Centre proposes fixed-term labour contracts

Centre proposes fixed-term labour contracts

The Union labour ministry recently issued a draft notification that would allow fixed-term employment across sectors and also approved moves by some states to amend the Industrial Disputes Act so that factories employing up to 300 workers can close or retrench labour without seeking government approval.

The draft notification on fixed term contracts is part of the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, and enables companies to hire workers for short term assignments and terminate their services when projects are completed. Once notified by the Centre, states can amend their rules accordingly. The draft notification has been uploaded on the ministry's website for stakeholder comments.

Under fixed-term employment, workers are entitled to statutory benefits available to a permanent worker in the same factory, including work hours, wages, and allowances. However, employers need not give notice to fixed-term workers on non-renewal or expiry of contracts

Niti Aayog's Recommendation

In addition, employers can directly hire a worker for a fixed term without mediation by a contractor.

Currently, fixed-term employment is only allowed in the apparel manufacturing sector. The cabinet had recently said it could be extended to footwear, leather and the accessories sector to help "attract large-scale investments at global scale". The government's Niti Aayog think tank had recommended extending fixed-term employment to all sectors beyond apparel in its three-year action plan unveiled last year.

A senior labour ministry official told ET that the Centre is encouraging states to undertake labour reforms as doing it at that level is simpler and quicker than changes at the central level because of stiff resistance from the opposition and trade unions, which argue that such moves leave workers open to exploitation. The difficulties attendant on exiting from businesses are seen as a key reason why business do not want to hire workers in large numbers.

"Moreover, even if the proposed legislative changes get passed in Lok Sabha, they are stuck in the Rajya Sabha where the government still does not enjoy a majority," the official added, although he declined to comment on the fixedterm draft notification, which critics have said was issued without taking all stakeholders on board.

This move is seen as part of the central government's bid to push states to undertake changes in labour policy as it looks to put in place structural reforms to boost investment, generate jobs and ensure long-term economic health. Prime Minister Narendra Modi told the World Economic Forum in Davos on Tuesday that India is aiming to double its economy to $5 trillion by 2025.

The Centre is encouraging states to undertake reforms by tweaking rules wherever possible through notifications allowing states to make similar changes. In case of amendments which are difficult for the Centre to make, they are persuading states to change labour laws through interventions at the chief ministerial level. The Centre immediately gives its consent to such proposals, officials said.

The changes in the Industrial Disputes Act by states are in line with this and typically raise the employee threshold below which a factory doesn't need permission to shut shop or retrench workers, say to 300 from 100.

AMENDING THE ACt

States like Rajasthan, Madhya Pradesh and Assam have already amended the Industrial Dispute Act, significantly enhancing the threshold limit from 300 workers up till which factories would not require government permission to shut down or retrench workers. Maharashtra is close to passing similar legislation while other three states are preparing to amend this crucial act. Successive governments have been unwilling to amend labour policies to make it easier for companies to fire workers and exit businesses.

But having won key assembly elections in the past few years, the ruling Bharatiya Janata Party (BJP) is in power in 19 of 29 states in the country, including most of the industrial ones, making it easier to get such changes done.  BJP governments in Rajasthan, Madhya Pradesh, Maharashtra, Gujarat, Haryana and most recently Uttar Pradesh have embarked upon labour reforms.

The government hopes such measures will improve India's ease of doing business ranking and encourage hiring. Employment generation is high on the government's to-do list as more people enter the job market everyday. A trade union leader said the Centre's policies were not labour friendly.

"Policies of the government are not pro-worker but pro-corporate," said Ashok Singh, president of the Uttar Pradesh unit of the Indian National Trade Union Congress (INTUC), the labour wing of the opposition Congress party. "Since they are now present in majority of states they will bulldoze through labour reforms at state level."

About 9% of Indian factories have up to 300 workers, while 17% have more than 100. Labour is in the concurrent list in the Constitution, which means both the Centre and states can legislate on the subject. However, central legislation prevails over state laws in case of a dispute.

The Economic Times, New Delhi, 25th January 2018