SINCE INDEPENDENCE A PLETHORA of committees and commissions have addressed the issue of comprehensive reforms to various aspects of labour and labour management relations in India. The most recent one is the Second National Commission on Labour headed by Ravindra Verma, a Gandhian and former Union Minister for Labour. In 1978, he unsuccessfully initiated moves to introduce a bill on workers` participation in management and another on industrial relations. Neither could be passed. What impact will the recommendations of the Commission headed by him will have now?

The Commission seems to have been jinxed from the beginning. Verma was not the choice of either employers or workers` organisations. They had other names in mind. When the Commission was constituted, some central unions expressed reservations about its composition as well as its terms of reference. While the First NCL appointed in 1966 focused on labour market and conditions of labour, the Second NCL focuses on product markets and the need to adjust labour policies and labour laws to meet the competitive    requirements of product markets in the wake of globalisation. When one is looking at the labour market, one is concerned about poverty, unemployment and inflation and seeks to address them and/or take measures to ameliorate them. When one is looking at product markets the emphasis is to meet the competitiveness through cost cutting, flexibility, etc. When the Commission was half way through, the Finance Minister announced, in his Budget speech in 2001, major changes in the Industrial Disputes Act without consulting either his colleague in the Labour Ministry or the Second NCL. Both the Labour Minister Dr Satyanarayan Jatiya and the Chairman of the Second NCL were peeved and almost threatened to resign because the government had by design or default considered them redundant by failing to extend the minimum courtesy of consulting them. The Left unions nevertheless boycotted the proceedings of the Second NCL.

The Second NCL did not have the resources to collect empirical data. To add to its woes, two reports on employment submitted by the study groups appointed by the Planning Commission headed by its members had come out with contradictory findings about the employment-unemployment situation in the post-liberalisation era. Unlike the First NCL, its successor had few study groups (6 against over 26  in the First NCL). The six study groups appointed by the     Second NCL covered the following       subjects: Globalisation and its impact, labour laws, skills development, umbrella legislation for unorganised labour, women and child labour and social      security.

The views of the Chairman of the Second NCL and of several chairpersons of the study groups are known through their prior documented efforts. Of the two union representatives on the Second NCL, the representative of Bharatiya Mazdoor Sabha (BMS) wrote a dissent note on the final report while the two employer representatives in the sub-committee on labour laws disagreed with the study group’s report.

Critique

By and large, the Commission`s recommendations meet the employers` demand for flexibility, particularly in virtually dispensing with prior notice under Section 9A and prior permissions for lay-off, retrenchment and closure. If the government picks up political will, it will mark a serious beginning in aligning labour policies with industrial policies. The impact of these recommendations will    depend on the pace and scale of economic growth. If both are slow, they will have a negative spiral. If the pace of change and scale of economic growth are rapid and high (double digit), it can set in motion a positive spiral whereby the gains outweigh the pains. Those who gain will be different from those who suffer. Without proper and commensurate      investments in physical and social infrastructure, economic growth may  continue to exclude and elude the masses. At the same time, it must be admitted that the consequences of non-change (and non-flexibility including non-closure of unviable units) will be higher than the consequences of change. Political  consensus on the Commission`s recommendations remains elusive.

On some other aspects, the Commission took a balanced view and sought to safeguard the interests of labour as well. The Commission observes that its recommendations should be considered as a package and accepted in toto. Will the proposed labour law reforms meet the need for adjusting them to globalisation pressures? In what follows, four issues need to be raised to discuss the effect of the recommendations of the Second NCL.

1. Will the recommendations, if ccepted, create a favourable climate to attract investments - foreign and domestic?

Labour is `a` problem, not `the` problem in attracting investment. Red tape and poor physical and social infrastructure are even more critical than labour issues. Also, labour law reforms alone is not going to deliver the good. Labour law implementation, speedy and effective redressal of disputes, creation of mutual trust and transparency and promotion of a culture of cooperation and collaboration are equally important.

2. Will the recommendations, if accepted, prove conducive for Indian enterprises to become agile, flexible, adaptive and competitive?

The recommendations evoked a mixed response. Over all, if as the Commission itself suggests, they are to be taken as a package, they can be considered to     constitute a significant improvement over the present system.

The Commission has attempted to broaden the definitions of workman and industry. It has also made the case for uniformity across all legislations regarding wage ceilings and employment thresholds for their applicability and called for progressively increasing wage ceilings and lowering employment thresholds and eventually   removing both.  While the industry may have reservations on these, it is important that the legal framework should broadly cover the entire workforce than exclude large sections of workforce. In that sense the relevant recommendations must be welcome. On the same logic, the Commission`s recommendation concerning minimum protection for managerial employees against arbitrary dismissals is in consonance with the principle of natural justice.

By and large the industry welcomed the following recommendations of the       committee:

• Excluding workman drawing over Rs.25,000 per month from the purview of workman
• Section 9A notice not to operate as a stay under Section 33, but can be justiceable under Section 33A
•  Restrictions on reinstatement under certain circumstances under Section 11 A provisions
•  Provisions on check-off and bargaining agent/council
•  Provisions on strike and lockout
• Workers to undergo compulsory training to equip for different kinds of jobs to facilitate restructuring and refusal to do so tantamount to misconduct
•  Deletion of Chapter VB, but not the other recommendation to make it part of Chapter VA.

There are four aspects in workforce reductions: Notice, Consultation, Compensation and Prior Administrative Approval. The first three are essential. Prior administrative approvals should go.  The larger the percentage of workers affected by management decision, the longer should be the period of notice. Also, workers with longer period of service deserve longer notice than workers with shorter period of service. The levels of compensation can be raised as has been proposed by the Commission.

The Commission`s recommendations concerning contract labour is unclear and remain contentious. The concept of pay parity between workers with similar skill doing similar jobs regardless of whether they are regular or contractual employees is well conceived.

The Commission`s recommendation on workers` participation in management establishment of grievance procedure is a step in the right direction.

The unions are, however, upset with the Commission`s recommendations on flexibility, restrictions on strikes (including de-registration and de-recognition of unions participating in illegal strikes), imposition of strike ballot and recommendations on terming `go slow` and `work to rule` as misconduct. They need to appreciate the Commission`s efforts to strengthen the unions (4 year tenure and check-off validity to dissuade workers with instrumental orientation freely shifting loyalties) and to levy a fee on free riders who benefit from union efforts without being members.

The Commission`s recommendations on trade unions are aimed at reducing the multiplicity of trade unions, strengthening recognised unions, reducing the privileges of unrecognised unions and introducing a measure of democracy in the functioning of trade unions.

There are grey areas though. Consider, for example, the distinction in the scope and coverage of legislation for units employing less than 19 workers and the umbrella legislation for unorganised sector. It appears that where it is possible to establish employer-employee relationship even units employing one person would be covered by the legislation meant for small establishments. Technically, even domestic servants should be brought under the purview of this legislation.  Where it is difficult to identify employers or workers and establish the relationship between the two, the umbrella legislation for unorganised sector would apply. Will the umbrella legislation then seek to regulate employment relationship that is, in the first instance, difficult to identify and/or establish or will it be concerned mainly with social security aspects alone?

3. Will the recommendations, if accepted, promote efficiency with equity?

The Commission has made an earnest   effort to balance the considerations of both efficiency and equity.

4. Do the recommendations adequately take care of the concerns for social   security, both in the organised sector and the unorganised sector?

Not only all working people, but also all citizens need job, income and social    security. Employers expect flexibility in adjusting workforce as per business needs. It is imperative to have credible systems of compensation to people affected by structural economic and other changes. It is equally imperative to have a credible system of social security benefits to all.

Governments expenditure on social security in India is negligible compared to corresponding investments in developed countries such as Germany and the Scandinavian countries.  Government has to step up the investments. Earlier, the joint family system used to provide a measure of cushion and safety to individuals. Over the past several decades both the government and the family ceased to offer the kind of security that is expected of them. Increasingly the burden fell on employers. Roughly 40 per cent of employee cost goes into social security contributions but social security continues to be elusive even for the 7 per cent in the organised sector. With falling interest rates and failing investments, the future of pension schemes seems grim.

Against this background, the recommendations of the Second National Commission are welcome. The Commission argues for making social security benefits universally applicable to all employed people irrespective of the size of the  establishment or nature of activity. It notes that the responsibility of providing a minimum social security benefit should rest with the State. Maximising them should be left to the individuals and groups based on their capacity and contributions. It has rightly argued for consolidation of social security legislations into one group, unification of different authorities and simplification of administrative procedures and taking the delivery to the door step of beneficiaries with appropriate encouragement to private provision of social security benefits where such benefits and services are at least on par with those provided publicly.

The Commission has rightly called for utilisation of the existing infrastructure like post offices and banks for efficient  delivery of social security benefits nearer the door step of the beneficiaries without adding to administrative structures and attendant costs.

The Commission`s observations on the difficulties in identification of employers and employees in the unorganised sector and its admission about the      difficulties in defining the unorganised sector are well thought. It has rightly made out a case for multiple and multipronged approaches and recommends the need to learn from the experiences of tripartite welfare boards in Kerala, Tamil Nadu and Maharashtra and  to develop occupation and area-based schemes with tripartite and multipartite boards.

The Commission recommends the need for providing a four-tier social security system. Tier one comprising social assistance, which is fully funded by the exchequer with tax revenues. Tier two comprising subsidised social assistance, which is partly funded by the exchequer and partly contributed by the beneficiaries. Tier three comprising social insurance based on individual and group contributions and Tier four comprising voluntary schemes. They could as well flow from collective bargaining. The tenor of the recommendations of the Commission places a strong emphasis on tripartite and multipartite social partnership in the provision of social security benefits.

The Commission do not provide for unemployment benefits to the fresh entrants into labour markets. It has also not considered the need for portability of social security benefits like heath insurance and pension. The government may give thought to these aspects. It has suggested two types of social insurance. One for people affected by market failure and the other for weaker sections. While the benefits under the first category could be defined and driven by contributions, those for the other weaker sections need to be subsidised by insurance companies, which are, licensed by the IRDA from the service tax revenues on insurance premia.