MEMORANDUM ON LABOUR LAWS
AND RELATED ISSUES
Presented to
Shri Sahib Singh Verma
Hon’ble Minister of Labour
Govt. of India
By
G.C. Chaturvedi
President IIA
INDIAN INDUSTRIES ASSOCIATION
AN APEX ASSOCIATION OF SMALL AND MEDIUM ENTERPRISES REPRESENTING MORE THAN 3500 INDUSTRIES IN U.P.
Dear Sir,
Humans are the most important and invaluable resources for any constructive or destructive activity being carried out on this Universe. Industry can not be an exception. Every industrial employer in India today realizes that a motivated employee is more productive compared to an de-motivated employee.
Gone are the days when Britishers were the employers and Indians were serving for these foreigners. The theory X left behind by the Britishers resulted in a bias in the minds of the employees of free India as well as the Labour Welfare Departments. Labour Laws in Free India were therefore drafted with a total bias that the employees are to be protected from the exploitation of the employers. 56 years down the line, industrial environment has changed drastically, the employer-employee relations have also undergone sea change. Industries in India today will survive only when these are competitive globally. It is therefore absolutely necessary that Labour Laws and Practices in India are also modified keeping in view the changes and need of the hour. Employer and Employees today can not think opposite to each other rather they need to practice empathy. If industries & businesses flourishes, employment flourishes automatically. A good example is IT boom in recent times.
Government and Law makers therefore need to change the Laws for creating a win-win situation for both the Industry as well as industrial employees.
I know, this is not an easy task. At the same time, I am confident that you can do it with your innovative and pragmatic approach. I am therefore submitting following suggestions for your kind consideration. Hope you will certainly take these seriously. I case you need us to explain the details, we shall be happy to do so at your convenience.
1- Change of Name of your Ministry.
You may consider change of name of your Ministry from Labour Ministry to “Rojgar Shrijan Mantralaya”. This will help all the employees of your Ministry to change their mind sets towards employment creation rather than employment protection only.
2- Social Security to SSI Entrepreneur.
If Industry survives, employment also survives. More than 95% industries in India are in SSI Sector giving employment to more than 2 crore employees. SSI entrepreneur generally puts in his own assets into the business and then try to get loan from financial institutions which normally is not available.
In todays competitive world, the failure rate of SSI is much higher compared to earlier days when lot of protection was provided to this sector by the Government. Therefore there is a need to launch a social security scheme for SSI entrepreneurs also. So that in case of failure in his venture, he is able to restart new venture and instead of standing in the queue of un-employed, he still remains in the category of employment provider.
This social security net for the self employed entrepreneurs could be in the shape of a rehabilitation fund for them created out of the various taxes and levies paid by them during the course of his active business.
3- Social Security to Employees:-
We suggest that in lieu of the so called social security legislations like ESI, PF, Bonus etc. a composite legislation covering the above should be framed and one single contribution should be payable by the employer to cover these benefit to the workmen.
This could be in the form of a percentage of the Wage Bill which could be around 18 to 20 percent to be calculated on actuarial basis .
In the current form of legislation the workmen are paid about 28% of their gross salary as these benefits at the end of the wage periods/retirement. These when calculated on actuarial basis would amount to even less then 18%.
Alternatively the Government could think in term of an insurance policy in collaboration with General Insurance Corporation which could cover the above benefits. This we believe would be easier for implementation.
4- Minimum Wages Act 1948
a. Uniform wages for all kinds of scheduled employments should be prescribed instead of separate minimum wages for different scheduled employments. The Act should prescribe only one minimum basic wage for unskilled workers. Categorisation of workers in the skilled, semi skilled and unskilled categories should be avoided. The wages for workers of higher skills and their increments etc. should be left to the bargaining capacity of the workmen and let them be determined by the market forces. In any event, future revision of minimum wages as well as various dearness allowances, if any, should be essentially linked with productivity. This will ensure a healthy rise in competitive wages linked with quality and productivity. It is also essential for the survival of the industry. The provision of upto ten times compensation in section 20 is draconian and gives enormous and arbitrary powers to the Prescribed Authorities which are more often used to threaten the industry with ulterior motive. The provisions of compensation and penalty should be rationalized.
b. Minimum wages should be worked out assuming a family size of 3 adult consumption units i.e. the worker, his spouse and two children.
c. The urban poverty line should be region/district specific. Accordingly, the minimum wages should be fixed on the basis of the following formula
No of consumption units in a family X present urban Poverty line of the region/district X Current CPI
Current Average Consumer Price Index
d. Minimum Wages should not be made applicable with retrospective effect as various judicial pronouncements have declared such retrospective operation being void and illegal.
e. In India the over time wages prescribed are twice the normal wage but in Industrial advanced countries like USA the over time wages are only one and a half times the normal wage. We therefore suggest a similar rationalisation of over time wage in India.
f. Large Scale Industrial Units are treated at par under this act. SSI units compared to large units are disadvantageous position in may ways, hence there is a need for lower minimum wages for SSI, units.
5- Criminal Prosecution
At present the various labour legislation provide for imprisonment/criminal prosecution of promoters for certain violations, treating them as criminals. Such provisions are in the present economic scenario absurd and should be immediately done away with.
6- Suggestion for increasing employment in SSI Sector
Labour Laws for Small Scale Sector may be reformed keeping in view immense opportunities to increase employment through this sector. Once the small scale sector units find themselves freed from fetters of laws they will be encouraged to recruit more workers. Besides more employment will help curb social unrest and crime. It is estimated that rationalisation of labour laws would lead to increase in employment by almost 50 percent. It is therefore, necessary that:
(a) Threshold limit for all labour laws may be raised to 50 in order to eliminate Inspector Raj.
(b) New units should be allowed a gestation period of at least five years from application of all labour laws so that in this initial period , industrial units may be able to Concentrate on production and marketing to consolidate their position in the competitive environment.
It must be appreciated that small enterprises are really speaking training institutions like ITI’s for workmen and entrepreneurs and may be treated as such. Besides SSI units are not equipped to handle nor can afford vast administrative work required for compliance of present labour laws which are same for large units and small.
(c) Non compliance of labour laws of technical nature (having no real bearing on labour welfare) may be disposed off through Lok Adalats from time to time and penalties for such omissions should be at nominal rates.
(d) Time limit (time barring) should be fixed for inspection of old records/ documents under all labour laws.
(e) Those industrial units in which the workers and employer reach an annual agreement, should be exempted from inspections.
(f) The penalty for imprisonment of entrepreneur in respect of breach of any Labour Law should be abolished.
7- Suggestion on Functioning of Labour Officers.
(a) All judicial functions under the Payment of Wages Act, Minimum Wages Act, U.P. Industrial Disputes Act, Workmen’s Compensation Act, Payment of Gratuity Act, should be transferred to Labour Courts and Tribunal even if some more have to be established for this purpose. The dual executive and judicial power with which the officers of the labour department are armed, is not only doing injustice to all concerned but is taking the corruption and resultant harassment to greater heights day by day. While on the one hand they are not well conversed with the various laws and judicial procedures on the other hand, their sole aim is not to adopt the judicial approach but to extract money from the parties. The thinking has reached to such an extent that at some places even the workers are made to pay bribes in order to get their application moved or a judgement be declared in their favour. The employer particularly in the small scale sector is unable to cope up with the demands which keep on being raised and as a result is at its wits and to handle the labour officers and inspectors without damaging his business.
(b) Except in cases of emergencies , the labour inspectors presently known as Labour Enforcement Officers must be made to intimate in advance the proposed date of their visit / inspection so that the employer may make himself or some body else competent available for this purpose.
(c) The newly started practice of senior officers of this department who are not even the inspectors under the various Acts to inspect the factories with the sole purpose of earning a quick bribe should be seriously dealt with and their visit should be made permissible only under rare circumstances.
Needless to say that by and large the purpose of the officers of the labour department is not to get the provisions of law implemented in the units or to bring benefits to the working classes but only to find out faults and extract illegal gratification. Never are the employers advised or persuaded to implement the laws at least in future.
(d) Summons should be issued to entrepreneurs only on signed complaints supported by documentary evidences. Complaint, if any, by a worker should first be addressed to the employer and after a reasonable period if he is not satisfied a formal complaint may be lodged with the DLC under intimation to the employer.
8- Contract Labour (Regulation & Abolition ) ACT. 1970
With the liberalisation of economy, competitiveness can be achieved only through productivity of resources.
Productivity of work force is thus the need of the hour.
It has to be admitted that productivity has been comparatively very low in our country leading to high cost of production.
It is a fact that productivity does go down as a person becomes permanent. In other words permanency breeds complacence. Therefore, certain amount of uncertainty creates the right type of tensions and keeps one on the toes.
This is not to argue against creating permanent jobs but to highlight that the work load which are of uncertain quantum or transient or not the main line activity of an organisation should be allowed to be filled by the contract labour.
Looked at differently, the contractor is an entrepreneur with insufficient resources for creating his physical facilities. He should not be prevented from taking up that he does jobs on the sole strength of his labour force. At times such contractors have graduated to full scale entrepreneurs and have set up their own enterprises.
It is the low productivity, indiscriminate employment of work force and wrong policies that have forced PSU’s to offer golden hand shakes, etc. out of compulsion to become economically competitive.
Thus in the present context of globalisation the employers may not be barred from opting for the services of contract labour. This will help them to remain lean and cost competitive specially in the SSI and Medium Sector.
We in India needs to learn from our neighbourer and competitive China where there is a provision for short terms contractual employment u pto 10 years. Why can’t we do so in India.
Contract labour should also be permitted to exporting units because their nature of business is essentially order based and orders have to be executed within the stipulated time. There is, therefore, need for total flexibility in employing workers.
9- Factories Act 1948.
(a) Section 2(m): Definition of Factory-A factory should only be covered under the Factories Act in case the number of persons employed are 50 or more.
(b) Section 2(n): Definition of Occupier- It should not be compulsory at the initial stage of setting up of the Industry and for the purpose of any extensions(s), no approval should be required to be taken from the Chief Inspector of factories and the Extended Plans should be submitted by the Company for information purposes only as long as it conforms to prescribed standards.