Labour panel recommends hire & fire

NEW DELHI: The second National Commission on Labour and the group of ministers (GoM) on labour seem to speak in the same voice.
The former, which submitted its 1,470-odd page report to the Prime Minister Atal Behari Vajpayee on Saturday (a copy of which is now available with ET) has given its thumbs up signal to contract labour, “hire and fire� policy and closure of units, subject to safeguards. This endorsement by the second National Commission on Labour, albeit qualified, of proposed labour reforms removes a major hurdle in the path of reform.
For contract labour, the safeguards recommended include putting in place a social security net, including unemployment insurance and the provision for medical facilities and the institution of mandatory system of two contracts – one an individual contract and the other, a collective contract with the workers’ union.
In the case of easy closure of units, the committee has recommended that instead of raising the threshold for exemption from government clearances from 100 to 1,000 employees in one go, as has been proposed so far, the limit should be raised from 100 to 300 employees.
The committee has additionally recommended retrenchment (VRS) should be accompanied by adequate compensation. This compensation would be different for sick and running companies. In case of sick ones (defined as erosion of capital for three years or filing for liquidation), the retrenchment compensation should be 30 days’ wages per year of service.
For charitable institutions and non-profit organisation, retrenchment compensation should be 45 days’ wages per year of service. For running companies, retrenchment compensation would be 60 days’ wages for every year of service. For closure, compensation for closure would be an additional 45 days wages for every completed year of service.
The Commission has also provided that the worker’s dues should be paid prior to the closure of the unit, instead of waiting for the liquidators to liquidate the company. Workers would also be entitled to two month’s notice, or notice pay in lieu of notice, in case of retrenchment.
The rationale for prescribing 60 days’ wages is that retrenchment compensation for profit making units stems from the logic that this payment should be slightly higher than the lay off compensation, which is set at 50% of the wages earned even at present. In case of layoff exceeding one month, units employing more than 300 employees would also be required to take a post facto Central government approval.
The committee has also recommended that employers should consider outsourcing jobs from retrenched workers or their cooperatives, giving the trade unions a chance to run a unit before it is closed down, underwriting facilities for medical treatment, education of children, etc. The committee also recommends provisions for third party or judicial review without compromising the management’s right to effect economic efficiency. “In these circumstances (where governments refuse quick permission for closures and where employers resort to subterfuges to close units), the commission came to the conclusion that the best, and the more honest and equitable course would be to allow closure, provide for adequate compensation to workers, and in the event of an appeal, leave it to the labour relations commissions to find ways of redressal –through arbitration or adjudication,� the commission states.
The commission has also defined terms like the organised sector, workmen, small sector and appropriate government. It has for the first time, delinked the definition of small sector from investments. Under the commission’s definition, a small unit is defined as one with less than 20 employees. The world over, small units are defined on the basis of number of employees (in the US its is 500 employees) and the industry ministry has been recommending this change for a long time as small units have remained stunted because of the existing definition in terms of the capital invested.
The committee has defined the organised sector to mean an establishment with over 20 employees. All workmen (to be called henceforth worker for purposes of gender neutrality) in these establishment would be covered by the labour laws. These laws would entitle him right to work of his choice, right against discrimination, prohibition of child labour, access to just and humane conditions of work, right to social security, protection of wages including the right to guaranteed wages, right to redressal of grievances, right to organise and form trade unions and right to collective bargaining and the right to participate in management.
The committee has also mooted the idea of removing highly paid employees such as airline pilots from the definition of workmen. Alternatively, the government could fix a cut off of Rs 25,000 per month to define workmen, who would be eligible for protection under the labour laws.
The committee has also recommended that supervisory personnel, irrespective of wages be taken out of the purview of labour laws and be clubbed with managers and administrators. The interest of such employees would be taken care of under the adjudication and arbitration route. However, the social security measures would be available to all employees.
The committee has recommended the retention of labour under the concurrent list. It has recommended a single labour law called the labour management relations law or the law on labour management relations, comprising the Industrial Disputes Act, 1947, The Trade Unions Act 1926 and the Industrial Employment (Standing Orders) Act, 1946. It has also recommended the repeal of the Sales Promotion Employees (Conditions of Service) Act, 1976 and other specific acts relation to wage fixation.
Considering that all commercial and industrial activities are closely connected to government functioning, the committee has come down heavily on the number of holidays enjoyed by government employees. It has recommended three national holidays — Independence Day, Republic Day and Gandhi Jayanthi. Two more could be added by the states tailored to meet local requirements, it states, while restricted holidays be limited to 10 and government holidays be delinked from holidays under the Negotiable Instruments Act. In case of establishments opting for five day weeks, the committee has recommended that if a holiday were to occur during the week, Saturday should be a working day.
The committee has recommended the retention of a maximum nine-hour work day and a 48-hour work week. But within this broad parameter, it has recommended flexibility and compensation for overtime.