Doing away with rigidity in labour laws will boost jobs: Minister Gangwar

Labour and Employment Minister Santosh Gangwar said on Friday that the government’s decision to do away with rigidity in labour laws will act as a catalyst towards setting up big businesses in the country.

The Minister sought to allay fears of trade unions to emphasise that the new laws do not take away their right to strike.

“Removal of rigidity in labour laws, reduction of compliance requirements and time bound delivery of services would act as a stimulus for setting up of larger industries, which along with the steps taken for formalisation would act as a catalyst for employment generation,” Gangwar told Business Standard in an interview.

The Minister defended that the government’s decision to allow more factories to retrench, lay-off or shut shop without official sanction will not “promote hire-and-fire” but is meant towards eliminating red-tapism in labour law governance.

“The requirements of permission before retrenchment or closure do not serve much purpose but on the contrary leads to accumulation of losses and liabilities of the firms on verge of closure. Delaying closure of financially unviable establishments due to procedural web would not help the workers in any manner. We should understand that an employer would not want to close his establishment willingly,” Gangwar said.

The Industrial Relations Code, 2020 has allowed establishments with up to 300 workers to retrench or shut shop without seeking government nod, while allowing states to increase the threshold through the executive route. Earlier, establishments with up to 100 workers were allowed to do so.

“Due to this low threshold of 100, the establishments hesitate to expand their size and often do not show workers on their payrolls. Increase of this threshold will therefore lead to formalisation of workforce, encourage labour intensive production and promote establishment of big enterprises,” the Minister emphasised.

When asked why the government didn’t commensurately increase the retrenchment compensation while hiking the threshold, Gangwar responded that “the appropriate government (state or Centre) has been provided with the flexibility to enhance the retrenchment compensation in the IR Code” sot that this option is exercised “at an opportune time.”

When the Central government had in 2015 initially planned to increase the threshold three times allowing bigger companies to retrench without seeking government approval, it had also proposed increasing the compensation three times from 15 days of wages per completed year of service to 45 days. The government has retained the present compensation formula in the law.

The new re-skilling fund, the Minister clarified, will be utilised for crediting 15 days’ of the latest salary of retrenched workers in their bank accounts. Employers will make a contribution to the fund and workers will be paid this sum within 45 days of retrenchment by the government. “Further, the appropriate governments have also been empowered to prescribe other sources for supplementing this fund. The detailed procedure and modalities in respect of the re-skilling fund shall be provided in the rules,” Gangwar said.

The minister said that the laws protect the workers’ right to strike and it has not been “taken away from them in any manner. “A mandatory notice period of 14 days is just an effort to resolve the worker’s grievances or the matter of dispute on the negotiating table through mutual talk and deliberation,” Gangwar added.

In a bid to avert flash strikes, the government has proposed that workers in all factories will have to give employers a strike notice of at least 14 days. At present, only workers engaged in public utility services, such as water, electricity and essential services are bound to do so. Trade unions are particularly worried about a provision in the new law which stated that after the first meeting related to conciliation proceeding has taken place following a strike notice, workers will not be allowed to go on a strike. This, union leaders said, will make going on a strike impossible.