The TLDR: The Rajya Sabha passed three labour laws on Wednesday. They each have a significant impact on worker rights—for better or worse. Of course, the laws have been reported in biz newspapers in a manner designed to induce an instant headache. So we did the thankless work of wading through all the biz-speak to figure out what the laws will mean for the rest of us—the jargon-challenged janta.

If you want to skip the entire thing, here’s the gist: The changes are primarily business-friendly as they make it easier to hire and fire workers.

Quick background: There are 44 central government labour laws that regulate a variety of aspects—wages, social security, labour welfare, occupational safety and health, and industrial relations. There are more than 100 state labour laws, as well—since both the Centre and the states have the constitutional power to institute their own labour laws. The result is a legal nightmare riddled with loopholes that companies use to avoid following the rules. Labour law reform is greatly overdue. The real question is whether these laws do more harm than good.

Labour law #1: The Industrial Relations Code Law

The biggest changes are as follows.

Standing orders: As per existing labour laws, any company that hires more than 100 people has to issue ‘standing orders’—which clearly define the terms of employment. For example: leave, firings or layoffs, employee redressal etc. This threshold has been increased to 300 employees. 

The main worry: Three out of four factories in India have fewer than 300 employees. The higher threshold will make their workers more vulnerable to arbitrary dismissal, punishment for misconduct, and discrimination in promotion and transfers.

The defence: Giving greater flexibility to employers will increase employment—as it did in Rajasthan where the state government increased the threshold to 300.

Union strikes: Workers cannot go on strike without a sixty-day notice. They cannot strike within 14 days after they give their notice. They cannot declare a strike if their dispute with their employer is in front of a tribunal. And they cannot go on strike for at least 60 days after the tribunal has delivered its ruling. Also: only unions who represent at least 75% of the workers can negotiate with employers.

The main worry: Workers may never be able to go on strike. 

The defence: The government hasn’t said anything but free market advocates view strong union laws as unfavourable for attracting business and investment.

Fixed term contracts: Right now, companies hire contract workers via contractors/middlemen. The law allows them to directly employ fixed-term contract workers. And it can determine the length of the contract at will. 

The main worry: It accelerates the move toward a gig economy—where workers increasingly are employed on contract, and lack long-term job security. It also encourages employers to transform permanent positions into contract jobs—which pay less and can be eliminated with ease.

The defence: Existing laws that ban contract hiring in certain core industries have led to lower employment—especially in industries that require seasonal workers. Some experts say that making it hard to hire and fire people is “stupid, delusional and dysfunctional” in a labour-surplus country like India.

Labour law #2: Social Security Law

All workers—whether they are permanent, temporary or contract—will enjoy many of the same benefits. 

• This is huge as this will be the first time that gig workers (think your Swiggy delivery person) will get life and disability cover, health, pension and maternity benefits, old-age protection and other benefits. 
• Fixed term contract workers will also be eligible for gratuity (bonus for time served at the company)—which is currently only being paid to permanent employees, and only after five years.
• The government will set up a fund to pay these social security benefits for all migrant and other temporary workers in the unorganised sector. 

The main worries: are as follows:

One: Giving gratuity to even contract workers may be a huge burden for small and medium sized businesses—who mostly pay gratuity from their revenues. They may have to set up a gratuity fund or take insurance in order to make the payments. 

Two: It isn’t clear how these benefits will be funded. And as The Telegraph notes:

“The bill stipulates the creation of a social security fund, the money coming (a) wholly from the Centre; (b) from the Centre and the states; (c) from the Centre, states and contributions from the beneficiaries or the employers; or (d) from any source including the Corporate Social Responsibility funds paid by companies.”

Low-income, wage, home or self-employed workers account for 93% of the country’s 466-million workforce. Most of them cannot afford to contribute to a social security fund. The law stipulates that companies which rely on gig employees will have to allot 1-2% of their annual turnover. But that amount is capped at 5%. So without secure funding, the scheme may never take off.

The defence: This law will finally give some measure of essential benefits to the great majority of Indians—and who need it most.  

Labour law #3: Occupational Safety & Health Code 

The key provisions in this law focus on migrant workers:

• For the first time, it defines an inter-state migrant worker as a person who moves on his/her own from one state to another in search of employment—and earns up to Rs 18,000 a month. Until now, labour laws only covered workers employed by contractors.
• The central and state governments will maintain an online database of all migrant workers—who can self-register using their Aadhar card.
• All public welfare benefits will be portable—ensuring the worker can avail of them when s/he moves from one state to another.
• Employers are no longer required to offer temporary accommodation near work sites, but they must pay a yearly travel allowance to go home.
• A special help line will be instituted for migrant workers.

Also this: The law creates a single labour license that allows companies to hire workers on contract in different locations. Currently, a company has to apply for multiple licences.

Main worry: While migrant workers will receive overdue legal recognition, many worry whether they will actually receive any legal protection. As NewsClick notes:

• Workplace safety standards that apply to factories have been loosened by redefining a ‘factory’. 
• The term only applies to those who use electricity to run operations and employ more than 20 people. Or those who do not use electricity and employ more than 40 people. 
• So, say, if a unit employs 39 handicraft artisans, those standards don’t apply.
• The revised contract labour laws also only apply to companies that employ at least 50 workers. 
• This means at least two-thirds of all factories will not be covered by these regulations.

The defence: Many migrant workers died of starvation and exhaustion during the pandemic. The government claims it doesn’t have a clue as to how many died. At the very best, the new law ensures that won’t happen again.

Reading list 

BloombergQuint offers more details on the three laws, while Hindustan Times has a quick overview. The Print put together a series of quick takes from all sides of the debate. NewsClick offers a detailed critique from the labour point of view. The Telegraph rounds up the reactions to the new laws and the big questions about the social security fund. Scroll explains why they leave the Indian worker in a more precarious position. Mint lays out the challenge posed by the new gratuity requirement for contract workers.