Belabouring the laws

Modernising labour laws is good but where is social security for workers?

Alok Tiwari

As is usual in India, opinions are divided on the new labour codes that the central government finally notified. The four codes were enacted by the Parliament five years ago, during prime minister Narendra Modi’s second term. That the government sat on it for five long years and mustered courage to notify them only now indicates the government’s own extreme wariness on the subject. Despite the fanfare accompanying the notification, the new codes are far from becoming a reality on the ground. Both central and state governments must undertake several steps to make them operational.

The government, through massive advertisements, is projecting the welfare measures the new code provide for the workers. These are extending benefits of regular employment like provident fund and gratuity to gig workers who now make up a significant section of the workforce. Labour organizations, on the other hand, are up in arms against the provisions that provide more flexibility to employers in dealing with labour. In simpler terms they make hiring and firing easier. Business organizations have also welcomed the reduced compliance burden on them, meaning they will have to do less reporting to the authorities and theoretically there will be less corruption involved.

Labour scene in India is complex. There is a world of laws and there is a world of reality. There is a wide chasm between the two. We may have very good and modern traffic rules but that hardly means we have streamlined traffic in the country. Ditto for the labour laws, only it is much worse for the sheer diversity and scale involved. Workers range from domestic to farm workers, construction workers to those employed by small shops, factory workers to office goers. Much of the work is in unorganized sector. Even in organized sector there is government and private employment.

Laws exist to regulate most of these sectors yet ground realities are starkly different. A major dichotomy exists between government and private employment. Thanks to a history of trade unions, the government and public sector employees are seen as overpaid and mollycoddled. Senior management is unable to take any effective steps. Managers in PSU banks complain they cannot move a clerk from one counter to another without consent of the local unions. Probably no government employee has ever been fired on the grounds of inefficiency. While government employment is nice, it is shrinking as a proportion of total labour market.

The scene in private sector is dramatically different. Though Indian businesses complain loudly about the rigid labour laws that tie their hands, most of them operate pretty much outside the legal ambit. Even bigger companies draw up contracts for their regular workers blatantly in violation of laws. The statutory benefits are given out of employees’ own wages as part of omnibus ‘packages’ that look big on paper. Entire sections are being outsourced so workers, while being fully in service of a bigger company, are technically employed by a smaller entity and thus denied benefits and protection due to them.

Very few companies have effective unions and managements use intimidatory tactics to discourage workers from organizing. Collective bargaining has been replaced by individual bargaining. This may have inflated the wages of some people whose skills are in demand but has disempowered the rank-and-file employee in every sector.

The Achilles’ heel of Indian labour protection has been the enforcement. The laws may be making shutting down businesses and firing workers difficult but that has never prevented factories and businesses from shutting down. The legal process that ensues in such cases is so long, so arduous, and so grinding that most workers pass away before its resolution. Authorities and courts meant to protect them have proven ineffective. Businesses with means just pay off the regulators and do as they please.

Employers say this is because labour laws are unrealistic and heavily in favour of workers forcing them to ignore them. There could be some truth in it. It is same as tenancy laws. The new labour codes are supposed to bring a bit of balance. While they will offer more flexibility to employers with respect to setting shift lengths, shutting down businesses or firing workers they will also extend benefits to more workers.

Proof of the pudding is always in the eating. Laws are only as good as their implementation. Government advertisements proclaiming the benefits of the new laws do not specify how they will be enforced. Large companies that are in the public eye may implement the provisions but how the government will supervise hundreds of thousands of smaller businesses? The labour departments tasked with doing so far have proved to be hopelessly inept as well as corrupt. The judicial mechanism to resolve grievances is inadequate and slow. There is little hope of securing protection and justice for workers unless these are reformed.

Finally, a more flexible labour regime cannot come without universal social security. It is understood that jobs in modern age cannot offer cradle to grave security. It may be necessary for businesses to downsize or even shut down depending upon economic circumstances, yet it is inhuman to leave workers to fend for themselves, especially those not very young who might find getting another job difficult. They are also typically people having young children and unpaid home loans. Their lives are greatly disrupted at sudden loss of job. The pension accruing through EPS to such employees is a joke.

Government may offer more flexible labour environment to businesses, but it must also offer a robust safety net to workers until they are re-employed. A fund can be created with contributions from businesses and government to pay adequate unemployment benefits and for retraining/upskilling the workers for new jobs. Private sector pension too needs to be made adequate. There is little in the new codes towards this end. Until these steps are taken, they are only likely to enhance the misery of workers.

This column appeared in Lokmat Times on Nov 27, 2025