India Employment Law Outlook 2018
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The Indian government has been actively working to raise the country to among the top 50 in the World Bank’s Ease of Doing Business rankings. In the most recent survey, India jumped 30 positions to 1001 and was recognized by the report’s authors as one of the top 10 improvers and the only large country to have achieved such a significant shift in a year’s time.2
Labor Reforms to Date
Among the most significant labor reforms in 2017 were:
These changes are indicative of the efforts to provide greater benefits and facilities to employees.
In a move to make it easier for employers to comply with certain labor laws, the Indian government reduced from 56 to five the number of registers employers are required to keep under nine different federal level labor statutes.3 Employers are permitted to maintain these registers in electronic form as long as the integrity, serial numbers, and contents of the columns of the consolidated registers are not modified.
Similarly, the number of forms and returns employers are required to file under three federal labor laws has been reduced from 36 to 12 by eliminating redundancies and duplications.4
In addition, several administrative and e-governance initiatives have been undertaken by the federal and state governments to generate employment and facilitate ease of doing business. These include launching an online platform for registration under five central laws5 and providing online availability for registration of establishments for the purpose of provident fund (social security) and employees’ state insurance contributions.6
While reforms undertaken to this point have made it easier to do business in India, the government still has much to do, and outdated employment laws remain a hindrance to the economic growth of the country. Important reforms likely to be implemented in 2018 are discussed below.
Code on Wages, 20177
The Code on Wages Bill, 20178 proposes to replace four federal labor laws: The Minimum Wages Act, 1948; The Payment of Wages Act, 1936; The Payment of Bonus Act, 1965; and The Equal Remuneration Act, 1976. Among the key features of the Wage Code are the following:
The Wage Code has already been approved by the Union Cabinet and has been introduced in the lower house of the parliament. The legislation requires the consent of both houses of parliament and presidential assent to become law.
It has been proposed that several other federal labor laws be consolidated into three codes: Code on Industrial Relations,11 the Code of Social Security and Welfare,12 and the Code on Occupational Safety, Health & Working Conditions. However, trade union resistance has so far blocked legislative action.
Social Security: Provident Fund and Gratuity
The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 is one of India’s most important social security laws. There are proposals to amend the act by:
The government may also allow employees a one-time option to switch from contributing towards the EPF Act to the National Pension Scheme.
Employees in India are entitled to receive severance in the form of gratuity, provided certain conditions are met. The per-employee gratuity ceiling under the Payment of Gratuity Act, 1972 is currently 1,000,000 rupees (about $15,500), which the Union Cabinet has proposed to double through the Payment of Gratuity (Amendment) Bill, 2017.
Contract Labour (Regulation and Abolition) Amendment Act, 2017
On Sept. 28, 2017, the government released the draft Contract Labour (Regulation and Abolition) Amendment Bill, 2017,14 which would amend the Contract Labour (Regulation and Abolition) Act, 1970 to:
Law Pertaining to Factories
The Factories (Amendment) Bill, 2016 was passed by the lower house of parliament on Aug. 10, 2016.16 The bill would significantly expand the powers of state governments in the regulation of employment:
The Factories Bill is awaiting passage by the upper house of parliament and signing by the president.
Model Shops and Establishments Act
The Union Cabinet approved the Model Shops and Establishment (Regulation of Employment and Conditions of Service) Bill, 2016 as a way to bring national consistency to the regulation of employment and to make it easier to do business in India.18 State governments are free to adopt the act in its existing form or to modify it to meet state-specific requirements.
The state government of Maharashtra adopted the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 201719 on Sept. 7, 2017, although it is not yet effective. The act will, among other things, revise procedures for employer registration with the government, rules governing women working night shifts, and employee leave entitlement.
The state of Kerala is planning to also adopt the model legislation.20
The federal government is expected to continue to push labor reform at the state and federal levels throughout 2018 in the run up to the 2019 elections. It remains to be seen, however, if the government can in fact eliminate the bureaucratic impediments to a transparent, responsive, and accountable regulatory system.
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3 Under the Compliance to Maintain Registers under various Labour Laws Rules, 2017 (available at: http://www.labour.nic.in/sites/default/files/registers.pdf)
4 Under the Rationalization of Forms and Reports under Certain Labour Laws Rules, 2017 (available at: http://www.labour.gov.in/sites/default/files/294%20E.pdf)
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