From UPSC perspective, the following things are important :
Prelims level : Labour codes
Mains level : Not Much
Addressing to the National Labour Conference, Prime Minister said that the Centre had taken initiatives to abolish laws from “the period of slavery” that reflected a slavery mentality through the Labour Codes.
New Labour Codes
The four codes likely to be implemented in FY23 are:
- Code on Wages
- Industrial Relations Code
- Social Security Code, and
- Occupational Safety, Health and Working Conditions Code
Objectives of the Labour Code
- The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
- The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
- The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.
What is the current status of the codes?
- The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
- With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.
How many labour laws do Indian states have?
- The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
- India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
- The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.
What are the major reforms in these codes?
- Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
- Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
- Four days work: There could also be a permissible four-day work week of 12 hours per day.
How will it affect ease of doing business?
- Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
- Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
- Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
- Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.