Labour reform, corporate gain

It is ironic that legal and regulatory reforms relating to the corporate world often lead to an ease of doing business that benefits companies and boosts their profitability, while similar initiatives relating to labour also tend to favour business interests and are frequently perceived as coming at the cost of workers’ rights.

The Centre justifies the new labour codes as a move away from colonial-era structures—a goal that should be welcomed. But in the name of aligning with global standards, the reforms appear to import some of the worst aspects of contemporary labour practices, resulting in job insecurity, stagnant or declining wages, increased work hours, poor working conditions, and a dilution of collective bargaining power.

While many labour laws were enacted decades ago — some even in the pre-Independence period — it is true that these laws have evolved over time. The Industrial Disputes Act, 1947, for instance, underwent several amendments between 1965 and 2010.

Was the labour law framework complex, fragmented, and in need of simplification? Certainly. But a closer look at the new codes suggests that what the government hails as a progressive, pro-worker reform is seen by critics as decidedly anti-labour.

Consider, for example, the changes affecting contract workers. The codes mandate gratuity after one year, social security, health benefits, and an annual health check-up.

Yet trade unions argue that companies increasingly — and many say unjustly — rely on contract labour to cut wage costs, avoid providing adequate working conditions, and retain the ability to dismiss workers at will.

The government, meanwhile, emphasises “employability” and seems to believe that better wages, social security, and safe working conditions would burden employers and ultimately discourage hiring.

The Opposition parties, especially the Left parties, which wield considerable influence on trade unions, have come out strongly against the labour codes.

Demanding the revocation of the codes, the CPM claimed that the codes seek to “dismantle 29 hard-won labour laws that have, till now, protected the workers to some extent.” It opposed the new Codes, which it argued would try to dilute and abolish existing rights and entitlements and “shift the balance sharply in favour of employers.”

Predictably, the Bharatiya Mazdoor Sangh — part of the wider Sangh Parivar — has welcomed the new codes for enabling longer work hours, expanding fixed-term employment, and easing retrenchment rules. This aligns with the government’s view that the reforms will make India’s business sector more competitive globally.

The desire to compete with China is understandable, but India already has the lowest manufacturing wage costs in the region — between 20% and 50% of those in Indonesia, Vietnam, and the Philippines, and far below China, which also offers better social security protections.

Corporate and business lobbies advocating reduced compliance burdens and greater flexibility in hiring and firing appear to have succeeded in shaping the government’s approach. The government believes that easing compliance will boost employment — a claim that remains debatable. The decline of trade unions and the BJP’s repeated electoral victories have further emboldened the government to pursue a significant ideological shift with minimal resistance.