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  1. Analysis
May 24, 2021

India labour law reforms on track despite delays

Indian labour law reforms that had been due for implementation in April have been delayed – and according to several experts, are not now expected to be enforced before October.

“There was no official communication for a long time and therefore it looked like as if the codes were dead,” Saurabh Munjal, legal advisor to Apparel Export Promotion Council (AEPC) told Just Style. “But the government has come out with two new notifications, which means that they are still working on it.”

The anticipated reforms are expected to emerge through four new codes: ‘The Code on Wages’, ‘The Occupational Safety, Health and Working Conditions Code’ (OSH&WC), ‘The Code on Social Security’ and ‘The Industrial Relations Code’.

One goal of this work is simplifying complex existing rules that have been tough for industry to implement. For instance, according to a statement from the central ministry of labour and employment, the OSH&WC will integrate 13 labour laws.

For garment manufacturers, an anticipated increase in overtime hours and a major reduction in paperwork are key advantages of the new codes, says Sudhir Sekhri, managing partner of Trend Setters Group, in Gurugram, near New Delhi.

“This was done in consultations with the labour unions and all objections were taken care of,” he told Just Style. Even so, “there is this delay and now [the reforms] are unlikely to come this year.”

One possible reason for the delay is that several Indian states have yet to frame related local rules to implement the new codes.

The central government has also been assessing its political priorities after five states went to the polls in April – most notably West Bengal, which was lost by the central government’s ruling Bharatiya Janata Party (BJP).

“Now we have the major Covid-19 crisis,” Munjal says, which is keeping officials and politicians occupied.

Key changes

The new codes are also expected to give more powers to managers. Unlike the present system where unions can send complaints immediately to government labour departments, under the new code (as currently drafted) they would first have to discuss them with the management.

Another key change would be a uniform definition of wages, which until now have been defined in contrasting ways in different laws, Munjal explains.

“Presently there is lot of confusion about inclusion of provident fund, gratuity [retirement benefits] and Employees’ State Insurance in wages, which gives rise to lot of litigation. With more clarity and transparency, the [foreign] buyers can gain more confidence in Indian [garment] exporters.”

There is also some liberalisation expected in the new codes, which as presently written, would exempt companies from seeking official permission from regulators before closing a plant if they employ up to 300 people – up from 100 in the past.

And the new codes would apply to industrial units that are electrically-powered only when they employ 40 or more people, up from 20 at present.

Finally, one element that is particularly disliked by trade unions would give companies more flexibility to set the time limits of contracts, whereas at present these are generally limited to six months. Labour organisations fear if this freedom were added to the final code, it would discourage workers from joining unions.

Last year 49 apparel brands, including Adidas, Bestseller, Primark and Next, also raised their concerns at proposed changes to India’s labour laws intended to help employers cope with the effects of the Covid-19 pandemic.

The Indian legislature passed the multiple labour law reforms in September 2020, details of which can be seen here.

As reported on Just Style earlier this week, the ability of India’s clothing industry to serve overseas buyers has been devastated by the country’s ongoing second Covid-19 wave, with a collapse in domestic orders, workers fleeing urban areas and disrupted upstream supplies slashing industry capacity: Covid-19 surge puts India clothing sector on the rack.

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