non-standard’(and for that matter ‘standard’) employment.
We are, it should also be noted, dealing here specifically with ‘non-standard’ employment as a concept distinct from, though obviously overlapping with, other forms of work variously described as ‘precarious’ or ‘informal’ in character. While these forms of work have much in commonwith ‘non-standard’ work arrangements they are conceptually distinct,. For example, in many cases ‘non-standard’ employment is defined and regulated by labour laws, and consequently, under some definitions at least, is not informal. Thus, to use a practical example, we have focussed on legal distinctions relating to ‘standard/non-standard’ employment (i.e. the type of work contract or other legal arrangement between the parties to the relationship) rather than whether or not the particular business in question is registered or unregistered according to state law (which might cause the relationship to be in some legal sense or senses‘informal’).
In approaching our three core questions we relied upon two main sources of data. One of these was the primary legal material available, including, as noted, legislation (and sub-ordinate legislation), case law and other sources such as collective agreements (where possible). The second source was a review of the academic and non-academic literature (including media and NGO materials etc.) on the subject from a range of disciplines. On this latter point it should be noted that there is only a relatively slight academic literature on the regulation of ‘non-standard’ work in the three countries forming the basis of this Study.[7]
3. Non-Standard Employment in India, Indonesia and Viet Nam.
A preliminary point to note here is that drawing an accurate picture of the prevalence of non-standard forms of employment across these three countries is made difficult by limitations in official data and the lack of correspondence between available statisticaldata and the legal categories of employment used in our analysis. That point aside, the following observations can be made.
In all three countries a significant proportion of workers are engaged in temporary employment as we have defined it in our Study. In India, more than 50 per cent of all workers are classified as self-employed, but casual workers make up about 33 per cent, as compared with less than 17 per cent of permanent workers of the remaining 50 per cent which are engaged in employment/work relationships with others. There has been a shift in recent decades from self-employment to casual work, and a significant proportion of workers hold both self-employed and casual status simultaneously or alternately.[8]There has also been growth in the proportion of persons engaged as casual and fixed-term workers in Indonesia.[9] Sixty-five per cent of the 33 million workers now in formal employment in Indonesia are estimated by Indonesian trade unions to be employed in temporary work (either fixed-term or outsourced) as compared with 30 per cent in 2005.[10]There also appears to be high levels of temporary employment in Viet Nam, though it is difficult from the available information to assess whether this is in the form of casual or fixed-term employment or a combination of these.[11] Notwithstanding, some datasuggests that the proportion of workers on fixed-term contracts in Viet Nam is very high, particularly in manufacturing.[12]
Further, agency work is both common, and at least in some cases, increasing markedly in these countries. For example, in the formal-factory sector in India the proportion of agency work (contract labour in India) increased from about 12 per cent in 1985 to 23 per cent in 2002. Some of the research indicates that even these figures seriously underestimate the prevalence of agency work in India.[13] Similarly, a high incidence of labour outsourcing is now also reported from Indonesia.[14] A study of labour outsourcing practices in manufacturing indicates the shift of workers from permanent employment contracts to engagement through labour supply companies.[15] Data on this matter from Viet Nam is less clear, though there is evidence from various sources that agency work and sub-contracting is very common.[16]
A further category of non-standard work, home-based work, is also common across these countries, although the largely invisible nature of this kind of work makes the task of gathering data relevant to its incidence and regulation very difficult. In India, home-based workers constitute a significant share of the non-agricultural workforce (15.2 per cent), are more likely to be females than males, are more prevalent in rural than urban areas, and more concentrated in manufacturing and trade and repair services.[17] However, the actual legal status of these Indian workers is difficult to ascertain.[18]Despite the lack of official statistics confirming this fact, home-based work has also long existed in Indonesia, particularly among women and children in the textile and handicraft industries, and is perceived to be a significant feature of the Indonesian labour market.[19]
Lack of data prevents even generalised overviews of other areas such as part-time employment and ‘sham’contracting (also often referred to as disguised employment) across these three countries.[20]
Unsurprisingly, non-standard employment is closely associated with lower social class, poorer workers, at least in India and Indonesia, and particularly linked with scheduled lower ‘caste’ workers in India, and with migrant workers in Viet Nam.[21] It is also, as we have noted, sometimes particularly associated with female employment generally.
****
As is the case generally, the use of non-standard employment techniques in these three countries is linked with the desire of employers to reduce labour costs and increase flexibility in the utilisation of labour. These strategies flow from the differing rights offered under law and other regulation to different categories of workers. For example, temporary workers may have less protection against dismissal and redundancy than permanent workers, and the use of ‘outsourced’ labour may legally ‘distance’ employers from various legal responsibilities which would otherwise be owed to those workers. These kinds of arguments are made very strongly about the growth in the use of non-standard employment in India,[22] although they are also present in Indonesia. There, for example, it has been argued that very generous severance entitlements with respect to workers on permanent contracts have led to the widespread use of fixed-term contracts.[23] At the same time, it is necessary to note that these kinds of arguments are contested in the literature. For example scholars point to a range of ways in which, under the Indian labour law system, that employers may access sufficient flexibility in practice, irrespective of these perceived rigidities (including limited formal application of labour law and so on).[24]
In the case both of India and Indonesia it appears that the greater use of non-standard labour has been facilitated by recent legal and policy direction on the part of the state. This includes, in India, legislative change at the level of some State governments, and recent decisions on the part of the Supreme Court, and in Indonesia the explicit legal recognition of agency work as part of that country’s efforts to promote more flexible labour market practices.[25]
4. The Regulation of Non-Standard Forms of Employment in the Three Countries
The core sections of our Study were concerned with the regulation of non-standard forms of work, or non-standard employment, across the three jurisdictions covered: India, Indonesia and Viet Nam. The Study focussed at this point on how labour law legislation and various other forms of formal labour regulation operated in respect of such forms of work: what general shape did labour law take in these countries, how did it impact on non-standard work, and how, and to what effect, had the debates over the perceived challenge of non-standard work to labour policy evolved? Given the length of our original Study it is possible for us to deal with most of these issues only very briefly here. Consequently the following sections of this paper address most of our findings in quite abbreviated form.
4.1 India
4.1.1 Labour Law in India
Legislative authority in relation to labour matters is shared between the Central and State governments in India.Labour law in present day India consists of a substantial body of statutes covering matters such as minimum wages and other conditions, trade unions, strikes, employment security, occupational health and safety, dispute settlement and social security. The Constitution of India also contains a number of labour rights.
Taken overall, statutory labour law has very limited application in India, where it applies probably only to about 6-7 per cent of the workforce at most. However,this has not prevented the emergence of strong criticism of the labour law system as engendering inflexible labour and employment practices, and over the past two decades a policy re-direction has seen some statutory change, particularly at the level of some State governments, and a general reappraisal of the labour law outlook at both Central and State levels. Under particular scrutiny have been the laws limiting the freedom of employers to close businesses, make employees redundant, and dismiss workers generally.
In addition to statute law, the common law tradition in India means that the courts continue to play animportant role in determining the scope and application of labour laws. Of relevance here is the fact that some recent decisions have led to a more permissive attitude to labour flexibilisation strategies.
Collective bargaining, while also limited in application has also begun to play a role in the regulation of non-standard work. Recent years have seen an increased focus on the organisation and representation of non-standard workers, particularly contact labour, by Indian unions. The function of collective bargaining in this area has been concerned both to attempt to introduce limits to contract labour and to regulate the terms and conditions of such workers where possible.[26]
4.1.2 Forms of Non-Standard Employment Regulated Under Formal Law in India
Five categories of non-standard employment are recognised under the Industrial Employment (Standing Orders) Act 1946; temporary employment, casual employment, ‘badlis’ or substitute employment, apprenticeships, and probationary employment. Indian law also recognises fixed-term employment and agency work.
Temporary Employment
In India, the terms ‘temporary’ labour, ‘casual’ labour, and ‘daily wage’ labour seem to be used interchangeably, along with the term ‘badlis’, which is used to denote a temporary replacement for an absent permanent employee. There is a significant body of case law to the effect that casual employees are not precluded from eligibility with respect to certain statutory entitlements merely because their employment is temporary in nature (for example, with respect to the Payment of Bonus Act 1965: see HP State Forest Corporation Ltd& Anr. v.Mohan Singh & Anr.[2014] Lab IC 155; andwith respect to the Employees State Insurance Act 1948: see Regional Director, Employees State InsuranceCorporation v. Suvarna Saw Mills [1979] Lab IC 1335).
On the other hand, however, many important statutes contain eligibility requirements based on minimum periods of service that in practice render casual employees ineligible. For example, workers must have been in continuous service for at least one year to secure protection under s. 25F of the Industrial Disputes Act 1947, which includes protection against arbitrary dismissal, notice of termination or payment in lieu thereof, and rights to severance pay. Similarly the entitlements to notice of termination of employment or payment in lieu thereof, and to paid leave, found in various State-level Shops and Establishments Acts, are also determined according to a service threshold. And whereas a casual employee may generally fall within the scope of the Employees’ State Insurance Act 1948 the entitlements of such a worker may be significantly less than those accorded to permanent workers.[27]There are, of course, certain exceptions to some of these rules. However, the general direction of judicial determination has been restrictive of the claims of casual workers to legal protection.[28]
Temporary employment on a fixed-term contract is also legally complicated.It is not a category explicitly recognised in the Industrial Employment (Standing Orders) Act 1946. It was added as a category to the Act in 2003, but subsequently removed following union opposition to its inclusion, in 2007.[29]
Given its non-recognition in a general legislative sense, prima facie a worker on a fixed-term appointment would seem to be entitled to many of the same protections as their permanent counterparts. However, the concept of a fixed-term contract is legally acknowledged in at least two respects tempering such suppositions. First, fixed-term employment isrecognised insofar as the Industrial Disputes Act appears to provide an exemption for these types of contracts from some parts of its operation. Following amendments to the Act in 1982 and 1984, the non-renewal of a fixed-term contract does not constitute a ‘retrenchment’ by an employer for purposes of s. 25F, and consequently workers on fixed-term contracts are not entitled to the protections of that provision.[30] The courts will, however, not accept an employer’s reliance on that provision where there is evidence that it has engaged in an unfair labour practiceby employing workers on successive fixed-term contracts.[31] Secondly, following the common law,courts will look to the substance of a contract rather than its wording in drawing a conclusion about its nature, including findings that a contract may be one for a fixed-term.[32]