This article is written by Jaanvi Jolly and Sneha Arora. It seeks to provide an in-depth overview of the dynamic landscape of labour laws in India. It highlights the historical background and the gradual development of labour legislations, tracing how labour laws have managed to balance the interests and rights of the workers and employees over time. This article examines the present status of labour law in India and how bringing in flexible reforms can help companies, initiating the introduction of the four new labour codes which aim at simplifying and modernising the regulatory framework. Overall, this article offers a comprehensive perspective on the dynamic nature of labour laws and their impact on the economy. 

Table of Contents

Introduction 

The debate about balancing protectionist policies with the need for economic growth, is a never ending one. It is often argued that labour laws are restrictive and seek to put undue burden upon establishments, which makes the process of hiring and terminating workers, in line with changes in the economy, very difficult. This  results in less investment, slow growth and a decline in formal employment. In 2010, the World Bank noted that “India is one of the most restrictive countries in the world in terms of regulations governing retrenchment and layoffs”. This clearly established a need to reform and bring in greater flexibility in hiring and firing regulations. These exigencies are not confined to just India. In the globalised era, as nations clamour to increase their competitiveness, the only resort is to introduce flexibility in labour laws. 

The various principles that guide the legislation of labour laws include- principle of regulation, principle of protection, principle of social justice, principle of welfare, among others. Flexibility in labour laws has many contours, such as the number of people employed, provisions for job security, limits to working hours and  remuneration. Companies are directly impacted by the extent of flexibility in the labour market. Liberal laws may result in a substantial increase in their profits, along with other advantages that include, improvements in efficiency, easy adaptation to changing business needs and fostering innovation. In a less regulated environment, they would be better equipped to work through changing market situations, to work out operations in an optimised manner and to create a dynamic and positive employer employee rapport. They can make changes to their workforce based on factors such as employee hiring and firing, compensation and benefits, working hours and conditions, changes in market, fluctuations in the economy, etc. This does not mean that the companies must be given carte blanche (complete freedom to act as one wishes), as the need for protection of employees’ rights would require some regulations. However, it is evident that in cases of rigid labour laws, companies are unable to modify their workforce, work on expansion, change employment arrangements or enhance the employer employee relationship, which negatively impacts not only the business but also the economy.

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The evolution of labour laws in India

In today’s era of high level of industrialisation and the contemporary business landscape, labour laws play a pivotal role in displaying the cornerstone of employer-employee relationships. The existence of industrialisation relies paramountly on two factors that is capital and labour. Labour legislation in India grew with the growth of industry in the 18th century, when India was not only a great agricultural country but a leading manufacturing country too. This industrial growth necessitated the establishment of labour laws to protect worker’s rights and welfare. Key legislations like the Factories Act of 1948, which aimed to regulate working conditions in factories, including work hours, safety of workers was one among several other steps that marked a major step in labour law progression. Additionally, the Maternity benefit Act of 1961 was introduced to safeguard the rights of pregnant women, ensuring benefits like maternity leave. However, the British government in India as a matter of policy discouraged Indian manufacturers to aid the rising manufacturers of England. This discriminatory policy forced the leaders of independent india to put forward a theory of economic development and planned industrialisation suited to the conditions of the country. Thereby, in India, several labour resolutions have been enacted to promote the conditions of the labour keeping in view the development of industry and national economy such as  Minimum Wages Act, 1948, The Employees State Insurance Act, 1948, The Payment of Gratuity Act, 1972, The Contract Labour Act, 1970.  etc. However, we need to acknowledge the fact that  for industrial regeneration, the partners of the industry must cut their respective defects. Since independence, both legislation and public opinion have had a substantial impact in improving the conditions of the workers but unfortunately, the response of the employers has been lukewarm at best.

The government and the factory owners must understand the labour psychology and consequently, a change in their outlook and attitude is required in order to secure the industrial peace. Similarly, workers in the country must understand that if they desire to secure their place in the industrial economy of the country they must think more in terms of responsibilities and duties and not a licence for impertinence.

In recent years, India has undertaken several reforms to modernise and simplify its labour regulations. The government consolidated 29 central labour laws into four comprehensive codes as follows : 

  1. The Code on Wages, 2019: This Code aims to streamline the rules and regulations concerning wages and bonuses across industries, ensuring a universal minimum wage for all workers and promoting timely payment. 
  2. The Industrial Relations Code, 2020: This code aims to simplify the process of dispute resolution between industries, introduce new provisions for strike and lockouts, and improve the mechanism for workers participation. 
  3. The Occupational Safety, Health and Working Conditions Codes, 2020: This code amalgamated several regulations concerning workplace safety, health standards and working conditions, ensuring a safer environment for workers in all the sectors. 
  4. The Code on Social Securities, 2020: This code integrates laws related to social security, including provident funds, employees state insurance, maternity benefits, gratuity, and employee compensation, aiming to extend social security benefits to all workers, including those in the unorganised sector. 

The introduction of the new labour Codes has elicited mixed reactions. While some stakeholders welcome the new labour code reforms, others have expressed concerns about the dilution of employee’s rights. Trade union groups have raised serious concerns regarding the increased retrenchment threshold and the weakening of trade union rights under the Industrial Relations Code. These objections have led to various strikes and protests in various parts of the country, emphasising the need for effective dialogues before the government, employers and trade unions to address the apprehensions of all stakeholders. 

By navigating and comprehending the evolution of labour laws and their impact on company flexibility, stakeholders can navigate employment landscape changes while promoting a sustainable work environment. This includes considering the benefits and challenges, the shift towards flexibility, the expansion of workers’ rights, and the historical context of the Industrial Revolution and early labour laws.

Present status of labour laws 

In India, the present status of labour laws encompasses a comprehensive framework that governs various features and aspects of employment including conditions, relations, rights and incomes. About 45 other national laws and around 200 state laws regulate the relations between workers and companies in India.Some key statutes under the Indian labour laws are as follows: 

Therefore, labour laws in India continue to evolve in order to protect the worker’s rights and safeguard their interest, and to maintain employer-employee relationship and ensure fair working conditions while at the same time providing the impetus to the businesses.

Why is there a need for flexible reforms in labour laws 

The demands for a reform in the Indian labour law landscape have been made by various stakeholders so as to provide a conducive business environment. In the last decade, India has been extensively pitched as an economy for foreign investors, with the only hurdle being several regulatory barriers and restrictive labour laws.

The reforms in India’s labour laws have been the result of rigorous debate. The literature, as found in the work of Amirapu and Gecher (2020), argues that restrictive labour laws compel firms to remain small, use contractual workers or use capital intensive technology. On the other hand, the work of Roy, Dubey and Ramaiah (2020) argues that labour laws cannot be held responsible for the sluggish growth of the Indian economy. Believing that strict labour laws were detrimental to the growth of the economy, the government began to reform the labour laws at the national level.

Facilitating foreign investment 

In numerous studies, it has been found that as the labour market regulations in the host country become flexible, the inflow of foreign direct investment (FDI) increases by as much as 18% and excessive regulations restrict growth by lowering the levels of FDI. It has been found that countries with excessive regulations and low quality institutions are unable to take full advantage of  trade liberalisation and globalisation. Thus, a reform in regulatory frameworks is quintessential in achieving positive gains from trade and FDI inflows.

In recent years, the Government of India has made significant efforts to transform the country’s economy and become a five trillion dollar economy by 2024-25. The Government of India has been striving to simplify the business environment, maintain business-friendly compliance and regulatory processes, promote entrepreneurship, innovation, and wealth creation and also focus on attracting foreign investments. To achieve this Government has brought about various schemes and regulations to enhance the ease of doing business in India.

Despite India’s competitive advantage in terms of labour and numerous measures to enhance the ease of doing business technologically and economically, it has still not fully realised its potential for attracting foreign direct investment (FDI) due to the lack of flexibility in labour laws. To increase FDI in India, location advantages like tax incentives, market size, and flexibility in labour laws play a significant role. In India, labour laws are regulated by both the central and the state legislatures, resulting in over 200 state and central legislatures governing the labour code in India. This multiplicity of laws creates a hindrance, complexities and unfavourable conditions for foreign investment.

Certain labour laws pose challenges for foreign investors looking to invest in India. One of those laws is related to the termination of unemployment during restructuring or mergers. The Shops and Establishment Act, 1954 and the Industrial Disputes Act, 1947 and standing orders on service contracts impose a challenge of procedural conditionality and hinder the employers during the deployment of resources. Obtaining government permissions for the deployment of the employees and for the disinvestment creates hurdles in quick decision-making and smooth execution of business operations. 

Another complexity arises from the Contract Labour (Regulation and Abolition) Act, 1970, which restricts the recruitment process for contract labourers based on production and demand, and grants the government the power to prohibit such recruitment. These complex regulations hinder regulatory compliance and the framework for foreign businesses to operate smoothly in India. 

Inflexibility and restrictions on the smooth execution of businesses, along with biases towards employees, hinder economic prosperity and growth. Foreign investors and profit maximising firms seek freedom and flexibility towards their business operations and executions. India’s labour market being ambiguously regulated, hinders and restricts foreign investors from investing and entering into the Indian market, leading to impaired labour relations, reduced labour flexibility and a lack of social security. Therefore, reducing the rate of FDI in India. 

Here are some sectors which are affected by the foreign investments

  • Manufacturing sector: Various companies like Hyundai, Honda, and Ford have established manufacturing facilities in India. These companies must have labour laws concerning minimum wages, special health and safety, working hours and leave entitlements.
  • Retail sector: Several foreign retail giants like Walmart, IKEA, and Amazon, among others, have entered the Indian market.These retail giants are subject to the labour laws governing workers’ wages, working conditions and other provisions concerning foreign direct investment, including source limits and sourcing requirements.
  • Construction and infrastructure: Foreign companies investing in the construction and infrastructure development of India must comply with the Indian labour laws related to contract labour, safety regulations, and workers’ welfare measures. These laws aim to safeguard the safety and rights of the workers.
  • Information Technology and Business Process Outsourcing: India is a significant destination for business process outsourcing and information technology services, attracting foreign investment from companies like IBM and Microsoft, among others. The Foreign investors investing in it and BPO must comply with the rules and regulations of the labour laws to maintain the data privacy, and working conditions of the employees, and to regulate the companies in a better way. 

Therefore, flexible labour laws help foreign investments and investors by enabling adaptability, innovation, creativity, agility and competitiveness. 

High rate of economic growth

To promote economic growth in India, it is essential to streamline labour laws to attract foreign investment, enhance business flexibility, and ensure workers’ welfare. The new labour Code consolidates the labour laws into four major Central laws, which fosters and simplifies compliance in a conducive investment climate. By allowing easy hiring and firing processes by the companies ultimately, increases the ease of doing business. By extension of social security benefits, these reforms aim to balance employers’ interests along with workers’ rights, therefore making India more appealing and attractive to foreign investors.

With reforms that would make the discretionary powers of businesses wider and the process of registration and licence seeking faster, these businesses would increase, which would directly affect the economic growth of the nation.

In a study by Poschke (2007), it was found that higher firing costs discourage the exit of low productivity firms, which congests the selection process and slows down growth. In a report by Basu and Maertens (2007), it was argued that stringent labour regulations were among the main barriers to economic growth in the Indian economy and that reforms were needed in the area. They suggested the introduction of a labour market system with flexible contracts, a minimal welfare and safety net for unemployed workers and a swift dispute resolution mechanism.

The government’s focus on modernising and simplifying labour reforms underscores its commitment to driving economic growth by promoting collective bargaining and resolving disputes. To further enhance economic growth and India’s sustainability, India needs to focus on boosting private investment, integration with the global economy and increasing competitiveness. Initiatives like financial sector reforms, simplification of the regulation framework and trade liberalisation are crucial for economic growth and help in reducing business costs and risk, thereby attracting foreign investment, and posting Innovation, technology and competitiveness. By addressing key factors like job creation, enhancement of employment opportunities, and increasing productivity and competitiveness. India can unlock its economic potential, create jobs and maintain a stable growth trajectory in the long run.

Enhancing industrial competitiveness  

In India, 90% of the workforce is engaged in the unorganised sector, a trend that has been consistent since independence. The unorganised sector in India holds several complexities and unfavourable conditions. However, recent Labour law reforms aim to address this gap and the complexities in it to enhance industrial competitiveness. The flexibility in the labour laws that are the reforms introduced by the government are of significant understanding as they consolidate and simplify existing labour laws, making them more efficient and workers-friendly.

In order to enhance the industrial competitiveness in india, several steps can be implemented, particularly given the predominance towards the unorganised sector and recent labour law reforms: 

  1. By balancing flexibility and worker’s rights: While flexible labour laws can attract foreign investment and boost up the profitability, it’s essential to protect the workers’ rights to ensure fair and sustainable working conditions. This balance is crucial for long-term industrial growth and sustainability. 
  2. Skill development: Investing in skill development programmes can enhance the capabilities of the workforce, making them more adaptable towards technological advancement and development. 
  3. Infrastructure improvement: Enhancing infrastructure and facilities such as transportation, logistics and energy supply, can reduce operational costs and increase efficiency for industries. 
  4. Enhancing Technology and Innovation: Encouraging the adoption of new technological advancement adds to higher productivity and better quality products, making Indian industries more competitive globally. 
  5. Flexible labour laws: Recent reforms have simplified and modernised the existing labour laws thereby making them more efficient and workers-friendly. It facilitates hiring skilled, efficient workers for short-term projects or seasonal demand, reducing labour costs and increasing productivity.

Flexible labour laws help improve and enhance industry by allowing companies to adapt quickly to changing market conditions in a dynamic and diverse economy like India, and to innovate and operate more efficiently and effectively. It can facilitate the hiring of skilled labourers for short-term projects or seasonal demands, reducing labour costs and increasing productivity. Therefore it’s crucial to strike a balance between flexibility and protecting workers’ rights as flexibility enhances the foreign investors’ capacity to gain more profit as per their suitable and appropriate working conditions and at the same time the protection and safeguarding of workers’ rights and interest is of high importance, so as to ensure of fear and sustainable working conditions.

Adoption of technological advancements and updates 

Adapting to new technological development under new labour law reforms highlights the significance of flexible labour laws to promote the companies in India. It involves addressing the changing nature of work and the impact of automation on jobs. Technology advancements are reshaping the labour market by creating both opportunities for the workers and challenges for the workers. Automation and technological advancement pose a challenge due to potential job losses. It is crucial to recognise that technology is more likely to transform jobs rather than eliminate them, which is increasing unemployment in a labour-intensive economy like India thereby, emphasising the need for upskilling and reskilling to adapt to evolving working requirements. The new labour codes aim to establish a positive relationship between employers’ interests and workers’ welfare by introducing reforms related to flexible hiring, grievance redressal mechanisms, and social security benefits. The employer seeks benefits through simplified compliance requirements and workforce flexibility. The introduction of fixed-term contracts and the promotion of collective bargaining under the new labour codes highlight efforts to align the labour code with the changing dynamics of the modern workplace. Adapting to technological advancements within the framework of the new labour laws involves enhancing workforce skills, embracing innovation, and ensuring that labour regulation remains responsive to the evolving demands of the digital economy.

The role of technology in enforcing labour laws has been a significant instrument throughout evolution. Digital platforms can streamline various processes, making compliance easier for companies and ensuring for workers. For example: 

  1. Reporting violations: Digital platforms can provide a user-friendly interface for workers to report labour law violations confidentiality and efficiently. 
  2. Tracking working hours: Automated systems like tracking working hours can accurately ensure compliance with regulations, legal requirements and fear compensation.
  3. Managing benefits: Digital management of social security benefits can reduce administrative burdens and ensure timely delivery of benefits to the workers. 

This development and adoption of technology can impact the society and its different sectors as follows: 

  1. Manufacturing sector: Robotics and automation can significantly reduce the need for manual labour costs, which can lead to a decline in the number of job positions but it also creates demand for skilled workers and labourers to manage these technologies. 
  2. Service sector: Digital transformation can enhance customer service and efficiency in creating new job rules in the IT sector and digital marketing. 
  3. Tech sector: Advancement in technology can create more job opportunities in software development, data analytics and cyber security and other tech-driven services. 

In order to improvise these technologies the government has taken various steps like Digital India initiative by the government of India in order to empower the digital society, Skill India Mission to upskill and reskill the workforce Trend, labour codes reforms and several other initiatives in order to meet the future trends to reshape the labour laws and the workplace like artificial intelligence and machine learning to transform various job functions and necessitate continuous learning and adaptation from workers, increase in the remote work and rise of gig economy and it’s work culture to protect freelance and contract workers. 

Therefore, the adoption of technological advancements in conjunction with flexible labour laws plays a dominant role in enhancing the operations of companies in India, attracting foreign direct investment, and ensuring economic growth.

Increase in dwarf companies 

The labour laws in operation were based on the size of the firms. This means that different requirements were postulated for firms with different employment capacities, and a negative incentive structure was put in place, which led to the firms wanting to remain small. For example, under the Industrial Disputes Act, 1947, a firm with more than hundred employees was duty-bound to receive permission from the government before retrenchment of employees, while a firm with less than hundred workers had no restriction on seeking such permission. Seeing that an additional layer of transaction cost was present for bigger firms, there was no incentive for expansion. Under the Factories Act, 1948 only firms that had more than 20 employees were covered. To circumvent this legislation, a lot of firms try to function with less than 20 employees. In the Indian economy, dwarf firms, which are small and older than 10 years, are the dominant players and also a hindrance to the expansion of job creation and productivity in the organised sector. These firms account for around 50% by number. However, their share in employment is only 14.1% and less than 8% in net value, as per the Economic Survey 2018-2019. Further, smaller firms cannot take advantage of economies of scale, which is the key to competitive markets such as exports.

To minimise the informal economy

Another factor in the smaller firm threshold is the difference between the formal and informal sectors. The producers generally have smaller firms, which leads to keeping the majority of the workforce in the informal sector. Seeing that the main aim of labour laws was to provide social security benefits, there is a wide difference in the bargaining powers of workers in the formal and informal sectors. Further, the workers employed in the gig and platforms were not covered within the ambit of the laws. 

The link between regulation growth, the informal sector and corruption, was the basis of the study by Loayza, Oviedo and Servén (2006), wherein it was found that high levels of regulation are linked with lower growth of the economy and the expansion of the informal sector. Further, strict labour regulation is positively associated with corruption and the growth of a shadow economy, while better law-enforcement shrinks the informal sector. A reduction in regulatory hindrances would increase the benefits for firms participating in the formal sector and lower the incentives to operate informally.

Expansion of businesses 

The main cause of the increase in the number of dwarf firms is that the benefits and exemptions provided to firms with a limited number of workers have made them remain small and hindered the process of expansion. Thus, an increase in threshold limits for exemptions would, without a doubt, lead to business expansion.

Higher employment and better adaptability to the changing economic environment

Stiff competition exists in the business world. Cutthroat competition is a normal situation for enterprises and thus, business owners are always on the lookout for new ways to stay competitive. With the changes in the economic environment, consumers are one of the most dynamic segments. This introduces another challenge for businesses, which is to adapt to the changing needs of consumers. Meeting customer needs is the key to retaining them and making the business succeed. When the economy goes through ups and downs,  businesses also need to adapt. As business owners, they need to identify the moments of opportunities and distress, and act accordingly. A poor economy sends businesses into a conservative phase, which requires a different set of adjustments. When a positive economy provides opportunities for growth, it would lead businesses to increase hiring, as they would be assured of flexibility in matters of termination in times of distress.

Avoidance of indolence among employees 

The employment scenario must be based on productivity and output, as it  would help in creating an environment of greater competitiveness between the employees to perform better, and would provide the companies with an opportunity to select workers who are most suitable to them. Under strict labour regulations, the process of termination may lead to increased litigation or demand for compensation, etc., which at times makes employers unwilling to let go of employees despite their dismal performance. However, a reform that makes the termination process easier would always keep the employees on their toes, as they would be aware that they could be easily replaced and would continue to be vigilant. This increased competitiveness and productivity would help the businesses grow.

Enabling multinational companies to enter the labour intensive production process of the country

The adverse impact of labour protection and the high cost of dispute resolution, among other factors, hinder the entry of multinationals into the labour intensive production process, as compared to countries like China and Philippines.

Preventing dependence on temporary labourers and increasing capital

It has been found that Indian firms have higher capital intensity than other countries with the same economic development level. The reason for this is strict labour regulations. Further, producers in pro-worker states replace labour with capital and firms prefer to use contractual or fixed term workers for reasons like reduced labour cost, reducing the bargaining power of permanent workers and increasing flexibility, as employers are free to hire and fire contract workers, etc.

What reforms would help bring in flexibility to the labour laws

Increased threshold limit for falling within the ambit of labour laws

Under the new labour codes, there has been recognition of the need to provide greater autonomy to businesses. The limits for firm size have been increased to provide an impetus for the expansion of businesses. In cases of retrenchment and layoffs, the limit has been increased from 100 to 300. Only firms with more than 300 workers are required to seek permission from the government prior to such an act. Further, in the case of the Factories Act, the number of workers required to fall within the definition of “factory” has been increased from 20 to 40. In the case of contract workers, establishments or contractors employing more than 50 workers beyond the earlier limit of 50, would be covered by the new law. This brings uniformity across the states and provides employers with operational independence and the opportunity to expand.

A single licence instead of multiple location specific licences

In order to make the process of hiring easier and simpler, instead of the prior provision requiring multiple location specific licences, the new laws provide a single licence to firms, to hire contract workers in different locations. 

Compliances prior to calling of a strike

Strike is a mass casual leave taken by employees on a working day. If an unlawful strike is called for, the employer has a right to lockout. A lawful strike checklist has been provided. Employees may not go on a strike –

  • Before 60 days from notice of strike 
  • Before 14 days from giving this notice of strike 
  • Before the end of the date of strike specified in notice 
  • During pendency of conciliation proceedings 
  • Seven days after end of conciliation proceedings 
  • During pendency of arbitration proceedings 
  • Sixty days after end of arbitration proceedings 
  • During any period of time wherein award or settlement are underway related to the matter

These restrictions would stop employees from going on strike arbitrarily, hindering the functioning of businesses.

Formalisation of workforce 

An informal economy is one wherein workers and enterprises are “not recognised or protected by legal and regulatory frameworks”. It was believed that with time, such an informal economy would decline, but that hasn’t been true. It is a major source of employment in developing nations. The job quality is far lower in these sectors and the workers are paid much lower than in the formal sector. They receive no health benefits, no child care benefits, sick leaves, etc. The key to economic development is converting the informal to formal. As per the Ease of Doing Business Index, labour laws are seen as the reason for informality. The two key reasons cited are- firstly, arduous labour laws lead to increased labour market rigidity, which reduces creation of new jobs or absorption of non- standard workers, like women and youth, in the workforce. Secondly, rigid labour laws create incentives for law evasion or informality, as seen in the case of dwarf companies. 

Digitisation of compliances 

One of the most pro-business changes includes the formation of common digital returns for Employees Provident Fund Organisation and Employees State Insurance Corporation, a reduction in the number of registers, a single return system to ease compliances, and a single window compliance portal called ‘Shram Suvidha Portal’, which makes compliances simpler. In New Zealand, embracing digital technology in matters of government services, administrative processes and reduction in bureaucracy has been a major factor in their rank in the Ease of Doing Business Index.

Special exemptions to MSMEs and start-ups

These categories of businesses have been granted an impetus to grow, by providing special exemptions to them in matters of self certified returns and disclosure, for the initial few years.

A recent demand to do away with ‘Angel Tax’ has been raised, which is essentially the tax levied on the difference between the issue price of the unlisted securities and their fair market value.

The reforms would also enable them to scale their innovative ventures. Here are some ways in which entrepreneurs can benefit from flexible laws:

  1. Flexibility in working hours: The new labour codes help workers to achieve greater flexibility, making it easier for them to navigate. This can help adapt to the unique needs and requirements of the labours. 
  2. Ease of compliance: this helps them to navigate the regulatory framework. Ultimately, saving time and resources, allowing them to focus on growing their business. 
  3. Incentives for training: the new labour codes help the entrepreneurs to incentivise the training programmes. This can help develop a skilled workforce thereby increasing quality of production. 
  4. Reduced bureaucracy: the new labour code tries and seeks to reduce bureaucracy and to streamline the [process of setting up and running a business. This can allow entrepreneurs to get their ventures off the ground and scale them quickly. 

Decriminalisation of non compliances

Non-compliance in the case of disclosures has been decriminalised and is now only met with monetary penalties to keep a check on enforcement.

Incentivize infant firms

These are the firms that are small when they are young but can grow to become large firms as they age and have higher productivity and higher value added in manufacturing. When incentives are provided to firms irrespective of their age, it does not push them to grow. For such firms, there would be no incentives if age were a criteria. The dwarf firms are the ones that are small and continue to remain small despite ageing, having low productivity and low value added in manufacturing. Thus, a shift from size-based incentives to age-based incentives would help in the economic growth of the country. Age-based incentives can be implemented to ensure the withdrawal of firms’ incentives after a fixed period of years, irrespective of their size. Once the small firms are aware that they would receive no benefits by continuing to remain small despite ageing, they will be pushed to grow, and this will in turn generate economic growth and employment.

Prioritise start ups 

Start-ups are the face of a new India. These new emerging businesses are at the forefront of innovation. They seek to develop technologies, products and services that have the potential to change the world. These businesses are based on new age ideas to solve new problems and thus, exemptions in various labour regulations would provide them with an impetus to grow. Providing digital set ups for registration, compliance licences, benefits in taxation, refund benefits on patent filing, and easy winding up procedures, along with providing them with financial and infrastructural aid, would help change the face of the Indian economy by creating unicorn businesses.

Improvement in inspection mechanism

In some cases the introduction of provisions for web-based inspections and third-party certification for notified classes of establishments would make the process of inspection swifter and reduce instances of corruption and red tape.

Establishing a negotiating council 

All the industries that have a registered trade union must set up a single negotiating union, which would be responsible for handling all the matters relating to industrial relations. Establishments with only one functioning registered trade union will recognise the trade union as a sole negotiating union of the employees, and for establishments with multiple trade unions, the union that is made up of 51% or more employees will be recognised as the sole negotiating union of the employees.

Reducing or abolishing minimum wage

This seeks to establish a laissez faire economy, wherein wages are decided as per the calibre and contract between the employer and the employee. It seeks to reduce the interference of the government in creating a welfare state and, as an alternative, suggests setting up a capitalist free market economy. It would help the businesses to pay money to the employees as per their talent and effort.

Promotion of innovation and collaboration

The government must support research and development, grants and incentives, which would help in creating an atmosphere where industries can rely on cutting edge technology and create forward thinking industries.

Providing a transparent tax system

Transparency and simplicity are two factors that develop confidence in investors, both Indian and international. We must focus on digital services, accessibility of information and clear tax guidelines to make it easier for industries to understand and comply with their obligations. This not only reduces the administrative burden but also fosters a culture of tax compliance, which indeed enhances the overall economic environment.

Providing investor friendly regulations

A country with investor friendly regulations and a strong and speedy legal framework, provides a secure environment for investors and businesses. Additionally, the protection of minority investors is a very important aspect of the legal system, along with ensuring fair treatment and transparency. This goes a long way in instilling confidence in investors and encouraging them to invest in the nation.

Dialogue with the trade unions 

Labour law reforms, especially those related to the simplification of business practices, have met with serious opposition from the trade unions, which consider these reforms an attempt to dilute their rights. The policymakers must find ways to make the reforms more palatable, which could include higher compensation and notice periods, in exchange for some flexibility in the labour laws approach, which is acceptable to all the parties- the employees, trade unions and employers. Small tweaks to the social security system and administration for employee welfare, increasing state freedom for business friendly regulations and engaging trade unions can build momentum for reforming India’s working sector.

Providing education and skill training to workers to improve their mobility 

The perspective of viewing workers as the weaker dependent class has to be changed in order to create a healthier power balance. An employee re-skill fund will provide laid off employees with opportunities to upskill themselves. These would include crediting the accounts of such laid off employees with wages worth 15 days of work. This would provide the employees with better prospects for future employment with increased pay and better opportunities.

Simplified business registrations

A nation where entrepreneurs can register new businesses in an easy, efficient and, if possible, digital manner, would help cut red tape and use technology to the fullest. This would provide a conducive and friendly environment for investors and businesses, both Indian and international.

How will reforms aimed at introducing flexibility benefit companies

Increase in foreign investment 

As the labour market of a host country becomes more flexible, foreign direct investment, as per various studies, may increase by as much as 18%. This effect would be particularly strong in transition economies and more significant for investments in the service sector. Nations with strict regulations and low quality institutions have been unable to take advantage of the full advantages offered by trade, liberalisation and globalisation. Where a nation offers an easy dispute resolution mechanism, flexible labour markets, easy licences, permits and authorisations, effective laws mandating the performance of contracts, etc., it provides a lucrative opportunity for foreign investors to invest in such a country. India aims to become a manufacturing hub with programmes like Start Up India, Make in India etc. To get maximum benefits out of these programmes, they must be accompanied with liberalisation in the labour law arena.

Short term labourers or contract labourers

One of the most difficult tasks after employing workers is termination. Numerous safeguards from termination have been provided to the workers. If the companies are allowed to employ short-term contract labourers or contract labourers in response to the fluctuations and changes occurring in the market economy, it would help them to cope with such fluctuations without having to increase their permanent workforce.

Easy adaptation to changing business needs

We indeed are functioning in an era of volatility, wherein globalised economies are more interdependent than ever before. Happenings in one part of the world impact economies all over. Flexible labour laws in such circumstances would enable the companies to modify their modus operandi, to adapt to dynamic business conditions. They can modify the size and nature of their workforce, working hours and terms of employment as per the changes in economic conditions and fluctuations in market demand.

Easy negotiation of wages 

Where there is no minimum wage set, it would help the businesses to pay each employee according to his talent and calibre. The wages would be determined as per the contract between the employer and the employees, not by legislation. The companies would be free to pay more to employees who bring in more output and less to employees who do not reach the desired level of output.

Easy termination of employment 

The company is reluctant to expand an employee’s additional workforce, as the termination process often creates problems for businesses due to the protectionist laws provided in our country. If easy termination procedures are provided, the companies would be more active in employing additional workers when the market conditions are suitable. This would help in expansion of businesses and the creation of jobs without the fear of facing litigation for unfair termination, etc, by the workers.

Increase in the competitiveness of the company 

Where the employment period and conditions, including wages, are determined not by legislation but by a contract between the employer and the employee, depending on the output produced by the employee, it would provide an impetus for the employees to work harder and create a positive competition within the company. This would indeed help the company grow and consequently, the national economy would grow. Further, inter-company competition would benefit both the businesses and the consumers.

Promote innovation and growth 

When companies are no longer restricted by labour laws, they will have the resources to explore new business, outlooks, and innovations. They would be braver to experiment with different work cultures, which may include remote working or working within flexible schedules. This practice would help companies engage skilled workers, foster creativity and boost employee morale, which would result in growth in the business’s performance. There are multiple links between labour, market institutions and growth. In the investment and entrepreneurship study by Hallward-Driemeier and Stewart (2004), it was found that a reduction in regulations improves the investment climate and, in turn, leads to increased productivity, higher investments and job creation, particularly for smaller firms. Strict and overambitious labour regulations often raise the labour cost and cause the firm to hire fewer workers and depend more on newer technologies. 

Increase in efficiency 

It is a proven fact that in business, efficiency is the only currency that works. Every consumer seeks to opt for the cheapest or most productive option. Companies with the most efficient ecosystem often end up being the preferred choice. Flexibility in labour laws would allow the establishments to efficiently allocate their funds, fix work schedules with flexible shifts for optimal workforce management, and employ part-time or temporary employees as the demand arises. This freedom to modify the overall workings of the company would minimise inefficiency and optimise labour costs. In Sweden, labour market flexibility was seen to be linked with higher labour productivity.

Impetus for business expansion 

When the labour laws are aimed at promoting  industries and businesses and are flexible in their approach, it would push the businesses to further expand their operations all over the country and in various different segments. Often, regulations and restrictions on entering different states or different avenues inhibit business expansion. Flexibility in labour laws in employment terms, would allow the country to scale the workforce when the specific need for expansion arises, thus allowing the companies to adapt to the local labour market conditions, and legal requirements. A 2004 European Commission study pointed out that reforms in the labour market have both direct and indirect productivity impacts. Directly, it decreases the cost of doing business and re-removal of barriers to entering new avenues, and indirectly, it leads to higher levels of allocative, productive, and dynamic efficiency.

Promote creation of jobs 

While businesses seek the greatest profit, they do recognise the role that skilled and talented employees play in the success of the business. When the labour laws are flexible in their approach, it would be easier for companies to employ more members into the workforce and expand their business. If the company is able to hire additional workers who may be temporary without having to face any legal difficulties, it would undoubtedly have an effect on employment rates and provide an impetus to economic growth. It has been found that over-ambitious labour regulations tend to raise the labour cost, which consequently curbs the incentives for firms to hire additional workers and they rather choose to adopt newer technologies, which reduces the allocation of labour to productive jobs in the formal economy.

Reduced unemployment

A restrictive labour law could create a situation wherein a company, while considering hiring a full-time employee, may be concerned that once he is hired, it would be difficult to fire him when such circumstances arise, and of the compensation which might be claimed by the worker, claiming unfair treatment, etc. Such a company would end up hiring a short-term contract employee. This system may benefit full-time employees who have secure positions, but would harm prospective permanent employees, who may be hired on a temporary basis, making their life unstable.

Improve employer-employee relationship 

Marx argues that the first historical act is the production of material life. Production is a social enterprise since it requires cooperation, the modern day enterprises also work on the same principle of cooperation. Businesses that are built on trust, loyalty, and cooperation between employers and workers are the ones that grow. When the labour laws provide  employers with the independence to hire and fire as per the requirements of the company, it could help create a more productive and positive work environment with improved job satisfaction and loyalty. The employer must keep an employee in service, not because he has to, but because that employee actually adds value to the company. Further, when a company provides the flexibility to accommodate individual employee needs, such as work-life balance, caregiving responsibility, or time constraints, a more cooperative environment is created, which would result in improved employee turnover and higher engagement and productivity.

How will reforms aimed at introducing flexibility help the employees

Flexible working hours Flexible working hours are allowed under the new labour codes, enabling companies to offer arrangements such as flexible work hours, compressed work weeks, and remote work options. These initiatives contribute to employee well-being.

Paid Time off: Paid time off policies include generous vacation, sick leave, and personal days. These provisions allow employees to take time off for personal well-being and proper rest.

Wellness program: The company aims to provide wellness programs such as a stress management programme, fitness classes and counselling services that can help employees maintain their mental and physical health well-being. This holistic approach to the well-being of employees can boost both morale and productivity. 

Child care assistance:  Child care assistance, such as onsite facilities or subsidies for external child care services, significantly eases the burden on working parents.

Proper mentorship, guidance and training: Companies providing mentorship and training opportunities and programs can help employees develop their skills and advance their careers. This investment in employee growth demonstrates the company’s commitment to their long-term success and work-life balance. 

TCS (Tata Consultancy Services), a leading company in India, has implemented several initiatives to promote work-life balance among its employees. Some of their key programs include:

  1. Flexible work hours for employees as well as available facilities for work from home that is flexible work. 
  2. Generous leave policies, including paid time off for new parents. 
  3. Onsite child care assistance and facilities.
  4. Wellness programs such as yoga classes and stress management programs and workshops.
  5. Career development opportunities through training and mentorship. 

As a result of these initiatives, TCS has seen improved employee satisfaction, reduced attrition rates and enhanced productivity. The company’s commitment to work-life balance has also contributed to its reputation as an employer of choice in the industry. 

Certain data and studies support the impact of TCS:

  1. Improved employee satisfaction: A study by Swapnil Deoghade and Dr. Sapna Ghutke found that TCS employees reported a high level of satisfaction with their work-life balance, thereby citing the company’s flexible work hours and generous leave policies as key factors.. 
  2. Reduced attrition rates: TCS has reported a certain reduction in attrition rates, which can be attributed to its focus on work-life balance and employee satisfaction. For example: in the fiscal year 2010-13, the rate of attrition was 10.6%. The attrition rate is the rate that defines the pace of employee turnover and is also known as a metric rate, it is generally expressed in terms of percentage. This rate helps the HR teams to evaluate retention efforts and understand organisational dynamics.

Rajasthan – a case study on flexible labour laws

The Economic Survey of 2018-2019 discussed studies that found that labour intensive industries in states that have moved towards more flexible labour markets, for example, Rajasthan or Uttar Pradesh, are 25.4% more productive than their counterparts, which continue to remain rigid in their labour laws. The state of Rajasthan implemented labour reforms in 2014, which include the following-

Industrial Disputes Act, 1947

  1. In order to form any union, membership increased from 15% to  30% of the total workforce.
  2. There was no requirement of permission by the government for establishments employing up to 300 workers (earlier, 100 workers was the limit) for retrenchment, layoffs, or shutting down units.
  3. Any objection related to discharge or termination must be raised by the worker within three years. No limitation period was set earlier.

Factories Act, 1948 

  1. The applicability threshold limit was increased from 10 or more workers to 20 or more workers in industries using power.
  2. The applicability threshold limit increased from 20 or more workers to 40 or more workers in industries not using power.
  3. Complaints for violation of the Act against the employer cannot be taken into cognisance by the court without prior state government permission.

The Contract Labour (Regulation and Abolition) Act, 1970

  1. Under this Act, the applicability threshold limit increased from 20 or more workers to 50 or more workers, on contract.

Apprentices Act, 1961

  1. This Act fixed the number of apprentice related seats in industries. 
  2. Stipend for apprentices would not be less than the minimum wage
  3. To encourage upskilling, the government would bear a part of the cost of apprentice training.

Results

The labour reforms in Rajasthan had severe notable impacts on the state’s industrial landscape. It led to increased investment and industrial growth. There were relaxing labour laws in Rajasthan, thereby attracting more investors. The greater operational flexibility in the labour law and the increased employment opportunities in Rajasthan have increased the ability to adjust workforce size in accordance with the market conditions. On an average, it led to the increase in the production gains, which has significantly contributed towards the ability of the forms to optimise their workforce and operations without hampering the restrictive regulations.

Before 2014, the average number of firms with hundred employees or more was the same in Rajasthan and the rest of India. However, after the change in the law, we have seen a significant increase in firms employing more than 100 workers in Rajasthan, which is substantially above the national average. After the reforms, the percentage of factories employing more than 100 workers in Rajasthan jumped from 3.6% to 9.33%, while in the rest of the nation it increased from 4.56% to 5.52%. The total output jumped from 3.1% to 12% in rajasthan as compared to the increase from 4.8% to 5.7% in the rest of India. The number of workers per factory in rajasthan jumped from -8.8% to 4.17%, while in the rest of the country is increased from 2.1% to 2.6%. The CAGR (Compound Annual Growth Rate) for Rajasthan has increased manifold, as compared to the rest of India. Clearly, each of these outcomes was positively impacted by the amendments in labour laws and the numbers are sufficient to acknowledge the success story of Rajasthan.

European perspective

The European Commission’s flexibility approach aims to enhance flexibility for both workers and employers, enabling workers to adjust their working lives and hours to their preferences while providing a conducive environment for business growth. 

The labour market in Europe faces  severe challenges, including globalisation, technological advancement, demographic ships and economic fluctuations. The labour laws in accordance with these challenges can allow Swift to adapt to various changes while ensuring that workers will secure employment and career prospects.

The approach behind implementing this flexibility in Europe was to settle reliable contractual arrangements that involved comprehensive learning strategies to promote the consistency in skill development and education among the employees and the workers. It has also been effective in the implementation of active labour market policies such as assistance in improving employment or self-employment prospects. These policies help the unemployed workers to find jobs and fill the gap. This approach has helped in developing the sicilia security system for the workers during periods of unemployment, illness and career transition. This led to an active working life, thereby enhancing social security, job security and greater opportunities for all. 

In the retail sector, the Union of Shop, Distributive, and Allied Workers (USDAW) has facilitated collective bargaining, resulting in improved minimum wages, working conditions, and benefits for its members.

The flexibility in the labour laws denotes a notable framework while relating it to the companies as well as the workers. The concept of ‘kurzarbeit’ in Germany, also known as short-term work, is a notable and landmark example of flexibility in labour laws. This policy allows companies to reduce the working hours of the workers and employees during economic downturns, rather than laying them off, thereby preserving jobs and maintaining economic and market stability.

Case laws

In the UK, the combination of legal principles established through indirect sex discrimination case law with the procedural emphasis of the Right to Request Flexible Working has strengthened women’s ability to successfully request flexible working in court, in part because employers are aware that this is the prevailing interpretation of the law. Court cases have successfully challenged employers’ blanket refusals to consider alternative work arrangements or seriously consider the feasibility of a flexible working request. In the UK, flexible working disputes annually have comprised at most 0.2% of all tribunal claims since 2003, helping to clarify the boundaries of flexible working rights and sending strong signals to employers about their obligations.

The UK’s right to request flexible working hours has been established in various court cases that have clarified the legal principles and employer obligations.

Zerehannes vs. Asda Stores Ltd. (2018)

This case signifies the importance of considering the alternative work arrangements and the feasible working request. The court ruled that an employer’s blanket refusal to consider flexible working requests was discriminatory and in violation of the right to request flexible working hours. 

Facts

Mr. Zerehannes, the claimant applied for the amendment for his claim against asda to add a complaint under section 80H of the Employment  Rights Act 1996 regarding his appeal for flexible working hours. The amendment application was refused by the Employment Judge, Camp, on 28 January the date of the preliminary hearing in Nottingham. The judge also made a deposit order against Mr. Zerehannes in this case, which was separate from the larger equal pay claims brought by predominantly female asda retail employees of the company. The written reason provided details on the judge’s rationale for refusing the amendment and imposing the deposit order..  

Issues 

Whether la Zerehannes faced discrimination and unfair treatment by her employer, Asda.  the case examined these specifically:

  1. The allegations of the discriminatory treatment under the Equality Act 2010.
  2. Claims of unfair dismissal under the Employment Rights Act 1996.

Judgement

The tribunal held in favour of Zerehannes, determining that she was subjected to unfair dismissal and discrimination of Asda. The applicant was awarded compensation for these violations. 

Thomas vs. King’s House School Trust (Richmond) Ltd (2019)

This case highlights the need for employers to engage in meaningful considerations and consultation with employees regarding flexible working requests for the employer’s business. 

Facts

The facts of the case involved an employment dispute where Mr. Thomas, a teacher, brought acclaim against his employer, King House School Trust Ltd. Thomas contended that he had been unfairly dismissed and was discriminated against on the grounds of disability. The facts which evolve now are whether the school had made reasonable modifications to facilitate his disability and if the discharge process is handled in a fair and lawful manner. 

Issues 

  1. Whether the school discriminated against Mr. Thomas based on his disability’
  2. Whether reasonable adjustments were made to facilitate Mr. Thomas disability. 
  3. Whether Mr. Thomas was unfairly dismissed from the school. 

Judgement

It was held by the tribunal in favour of Mr. Thomas, finding that he has been unfairly dismissed and ill-treated against due to his disability. The school failed to make reasonable adjustments for his condition. 

Dankyi vs. St Margaret’s School (2017)  

This case highlights the need for employers to provide a valid reason for refusing flexible working requests. The court stated that the employee’s request was based on an incorrect assumption and was therefore invalid.  

Facts

A teacher named Mr. Dankyi, was a claimant claiming that he was unfairly dismissed and subjected to the racial discrimination by the school St. Margaret’s school. The case centres around the situation which led to the discrimination and whether the school had treated him less favourably because of his race. 

Issues

  1. Whether the claimant was unfairly dismissed. 
  2. Whether Mr. Dankyi was subjected to racial discrimination by the school.

Judgement

The tribunal held in favour of Mr. Dankyi the teacher of the school, finding that he was both discriminated against and subjected to racial discrimination by the school. 

These case laws  illustrate how flexible labour laws can impact both workers and companies, with the potential to create more job opportunities and a conducive environment for growth, while also highlighting the need for a balanced approach that considers the interests of both parties.

The impact of flexible labour laws on gender and minority rights

Gender and minority rights are one of the most crucial rights for workers. These rights give basic rights to the workers, flexibility in labour law can assist the workers (male and female) and can also help the companies.

But, the flexibility in these kinds of laws has effective and bleak impacts on both the labourers  and the company it will help them to embrace the market conditions and will give more job opportunities to the people whereas we can’t also deny the fact that it will also harm the vulnerable groups if these things are not taken seriously.

However, we can see that the New Labour Codes which provide aid to the workers are aiming to maintain a balance by accommodating flexibility while still protecting the interest of workers. Here we can look at this example which can give a clear view of these rights that, the Occupational Safety, Health and Working Conditions Code 2020 has amenities for equal opportunities and forbidding discrimination.

Flexibility can benefit workers by allowing arrangements such as casual/temporary jobs, remote work, and flexible hours.

In summary, flexibility in labour laws has both positive and negative implications for gender and minority rights. The dignity and equality of all the people who are working is very crucial, so we should conscientiously execute and provide strong safeguards so that it can create more opportunities for the people rather than causing any kind of problems for them.

Disadvantages of flexibility in labour laws

  1. Excessive control in the hands of the employer, wherein he would be free to exercise his option of firing workers if they did not give in to his demands, which may at times be unreasonable, would lead to people living in constant fear of losing their jobs.
  2. Arbitrary exercise of powers by the employers, which leads to exploitation of the workers. For example, there could be dangerous and dirty workplace conditions wherein workers are expected to perform for long shifts for little wages, etc.
  3. Labour regulations can generate long-term economic gains for businesses that adopt a high productivity route to competitiveness, which means that they prevent other firms from competing against them on the basis of poor working conditions. The regulatory measures thereby channel competition away from the unacceptable treatment of workers into other sources of competitive advantage, such as technological and managerial innovation, etc.
  4. A growing body of empirical evidence suggests that labour regulation does not necessarily lead to weaker labour market outcomes and that the cost and benefits of regulations change over time. Regulations cannot be considered a hindrance to the flexible working of labour market. It differs from country to country. In order to understand employment performance, a whole range of variables have to be considered in addition to the labour laws.
  5. Flexibility in labour law can lead to preferentialism, with some workers getting little benefits. This can create inconsistency within the workforce. In order to mitigate this issue of preferentialism coming from the labour laws, the companies must adhere to clear guidelines for benefits of the employment terms. Along with this, regular audits and transparency in hiring and promotion process can help monitor out the compliance and prevent discrimination. Additionally, training management and HR personnels on non- discrimination and fair labour practices can further ensure that the employees receive equal opportunities and benefits. 
  6. Legal compliance becomes more complex when supervising a flexible workforce under evolving labour laws. Ensuring adherence to regulations and avoiding legal disputes becomes challenging with increased flexibility. In order to manage legal compliance with a flexible workforce, companies should invest in comprehensive compliance training and must utilise the specially established legal structure to track regulations. Along with this, it must also regularly consult the legal experts to stay updated on evolving labour laws. Also implementing robust internal policies and procedures for monitoring compliance and conducting periodic audits can help prevent legal disputes and ensure adherence to legal regulations.
  7. Regarding work-life balance, excessive flexibility without proper regulation can blur the boundaries between work and personal life, potentially leading to burnout. In order to address the impact of excessive flexibility on work-life balance. In order to overcome this challenge of excessive flexibility of work-life balance, companies should implement clear guidelines and policies that define working hours and ensure employees have designated time off. Therefore, encouraging a culture of respecting and maintaining personal time, providing resources for mental health and promoting the idea of regular breaks can help in maintaining healthy boundaries between work and personal life. 
  8. In a lot of developing countries, only a small share of the workforce is employed in the formal sector. So, regulation, rather than the formalisation of the labour market, would constitute a key policy priority.

Conclusion

India is a labour surplus economy. Due to this, it is expected to be protective of its labour force. However, if this is the sole motive kept in mind while legislating, it would create difficulties for the operation and growth of businesses, which would in turn lead to limited job opportunities and ultimately badly affect both the businesses and the workers. However, as labour laws are to be reformed, other laws like property laws and security regulations must be strengthened through effective institutions. A study conducted by Bardhan resulted in the conclusion that the history of underdevelopment suggests that a major stumbling block to beneficial institutional change in poor countries, lies in the distributive conflicts and the asymmetries in bargaining power among social groups. Thus, labour regulations must be seen as an institution that promotes efficiency in the market by promoting greater equality and social cohesion, along with individual and collective freedom.

The new labour laws indeed seem to provide solutions for the current economic demand of India. It includes a greater number of firms and employees under its ambit and simultaneously makes the requirement of legal sanctions, lighter and simpler. The compliance costs of firms are also reduced. All these reforms would definitely boost India’s position in the Ease of Doing Business Index and increase its competitiveness in the global sphere. However, the government and businesses must remember that labour market reforms will only succeed when they are accompanied by improvements in social protection mechanisms and cushion adjustment costs for workers.

Frequently Asked Questions (FAQs)

Which country ranks the highest in the ease of doing business rankings and why?

According to the 2020 report, New Zealand retained its first position as the country with the most business friendly regulation. The success of the country is driven by a combination of factors which create a conducive environment for entrepreneurship, innovation and economic growth. The following other factors have helped the nation achieve this ranking-

  1. Simplified business regulations, including online business registration, which cuts the red tape and embraces technology.
  2. Efficient construction permits with clear guidelines, efficient communication and digital platforms, play a pivotal role in fast tracking this process.
  3. Investor friendly regulations, such as the protection of minority investors, is a critical aspect of the nation’s legal system, which ensures fair treatment and transparency.

What is the ILO’s WISE Program? 

The Work Improvements in Small Enterprises (WISE) Program, seeks to improve working conditions in MSEs by educating  owners and managers, about the link between improved working conditions and higher productivity. The program is based on the recognition that one of the major problems with occupational health and safety, is that most workers and employers lack understanding of the importance of improving health and safety at work. WISE focuses on simple low-cost solutions to improve job quality. It relies largely upon the voluntary participation of employers and their willingness to implement higher safety standards.

What is the Make in India project?

The Make in India initiative was launched in 2014, as a part of a wider nation building programme. It seeks to transform India into a global design and manufacturing hub. It was a call to action, for India’s citizens, business leaders and potential international investors. It represented a comprehensive and unprecedented overhaul of outdated processes and policies and a changed governmental mindset, a shift from issuing authorities to business partners and a shift from minimum government to maximum governance. Through this scheme, the government intended to revive the lagging manufacturing sector and initiate the growth of the economy, along with encouraging businesses from abroad to invest in India and also set up their manufacturing units in India, by improving the country’s Ease of Doing Business Index. It focuses on 25 sectors, which include leather and footwear, aerospace and defence, new and renewable energy, medical, value, travel, and legal services, communication services, financial services etc. For the first time, the railways, defence, and insurance sector have been opened up for more FDI. The maximum limit for FDI in the defence sector through automatic route, has been raised from 49% to 74% in construction and for specified real infrastructure projects, FDI has been permitted up to the limit of 100%. Permits and licences required to start a business have also been relaxed, among other reforms.

What is the Startup India project?

Under the Startup India scheme, eligible companies can gain recognition as start-ups, by the Department for Promotion of Industry and Internal Trade,  and consequently be entitled to access a host of tax benefits, easier compliances and IPR fast tracking, among other benefits. Under this scheme, it was intended to develop over 75 start-ups and support hubs in the country. The aim of this project is to discard some of the restrictive policies, like licence raj, land permissions, foreign investment proposals, and environmental clearances, and is based primarily on three pillars- providing funding support and incentives to various start-ups in the country; providing industries with academia, partnership and incubation; and simplification and handholding. The Government of India, in line with the project, also launched the Pradhan Mantri Mudra Yojana, which aims to provide financial support to entrepreneurs hailing from low socio-economic backgrounds via low interest bank loans.

What are the constitutional provisions that are connected to the subject of labour laws?

Labour is a concurrent subject under the Indian Constitution, which means that it can be legislated on, both by the federal and state governments. The following articles provide a link between the Constitution and the labour laws.

  • Article 19(1)(c) provides that all citizens shall have a right to form associations and unions. This right extends both to the employees working in an establishment, as well as the employers. 
  • Article 23 prohibits and makes punishable, the practice of trafficking, beggars (practice of forcing people to work without paying them for the same) and any other form of forced labour.
  • Article 24 prohibits the employment of children below the age of 14 in any factory, mine or hazardous employment.
  • Article 39 makes the state duty-bound to direct its policies towards securing for men and women equally the right to adequate means of livelihood, along with equal pay for equal work. It also provides that the state must monitor the health of the workers, along with ensuring that children of tender age are not abused and no person is forced due to economic deprivation, to enter employment unsuitable in view of their age or strength.
  • Article 42 directs the state to make provisions for securing just and humane conditions of work.
  • Article 43 directs the state to secure, by legislation or other means, a living wage, humane conditions of work, providing for a decent standard of living, and full enjoyment of social and cultural opportunities.
  • Article 43-A directs the state to take steps, by legislation or other means, to ensure that the workers are able to participate in the management of establishments or other industries.

How can the balance be maintained between flexibility and protecting labour laws through government policies?

Achieving a harmonious balance between flexibility and protection within labour laws requires thoughtful government policies. These regulations should simultaneously safeguard workers’ rights and foster business growth. Here are some key considerations:

  1. Fair wages: Policies must ensure that workers receive fair compensation for their labour. This includes addressing minimum wage standards and promoting equitable pay practices.
  2. Reasonable working hours: Striking the right balance between productivity and employee well-being involves setting limits on working hours. Policies should prevent excessive workloads while allowing companies to operate efficiently.
  3. Social security provisions: Workers need safety nets to protect them from exploitation. Policies should establish provisions for health insurance, retirement benefits, and other forms of social security.
  4. Adaptability for companies: Recognizing the dynamic nature of markets, policies should allow companies to adapt swiftly. Flexibility enables businesses to respond to changing demands, technological advancements, and economic shifts.
  5. Comprehensive approach: The government’s role extends beyond protecting workers; it also encompasses supporting employers. Policies should address the needs of both parties, fostering a healthy and sustainable work environment.

References

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