Govt drops plan for easier retrenchment, moots fixed-term employment

The government had earlier proposed allowing factories with up to 300 workers to retrench, lay off, or shut shop without seeking its nod in the Industrial Relations Bill proposed in 2015

The labour and employment ministry, moving swiftly on its reforms agenda, has sent the contentious Code on Industrial Relations Bill, 2019, for the approval of the Union Cabinet.

However, the draft Bill doesn’t include an earlier proposal to ease retrenchment norms for big-sized companies as the ministry has taken a cautious stance due to strong opposition from central trade unions, including the RSS-affiliated Bharatiya Mazdoor Sangh (BMS).

With some states having relaxed retrenchment norms, through an amendment in the Industrial Disputes Act, 1947, the Centre has decided to provide safeguards to these changes. However, there will be no change in the central law in this regard.

“The ministry hasn’t proposed an increase in the threshold to allow more firms to retrench workers or shut shop without seeking the government’s approval. However, there is a proposal to safeguard the changes made by various state governments that have made such a move in their pieces of legislation,” said a senior government official.

Further, in a bid to give relief to industry, the ministry has proposed making fixed-term employment norms part of the new Code, allowing companies across the country to hire workers on contracts with a pre-determined tenure.

In its previous tenure, the National Democratic Alliance (NDA) government tried to provide flexibility to industry by introducing fixed-term employment for all types of establishments through a notification in 2017.

Under the rules, companies within the ambit of the central government were allowed to hire workers on a fixed tenure if they provided all social security benefits given to permanent workers in the same establishment.

However, since labour is a subject on the Concurrent List of the Constitution, state governments were required to issue notifications for those to come into effect. To date, no state government has done it, though the BJP ruled in 22 states when the central norms came into effect.

“By introducing fixed-term employment in the Code on the Industrial Relations Bill, the concept of fixed-term employment will be made effective across the country without the Centre’s need to nudge the state governments,” the government official said.

The official added fixed-term workers would be better than hiring workers through contractors for companies because on the one hand workers will be given all benefits on a par with permanent workers, and, on the other hand, companies will save cost and time by hiring workers through contractors.

At the Central level, the government had proposed allowing factories with up to 300 workers to retrench, lay off, or shut shop without seeking the government’s nod in the Industrial Relations Bill proposed in 2015. At present, factories with up to 100 workers can do so. 

However, now that the Central government has dropped the proposal, the proposed code will run into a contradiction with the labour law reforms that as many as nine state governments have enacted, with the approval of the Central government. 

Over the past few years, Assam, Jharkhand, Uttar Pradesh, Haryana, Andhra Pradesh, Gujarat, and Maharashtra have allowed factories with 300 workers to retrench without official sanction.

Both the Centre and states can have their own laws on labour. States can bring in their amendments with a nod from the Centre but if the Centre amends the model Act itself, it will take precedence over the others’.

The NDA government has planned to merge 44 labour laws into four codes. Of these, two Codes — on wages and industrial safety — have been tabled in Parliament.

Treading with caution

Jul 2015

The labour ministry proposes the Code on Industrial Relations Bill, mooting relaxed retrenchment norms for industries

Feb 2018

The Bill circulated for inter-ministerial consultation, after much delay due to protest from trade unions

Nov 2018

The Bill sent to the Cabinet Secretariat for consideration of the Union Cabinet

June-July 2019

The ministry re-drafts the Code; includes fixed-term employment as part of new law