Govt to frame sector-specific model employment contracts for industries

Move aimed at easing compliance burden for companies; experts see it as micromanagement

In a first, the central government is planning to frame sector-specific model standing orders to ensure companies do not have to go through the process of certification.

“We are working towards a progressive model that will ensure a significant reduction in compliance burden. The idea is to have industry-wise standing orders immediately or over a period of time,” a senior labour and employment ministry official said. The government has already begun consultations with industry executives from across sectors on framing multiple model standing orders, the official added.

At present, there are different standing orders for the manufacturing and mining sector. A standing order is a legally binding collective employment contract and holds significance as it contains key work-related terms and conditions and is meant to prevent arbitrary dismissal of employees.

“This is a welcome move and we are happy that the central government will give a sense of clarity to make the standing orders operational in a short period of time. There will be no ambiguity once the Centre frames the model for companies and the States to emulate,” MS Unnikrishnan, chairman of the Confederation of Indian Industry’s industrial relations committee said.

Standing orders are compulsory for every firm hiring at least 50-100 workers at present. But when the Industrial Relations Code, 2020 will be notified likely from April then only firms with minimum 300 workers will be required to frame a standing order.

The standing order states the rights and liabilities of employers and workers in case of closure of a unit, conditions for terminating employment or suspending workers for misconduct, apart from informing employees about their work hours, holidays, wage rates, etc. It explicitly mentions the means of redressing unfair treatment by the employer.

“Each sector has its own rights and special issues so we are contemplating standing orders in at least five-six broad categories. Such a move will take care of peculiarity of that particular sector, rather than seeking a modification in the standing order, which will be a time-consuming process,” the official stated.

The government is planning to frame different standing orders for textiles and garments sector, electronic manufacturing, IT and information technology-enabled services, gems and jewellery, agricultural equipments, among others.

“The move will lead to micromanagement by the government, which it has sought to avoid through codification of labour laws. Further, even the judiciary has observed in the past that the standing order should be a standardised document across sectors. The move will lead to a ‘bureaucratic raj’,” XLRI professor and labour economist K.R. Shyam Sundar said.

According to the draft rules, employers can adopt the model standing order framed by the Central government but it will have to intimate the “certifying officer” about the date from which it will be applicable in its unit. If, within 30 days, the certifying officer observes a deviance from the model standing order, it will ask the employer to make the change in the next 30 days. If companies follow the model standing order in toto then it will not require certification from the authorities.

At present, the standing order is framed by the company management and requires consultation with the trade unions or workers’ representatives. After the formal consultation process, it is sent to the labour department for certification.

“The government has increased the threshold to frame standing order for companies from 100 to 300 workers. As it is most companies in India will be exempt from the requirement of framing a standing order which works in the interest of workers. Instead of letting workers and companies frame standing order with a common understanding and thorough consultation, the government is taking the wrong route of framing industry-specific standing orders,” Centre of Indian Trade Unions president K Hemalatha said.

A standing order states

* Rights and liabilities of employers and workers in case of closure of a unit

* Conditions for terminating employment or suspending workers for misconduct

* Important work condition such as work hours, holidays, wage rates, etc.

* It explicitly mentions the means of redressing unfair treatment by the employer

* Standing order is compulsory for all firms with 50-100 workers depending upon different states

* It will be a must for firms with at least 300 workers under the new Industrial Relations Code

* Standing order is framed by the company management and requires consultation with the trade unions or workers’ representatives and requires certification from labour authorities

* No certification will be required under the new law if companies follow model standing order framed by the government in toto