Ministry says Labour Codes aimed at expanding labour welfare measures not only to existing beneficiaries but also to over 40 more workers in unorganized sector
Posted On: 28 SEP 2020 3:06PM by PIB Delhi
The Ministry of Labour and Employment has today allayed all fears and doubts about historical game changer reforms bills known as Labour Codes passed by Parliament a few days ago. Union Labour Ministry has stated that the criticisms being aired are misfounded. In a pointed clarification on raising employee limit of smaller Units for closure to 300, the Ministry has underlined that Department related Parliamentary Standing Committee had also recommended increase in threshold from 100 workers to 300 workers for seeking prior permission for retrenchment, lay-off and closure.
It is only the aspect of prior permission of the appropriate Government which has been removed and other benefits and workers’ rights have been kept intact. The workers’ rights such as notice before retrenchment, compensation at the rate of 15 days wages per completed year of service and pay in lieu of notice period has not been compromised. Further, the IR Code envisages an additional monetary benefit equivalent to 15 days of wages under newly created Reskilling Fund. There has been no empirical evidence to suggest that higher threshold promotes hire and fire.
The Ministry also said that the Economic Survey, 2019 has analyzed about the pain of dwarfism prevalent in Indian firms. Dwarfism refers to firms which are surviving for more than 10 years but their growth in terms of employment is stunted. One of the inhibiting factors in creation of employment was observed to be the threshold of 100 workers under the Industrial Disputes Act, 1947. It was observed that threshold under Labour legislation creates perverse incentive to remain small.
The State of Rajasthan in 2014 had increased the threshold from 100 to 300 workers and done away with the requirement of prior permission before retrenchment etc., in case of firms having less than 300 workers. The impact of increase in threshold in the state of Rajasthan, showed that average number of factories in Rajasthan having more than 100 increased significantly as compared to the rest of India. The total output in those factories also increased. 15 more States have already enhanced threshold to 300 workers.
It further said that following the example of Rajasthan, Sixteen States, including Rajasthan, had already increased threshold under the ID Act from 100 workers to 300 workers, before passing of IR Code. These States include, AP, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, HP, Jharkhand, Karnataka, MP, Meghalaya, Odisha, requirement of permission before retrenchment or closure does not serve much purpose but at the same time leads to accumulation of losses and liabilities of the firm on the verge of closure.
Even in the existing ID Act, 1947, the requirement of permission was only in respect of factory, mines and plantation. The requirement of prior permission does not apply in any other sector.
Refuting rumours that Fixed Term Employment introduces hire and fire, Ministry said that Fixed Term Employment has already been notified by Central Government and 14 other States. These States include Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand (apparel and made up) Karnataka, MP, Odisha, Punjab, Rajasthan, UP (textile and EOU), and Uttarakhand.
Non-availability of fixed-term employment implied that an employer had options to either employ on regular basis or through contractual basis. The employment of workers through contractual basis means higher transaction cost to employer, lack of permanence of contract labour, untrained, unskilled contract labour. It also lacked committed and long-term relationship between employer and contract labour, as there are on ground two employers, i.e., contractor and principal employer.
The Ministry emphasised that Fixed Term Employment is pro-worker. It would be possible for an employer to enter into fixed term contract directly with the worker or the employee rather than going through contractor. There have been allegations that the contractors charges full amount in terms of minimum wage and other entitled benefits like EPF, ESIC but do not pass the same to the contract labour.
Union Labour Ministry also said that a fixed term employee has been made statutorily entitled for all benefits and service conditions equivalent to that of a regular employee. In fact the code on Industrial Relations also extends benefit of gratuity even for an FTE contract on Pro-rata basis which is five years in case of regular employee.
Talking about definition of Inter-State Migrant worker, the Inter-State Migrant Worker Act, 1979 has been subsumed in OSH Code. The various provisions of the erstwhile Act have been further strengthened in the OSH Code.
The definition of inter-state migrant worker was very restrictive in the Inter-state Migrant Worker Act, 1979. It provided that a person who is recruited through a contractor in one state for employment in another state, to be an ‘Inter-state Migrant Worker’. The OSH Code expands the definition of migrant worker to include those workers who would be directly employed by the employer besides by contractor.
Further, it has also been made possible that a migrant, who comes on his own, in the destination State, can declare himself a migrant worker by registering on an electronic portal on the basis of self-declaration seeded with Aaadhar. The registration on portal has been made simple and there is no requirement of any other document except Aaadhar.
The Ministry in this regard has also taken steps to develop a national data base to enrol unorganised workers including migrants, which will inter-alia help migrant workers get jobs, map their skills and provide other social security benefits. It will also help in better policy formulation for unorganised sector workers, in general.
A statutory provision for helpline for migrant workers has also been made.
The migrant workers will also be able to enjoy the benefits of portability in respect of ration and avail benefits from building and other construction cess. They will also get all other benefits of ESIC, EPFO and annual medical check-up etc.
Criticism of provision for allowing night shifts for women, Union Labour Ministry said is patently wrong as OSH Code entitles gender equality in the New India. The Code envisages that women shall be entitled to be employed in all establishments for all types of work and they may be employed during night also.
However, sufficient safeguards for employing women at night have been provided. The consent of the women for employing them at night has been made mandatory. Further, the appropriate government shall prescribe conditions for safety, holidays and working hours or other conditions before permitting women to work at night.
Ministry also said that for the Rights of Working Journalists, provisions have been made to strengthen the same. These include expansion of definition Working Journalist to include Journalists working in electronic and digital media and allowing Earned Leave for “working journalist” on full wages equivalent to not less than one eleventh of the period of service. The leave can be accumulated and accumulated leave can be encashed or availed.
It further said existing provisions for welfare of working journalists have been retained. Rules drafted under Code on Wages provide for constitution of a technical committee for Working Journalist for fixing the minimum wages under the Code for the working journalist as defined in clause (f) of Section 2 of the Working Journalist and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955.
Further, under Social Security Code, the eligibility for gratuity for working journalist has not only been retained but the eligibility period has been improved to three years of service instead of five years for others.
The Ministry has also said that new Welfare provisions have been introduced in the OSH Code –
(1)For establishment carrying on hazardous and life threatening occupations, the Government can notify coverage even on establishment having workers less than the threshold.
(2)ESIC has been extended to plantation workers.
(3) Appointment letter has been made mandatory.
(4) Free annual health checkup has been introduced.
(5) Bipartite safety committee has been introduced for establishments in factory, mines and plantation in place of hazardous factories.
(6)Activities of the plantation worker dealing with like insecticides, pesticides have been included as hazardous processes.
(7) Strengthening of provisions relating to inter-state migrant worker and including provision of annual journey allowance to visit home-town.
Context:
In a unanimous decision, the Permanent Court of Arbitration at The Hague has ruled that:
India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on Vodafone for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”.
India should not to pursue the tax demand any more against Vodafone Group.
What is the case?
In May 2007, Vodafone bought a 67% stake in Hutchison Whampoa for $11 billion.
In September that year, Indian government raised a demand of Rs 7,990 crore in capital gains and withholding tax from Vodafone, saying the company should have deducted the tax at source before making a payment to Hutchison.
Vodafone challenged the demand notice in the Bombay High Court, which ruled in favour of the Income Tax Department.
Then, Vodafone challenged the judgment in the Supreme Court, which in 2012 ruled that Vodafone Group’s interpretation of the Income Tax Act of 1961 was correct and that it did not have to pay any taxes for the stake purchase.
But, the same year, the then Finance Minister, the late Pranab Mukherjee, circumvented the Supreme Court’s ruling by proposing an amendment to the Finance Act, thereby giving the Income Tax Department the power to retrospectively tax such deals.
The case had by then become infamous as the ‘retrospective taxation case’.
What happened after India passed the retrospective taxation law?
The Act was passed by Parliament in 2012 and the onus to pay the taxes fell back on Vodafone.
Later, Vodafone Group invoked Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and the Netherlands in 1995.
Article 9 of the BIT says that any dispute between “an investor of one contracting party and the other contracting party in connection with an investment in the territory of the other contracting party” shall as far as possible be settled amicably through negotiations.
What is the Bilateral Investment Treaty?
The BIT was signed for promotion and protection of investment by companies of each country in the other’s jurisdiction.
The two countries would, under the BIT, ensure that companies present in each other’s jurisdictions would be “at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other”.
What did the Permanent Court of Arbitration at The Hague say?
It ruled in favour of Vodafone. Because, the taxation was in violation of the BIT and the United Nations Commission on International Trade Law (UNCITRAL).
The tribunal also said that now since it had been established that India had breached the terms of the agreement, it must now stop efforts to recover the said taxes from Vodafone.
It also directed India to pay £4.3 million ($5.47 million) to the company as compensation for its legal costs.
What is retrospective taxation?
As the name suggests, retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed.
Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.
While governments often use a retrospective amendment to taxation laws to “clarify” existing laws, it ends up hurting companies that had knowingly or unknowingly interpreted the tax rules differently.
Context:
G7 finance ministers has backed an extension of a G20 bilateral debt relief initiative for the world’s poorest countries, but said it must be revised to address shortcomings hindering implementation.
About the G20 bilateral debt relief initiative:
G20 nations, in April this year, agreed to freeze bilateral government loan repayments for low-income countries until the end of the year as part of a plan to tackle the health and economic crises triggered by the coronavirus pandemic and prevent an emerging markets debt crunch.
The group also called on private creditors “to participate in the initiative on comparable terms” and asked multilateral development banks, such as the IMF and World Bank, “to further explore the options for the suspension of debt service payments over the suspension period”.
What is G7?
The G7, originally G8, was set up in 1975 as an informal forum bringing together the leaders of the world’s leading industrial nations.
The summit gathers leaders from the European Union (EU) and the following countries: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
How did G7 become G8?
Russia was formally inducted as a member in the group in 1998, which led G7 to become G8.
However, Russian President Vladimir Putin’s condemnable act of moving Russian troops into eastern Ukraine and conquering Crimea in 2014 drew heavy criticism from the other G8 nations.
The other nations of the group decided to suspend Russia from the G8 as a consequence of its actions and the group became G7 again in 2014.