May 20,2019 | 20 min read

Labour Laws In India: Need For Reformation by Advocate Karthik Raghavan

Author - Advocate Karthik Raghavan and Associate Nupur Mehrotra 

It has always been a challenge for developing countries to bring about development in the nation by providing the underprivileged with employment opportunities and improving their standard of living. India's labour laws are archaic and suffer from rigidities thereby holding back economic development. Ever since the introduction of market reforms in India in the 1990s, several investors, international organizations and general critics of government regulation have demanded further measures to be taken regarding the labour market. However, since 2014, as part of the legislative reforms, the Central Government has taken the initiative to codify and amalgamate 44 Central labour laws into 4 codes in order to simplify them. The Government has introduced four major law reforms that are yet to be implemented. These include:

  1. Code on Wages
  2. Code on Industrial Relations
  3. Code on Occupational Safety, Health, and Working Condition
  4. Code on Social Security

Code on Wages Bill, 2017

  • The Bill was introduced in the Lok Sabha on 10th August 2017 and it subsumes four existing labour laws namely the Minimum Wages Act, 1949, the Payment of Wages Act, 1936, Payment of Bonus Act, 1965 and lastly the Equal Remuneration Act, 1976.
  • After enactment of Code of Wages, all these 4 Acts will be repealed. It will remove multiplicity of definitions and authorities leading to ease of compliance without compromising on wage security and social security to the workers. 
  • The new code will make sure that equal and timely wages are given to every worker and there is no discrimination on the sector basis and absence of wage upper limit.
  • A provision of National Minimum Wages will be introduced through this code that would ensure that no State Government fixes the wage below the National Minimum Wages as specified but no amount has been fixed as National Minimum Wage.
  • The provision of payment through cheque or mainly electronic mode has been introduced so that digitalisation increases as well security is maintained at the same time.
  • A provision for Appellate Authority has been established between the Claim and Judicial Forum to ensure speedy and cheaper redressal of grievances and settlement of claims.
  • An introduction of different penalties for different offenses made with varying amount has been incorporated in this Bill.

Social Security Code, 2018

  • After enactment, Labour Code on Social Security will replace 15 laws like the Maternity Benefit Act, 1961, Employees State Insurance Act, 1948, the Payment of Gratuity Act, 1972, etc.
  • With the introduction of this code, it will be mandatory to register all types of workers under the (Aadhar based) Universal Registration system envisaged in the Code as per the registration protocols decided by the Central Board for universal applicability and portability of registration.
  • It also aims to streamline and centralise the investments for maximizing returns.
  • The definition of employee cover all kinds of workers i.e. part-time, casual, fixed term, informal, home based, domestic etc.
  • Social Security Fund in each State is to provide for schemes such as Pension, Sickness Benefit, Maternity Benefit, Disablement Benefit, Invalidity Benefit, Dependent's benefit, Medical Benefit, Group Insurance Benefit, Provident Fund, Unemployment Benefit and International Worker's pension benefit.
  • Employer’s liability arises only when he/she neglects to pay the contribution in respect of a worker or worker does not complete qualifying service for entitlement of dependant or disablement benefit. Employee shall be deemed to be in continuous service for the purposes of gratuity so long as he served continuously for the same Principal Employer.

Industrial Relations Code, 2018

  • Labour Code on Industrial Relation was recently sent to the Cabinet for consideration, after which it will be introduced in the Parliament. Once enacted it will replace the Trade Union Act, 1926, the Industrial Employment Act, 1946 and the Industrial Disputes Act, 1947.
  • This code restricts any person from holding office in more than 10 unions.
  • If the bi-annual elections are not held or the annual report is not submitted it will lead to the cancellation of the registered trade union.
  • This code will mandate that the organization with 50 to 300 workers have to be given prior notice of 2 months before the closure of any unit.
  • It is instructed that a minimum of 100 people should form a trade union or at least 10 per cent of the workers currently working in the unit.
  • This code would also raise retrenchment/closure compensation to workers from 15 to 45 days for every year of completed service.

Code on Occupational Safety, Health, and Working Conditions

  • The draft has provisions that has taken cues from 13 Acts and classifies workers from different sectors.
  • It has laid down guidelines for each sector separately. 
  • Some of the categories include factory workers, miners, dock workers, building & construction workers, plantation labour, contractual labour etc.
  • It prescribes guidelines for registration of companies. 
  • It specifies duties for an employer to ensure that employees do not face hazards and remain healthy at their workplaces.
  • It mandates all types of companies to constitute a safety committee and notify it about spread of diseases, if any and also about hazardous circumstances at the workplace. 
  • The draft proposes the appointment of facilitators to ensure that the code is being adhered to at workplaces

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Lex Comply - Knowledge Dossier (10 July 2020)

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Shareholder Agreement

Joint Venture Agreement

Permanent Employment Agreement

Memorandum of Association of a Company

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Karthik Raghavan

A sole legal practitioner with over 6 years of experience in litigation and corporate law. My main areas of interest include Employment Law, Contract Law, Intellectual Property Rights, Consumer Protection, Real Estate and Dispute Resolution. For more details please visit my LinkedIn profile.