India Will Benefit From Agile Labour Codes: Look At China, Bangladesh And Vietnam For Results


Most of India’s labour laws were framed shortly after independence when it was a predominantly manufacturing/agrarian economy, often stuck in the quagmire of a License Raj. The protectionist and socialist undertones determining the labour laws at the time led to the creation of a labyrinth of over 40 different legislations regulating different aspects of employer and employee relationships, which primarily catered to the needs and rights of the worker.

India’s existing laws focus on income and job security rather than boosting job creation. This is evident from provisions such as prohibition of contract workers, strict laws pertaining to termination of employees, unionising and strikes. However, India’s liberalisation drive has placed it in the centre of a globalised world economy by boosting the services sector. Particularly IT/ITeS contributes over 7 percent of India’s GDP and that number is set to rise to 10 percent by 2025 and create 3 million jobs. In an increasingly shrinking world, workers need to cater to global norms and supply chains which needs to be fostered by Indian legislation.

The pandemic has brought into sharp focus the scuffed edges created by trying to use square pegs of India’s existing labour laws to plug the round holes of a service and technology. Covid-19 has highlighted new trends, such as work from home, part-time workers and gig workers, while exposing the failures of the existing system to facilitate ease of doing business. Multiple compliances and administrative procedures covering key issues such as business registration, rules governing migrant workers make it difficult for employers to unlock the potential of India’s skilled and unskilled workforce. The proposed labour codes will play a cardinal role in sparking India economy’s V-Shaped recovery. China, and more recently Bangladesh and Vietnam, have shown the benefits of agile labour codes which India should look to emulate.

The pandemic and onset of technology have created new opportunities of employment, such as work from home, part-time employment, contract workers and gig workers. This provides opportunities for women and students to partake in India’s economy while simultaneously empowering them. The new labour codes need to recognise contract labourers and make provisions for them. Sharp spikes typically govern services such as IT/ITeS and e-commerce activities. Unlike traditional manufacturing, these industries witness increased activity during festivals, holiday seasons, and sales. Adopting measures to recognise and promote contract working will aid business during phases of increased activity while providing part-time employment to many Indians.

As India pushes for global leadership, it must discard antiquated practices and apply an agile approach to facilitate growth. One such example is standing orders. Standing orders were devised to protect factory workers by stipulating conditions, such as working hours. The rigidity of such measures will affect the service industry, particularly businesses with global clients. Working according to client time zones, establishing patterns specific to projects, and options to work remotely will be hampered if sectors such as finance, consulting, IT/ITeS and E-commerce are not exempted from notifying standing orders. Moreover, IT/ITes sector has in place robust grievance mechanisms and adhere to global work culture practices and hence should be exempted. Multiple surveys show that IT/ ITeS companies are recognised as great places to work due to their employee-first practices and policies.

A critical factor to the success of industry in a free-market economy is its operational independence. Major economies across the world, including those of the USA, China and Japan, have a five-day work week. Studies have found that employees who dedicate more time to recreation are happier employees and work more efficiently. This benefits the health of both the employee and the establishment. In this context, an 8-hour work day will force companies to operate on a 6 day work week model which will compromise employee satisfaction and also hamper hiring, as companies will be reluctant to engage people on over time. The number of hours should be capped at 48 hours, with a 10/12-hour daily limit to aid operational flexibility. With the new codes already providing for flexibility in working hours, states need to ensure the same does not become exploitative.

A large number of businesses in India recruit employees from across the country through remote working facilities. As per the laws, an employer needs to register an establishment in every State where it has employees under the Shops and Establishments Act(s). This results in an avoidable increased compliance burden, increases the costs for business with no additional productivity, and hinders the ease of doing business for the industry. The new codes need to implement a single unified S&E registration.

One of the defining legacies of this government has been the push to digitize India and make it a global leader. India’s goal to become a trillion-dollar economy can only be achieved by establishing codes to foster growth and jobs and income of workers, which would in turn drive security and stability of employees. The service industry driven by technology-intensive sectors such as IT/ITeS, e-commerce, financial services and consultancy has immense potential. The labour laws need to promote employment, quality of employment and income in these sectors by enabling businesses operating in this sector.

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