Streamline labour laws to make India business-friendly

An upright economy includes clean and clear compliance systems. Outdated labour law provisions and execution procedures are a major roadblock for economic growth.

Published: 03rd December 2016 01:20 PM  |   Last Updated: 03rd December 2016 01:14 PM   |  A+A-

An upright economy includes clean and clear compliance systems. Outdated labour law provisions and execution procedures are a major roadblock for economic growth. Reforming the same in light of today’s scenario will make India a business-friendly nation and shall raise its position in the world economics.

The current ambiguous labour laws encourage inspector raj, rather than serving the intent of legal provisions such as providing adequate social security. Many a time the industries are forced to meet the extortionist demands as it makes economic sense for them to compromise rather than comply. Though unlike unorganised sectors, organised sectors generally do not succumb to illegal pressure of authorities. However, such illegitimate demands coupled with stringent labour laws refrain many multinationals to invest in India.

Workers at a construction site

Thousands of crores lying in the coffers of statutory authorities in the name of PF, ESI, labour welfare fund, cess under the Building and Other Construction Workers Act, etc. remain unutilised and even misutilised. Most of these amounts have been collected by way of capricious notices owing to the ambiguity of statutory provisions and wide power given to authorities. The provisions need to be modified and clarified as well as procedures need to be made transparent thereby diminishing scope for misuse by the authorities, especially at the lower levels. Some suggestions are as follows: the definition and coverage provisions should be elucidated in clear terms; while raising statutory demand, the inspectors should be required to issue reasoned show-cause notices based on wage or other relevant records and not casual notices on the basis of account book entries or balance sheets; details of employees along with compliance details should be made available on website; time-lines should be set for raising demand for any shortfalls with respect to retrospective period; compliances should be made electronically; companies across states should be allowed to digitalise records; in case of several branches, establishments should be allowed centralised compliances; authorities, locations as well as records should be consolidated; provisions should be reduced, etc. There is also an urgent need for clarity with respect to coverage and responsibility towards outsourced workers, and workers engaged for contingent jobs such as construction, repair  and maintenance. Apart from these, provisions like PF for international workers—virtually discrete to the real intention of the PF Act—need to be diluted.

The authorities are also prone to misusing the criminal and penal provisions which involve criminal prosecution of Directors, CEOs, imposition of heavy damages, interests, apart from harassment caused from court procedures. Since according to some statutory provisions like PF and ESI, filing of an appeal against an adverse order requires deposition of a certain percentage of liability imposed, companies are forced to either spend huge amounts on litigation or unfortunately come down to paying under the counter. Such provisions also encourage issuance of exorbitant show-cause notices for highly belated time periods, due to obvious reasons. Contesting litigations takes years together and paying sub rosa only encourages further arbitrary demands.

Colossal amounts stand collected in the accounts of labour authorities, while millions still fight for basic survival. It also needs to be ensured that depositions stand utilised for the purpose they are made. For India to become competitive worldwide, streamlining and simplifying labour laws is imperative. Such amendments will boost country’s manufacturing and other trade sectors, enhance job creation and improve the ease of doing business. Demonetisation may have attracted several debates, but these moves are likely to be supported by most.

Raavi Birbal Advocate, Supreme Court of India

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