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Incentivise Productivity, Profit-sharing by Labour

Published: 01st August 2014 06:00 AM  |   Last Updated: 01st August 2014 12:43 AM   |  A+A-

The Narendra Modi government has taken a major initiative when it cleared three pending Bills aimed at reforming labour laws. These Bills seek to exempt small companies from unnecessary regulations, allow a larger number of apprentices and improve the safety of workers. In short, they will make doing business easier. The government will, hopefully, get these Bills passed during the ongoing monsoon session of Parliament. Labour is one sector where reforms have been lagging, mainly because political parties have been unwilling to upset their labour unions. Most of the labour laws were enacted on the assumption that the factory owners were out to exploit the workers, who needed to be protected.

Much water has flowed down the Yamuna since the employer-employee relations have undergone a metamorphosis. Take, for instance, a factory owner who finds that he no longer has the wherewithal to run it. Elsewhere, he will liquidate his company, compensate his workers and quietly withdraw but in India he will have to comply with so many formalities that he will just not be able to close down his factory. Such archaic laws scare those who want to invest. They hinder industrial growth which alone will create more jobs. Also, the laws need to be updated to accommodate the new trends in employment like, for instance, the contract system of appointment.

A vast majority of workers do not enjoy any social security benefits like pension. Productivity is seldom linked to wages and everyone gets the same salary irrespective of his or her contribution. That workers are central to the success of a company is overlooked. Investors need to make profit not only to sustain themselves but also to grow. If the workers are also assured of a share of the profit, they will have a greater stake in the company’s prosperity. All this necessitates a redefining of employer-employee relations so that they become equal partners in growth. Good industrial relations are, hence, key to the success of the government’s economic growth plans.

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