Labouring with reforms

If one were to look at the reforms from the broader picture of downsizing governments, freezing and lowering Central recruitment, the proposal to abolish the Banking Services Recruitment Boards and expanding the ambit of outsourcing, the very strucure of Indian labour is in for change, says V. S. Sambandan.

LABOUR LAWS, which have so far remained outside the purview of the country's economic reforms, are in for a drastic overhaul in the months ahead with the Union Finance Minister, Mr. Yashwant Sinha, informing Parliament that the Government ``was convinced'' that the changes were required to take the reforms forward.

To begin with, the Government's intent to amend two laws - the Industrial Disputes Act and the Contract Labour Act - has been announced. While the procedure to amend these two laws will commence shortly, the wide sweep these legislations have over the nation's workers, is an indication of the broad level of changes that are to occur. In a way, the two proposed amendments have an impact on the structure of labour relations in the country in that they are to encompass a significant majority of the nation's workforce. Simply put, the level of protection now sured by law to labour is in for a drastic change.

The Industrial Disputes Act (ID Act) now mandates that an industrial establishment employing more than 100 workers should seek the Government's nod prior to closure. The Government's proposal is to increase this limit to 1,000 workers. This will imply that industrial establishments with a workforce of up to 1,000 employees can resort to lay-off without seeking Government clearance. To discourage indiscriminate closures, the Government proposes to increase the separation package from the present 15 days' wages for every year worked to 45 days.

Seen along with the thinking to repeal the Sick Industries Companies Act (SICA) and the sweeping changes to be brought in the Contract Labour (Regulation and Abolition) Act, the emerging picture is that of an overhaul in labour laws. The crucial change to be effected in the contract labour law is in doing away with the distinction of core and non-core activities as a basis for outsourcing.

In themselves, the changes proposed may not result in the immediate arrival of a `hire-and-fire' policy, but the manner in which the Government has started approaching the reform of labour laws is ample indication of what the final destination will be - a comprehensive exit policy offering a structure within which firms will be free to close down unviable ventures with minimal procedures.

The announcement has been welcomed by industry representatives along predictable lines. Labour leaders, however, see the impending changes as harming workers' interests and leading to ``unrest''.

If one were to look at the reforms from the broader picture of downsizing governments, freezing and lowering Central recruitment, the proposal to abolish the Banking Services Recruitment Boards and expanding the ambit of outsourcing, the very structure of Indian labour is in for change.

Industrial Disputes Act (1947)

The proposed change in the ID Act will considerably alter the country's manpower scenario as it will lift checks on industrial establishments that employ less than 1,000 workers from having to seek Government sanction before announcing a lay-off. As between 70 and 85 per cent of the country's organised sector workforce are in establishments that employ less than 1,000 people, the proposed amendment will affect a large section of workers.

Interestingly, the present requirement to seek Governmental clearance by industrial establishments with more than 100 employees was a change made in 1984, from the earlier limit of 300 workers. Clearly, the thinking at that time was for greater protection to workers and to make lay-offs more difficult.

Mr. K. T. Reddy, President of the Employers' Federation of Southern India (EFSI), welcomed Mr. Sinha's announcement as ``a major step.'' The change, he felt, would ``benefit the medium scale industries which are the ones that need to adopt new technology and reduce the labour force.''

Not so, feel labour leaders. Mr. W. R. Varadarajan of the Centre for Indian Trade Unions (CITU) contends that nearly 85 per cent of the country's workers will be left at the mercy of employers if this move was brought in. ``This will result in removing the protective provisions requiring approval by the appropriate Government to effect lay-off, retrenchment or closure,'' he said.

The proposed change incorporates a check on easy lay-offs in that it seeks to increase the separation package from the present 15 days per year worked to 45 days. Tripling the separation package is seen by employers as highly beneficial to the workers, Mr. Reddy feels that the higher separation package ``coupled with the proposed insurance scheme to cover such labour and to pay 30 per cent of the last drawn pay for one year,'' would sufficiently take care of the workers' interests.

Labour leaders contend otherwise: The proposal to hike the separation compensation, Mr. Varadarajan feared, ``will only free the employers from even introducing a voluntary retirement scheme with better financial packages.'' One apprehension of workers over the removal of a check on lay-offs is that industries can resort to easy lay-offs citing financial difficulties. The immediate reaction from employers' representatives that the 45- day separation package should be reduced only aggravates such doubts.

Contract labour

Contract labour, or resorting to outsourcing the activities of industrial establishments, is an increasingly evident feature in India. The most apparent advantage for the employer is that it substantially reduces costs through lower wage bills. That the contract labour system has not gone down well is apparent from the large number of litigations, even involving the public sector enterprises. Employers, for their part, have been asking for some form of clear distinction on the nature of jobs that can be outsourced to clear ambiguities in the law.

Mr. Sinha's thinking to do away with the distinction between core and periphery activities signifies a complete departure from the existing distinctions. Announcing the Government's thinking on this sensitive issue, the Finance Minister said, ``It is proposed to bring in an amendment to facilitate outsourcing of activities without any restrictions and offer contract appointments. It will not differentiate between core and non-core activities, and provide protection to labour engaged in outsourced activities in terms of their health, safety, welfare and social security. It will also provide for larger compensation - based on last drawn wages as retrenchment compensation for every year of service.''

Apprehensions in labour unions are that the removal of restrictions on outsourcing will result in lowering protection levels. Mr. R. Kuchelar, noted trade union leader, feels that these changes will result in ``high-wage islands''. Mr. Varadarajan feels that the end result of the reforms in contract law ``will be a recourse to perennial contractorisation of jobs.''

Cost-cutting benefits for employers apart, the changes will result in a reduced role for the country's trade unions. The unions, Mr. Varadarajan feels, will be increasingly marginalised with the proposed labour reforms. The reforms, Mr. Kuchelar feels, should serve as a rallying point for a coming together of the highly divided unions. There is also the increasing necessity to move towards `one-industry, one-union' approach to resolve labour issues, he said.

As much as there is the need to reform labour laws, there is also the need to provide an appropriate nursing time for the country's workforce to attune itself to the changed realities. As a representative of an industry organisation said, ``These changes are no doubt required, but they should be done not through dramatic announcements but after informed debate and discussion.''

An overarching consensus on the most crucial part of reforms will only improve its effectiveness.

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