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The government is set to introduce fixed-term jobs, moving away from the binary classification of permanent and contract employment, without changing the existing labour laws.
Garmenting business within textiles industry would be the first to have fixed-term workers. The Centre would allow firms to bypass some of the rules that don’t allow firms to engage workers for short periods, especially in the manufacturing sector.
“We have been advised by the labour ministry that there will be no need to bring in any amendments to any of the legislations for this new category of workers,” Rashmi Verma, textiles secretary, told Business Standard.
Labour secretary Shankar Agarwal too confirmed that his ministry expects to implement this reform through one or more executive notifications.
While the government had initially considered allowing all textile firms to have fixed-term employment, it was decided to make labour-intensive garment manufacturing or apparel sector as a pilot case before spreading it to other sectors.
While the textile ministry hopes to generate huge additional employment through fixed-term jobs, the trade unions are up in arms against the decision. Members of the unions said they would examine if such changes can be made only through notifications. Brijesh Upadhyay, general secretary of the RSS-affiliated Bharatiya Mazdoor Sangh said allowing fixed-term workers is a “contingency plan by the government without examining the long-term implication, which should not go through”.
Difficulties in hiring short-term workers has been one of the reasons why employment in the organised sector has remained flat at less than 8 per cent of total workforce in India.
“It is a welcome move,” said Amitabh Kundu, former professor at the Centre for the Study of Regional Development at the Jawaharlal Nehru University. “It has the potential to ramp up employment significantly, since it takes care of the social security needs of the employees without depending on the employers”.
The ministry expects the move would help in creating 1.75 lakh additional jobs in the garment sector alone in the next three years, said Verma.
Fixed-term employment is fairly common in European countries. Unlike contract employees, those in such jobs get the same social security benefits same as permanent employees. But unlike the latter, fixed-term employees get the job for a limited duration, ranging from a few months to a couple of years. “Considering the seasonal nature of the industry, fixed-term employment will be introduced for the garment sector. A fixed-term workman will be considered at par with permanent workman in terms of working hours, wages, allowances and other statutory dues”, notes a statement issued by the ministry after the Cabinet cleared the proposal.
A permanent worker in the organised sector like garments contributes 12 per cent of her monthly pay to the Employees’ Provident Fund with a matching contribution by the employer. For her counterpart, i.e. a fixed term employee, 8.33 per cent of the employer contribution will be payable by the employer, while the rest will be a subsidy from the textile ministry. Even the employer contribution meant for investment in the Employee Pension Scheme will be provided by the government, under a Budget scheme announced this year. The state will carry the load for all new employees for three years.
For fixed-term employees who will join at a salary of less than Rs 15,000 per month, the government has also waived the rule for mandatory contribution to the EPF. Since their take-home salary is small, this will “leave more money in the hands of the workers and also promote employment in the formal sector”, the ministry release noted.
Upadhyay also criticised this move. “Making the EPF contribution optional for employees with income of less than Rs 15,000 per month hits at their social security, which we do not support,” he said. BMS plans to hold a national convention in July to demand a rollback of this reform.
Supporting him, Gurudas Dasgupta, general secretary of CPI-affiliated All India Trade Union Congress said fixed-term employment is an attempt to regularise the phenomena of contract employment. “We oppose them as they weaken the ability of the workers to demand their rights”, he argued.
Fixed-term employees will not only be eligible for EPF but also for leave and other allowances that a permanent employee gets. The contribution will be financed from the Rs 6,000-crore government support for the sector that has been approved by the Cabinet. For instance, to make such recruitment more interesting, the government has doubled the number of hours an employee can work overtime in the industry to 8 hours per week. Though this is in line with ILO norms, current regulations in India limit overtime to four hours a week. “This shall lead to increased earnings for the workers,” the textile ministry release noted. The fixed-term workers will draw overtime at the same rate as permanent workers. The increase in overtime limits will apply to work in all segments of the textile industry, not just garments.
Kundu said the government should be encouraged to apply the social security benefits for a full year for the fixed-term employees, instead of just that period of the year when the worker is employed. He said it will tie in with the annual social security measures the government has introduced like the Atal Pension Yojana and the Prime Minister Jeevan Jyoti Yojana, to allow employees to seek such fixed-term employment opportunities, creating a rich supply of skilled labour for industry.
But Santosh Mehrotra, former director general of the government-run Institute of Applied Manpower Research said he was against a subsidy-led plan to expand employment. “There is scope to play favourites with sectors and that worries me”.
The latest annual Economic Survey released by the finance ministry estimates that contract workers now make for 25 per cent of the total workers employed in the manufacturing sector. According to the survey, “India’s apparel sector is dominated by informal firms. Approximately 2 million such establishments employ about 3.3 million workers (average size 1.5 workers), dwarfing the formal apparel sector’s 2,800 firms which employ 330,000 workers (average size 118 workers)”.
