Govt mulling measures to make lay-offs less painful

Workers being laid off will be entitled to full wages of 45 days for every year of service.

Here is a sweetener before bitter pills are administered.

Before ushering in a more liberal hire-fire regime, the government is working on measures to ensure retrenchment is less painful for employees.

The proposals being considered include minimum wages applicable through the country and a handsome severance package if workers are laid off. 

Workers being laid off will be entitled to full wages of 45 days for every year of service.

“While reviewing rigidities in labour laws, we have to ensure employees have three kinds of security -- job security, social security and wage security,” Shankar Aggarwal, secretary, ministry of labour and employment, told Business Standard.

These measures will go hand in hand with changes that entail allowing companies with up to 300 employees to lay them off without government permission.

Currently, only companies with 100 employees are allowed to do so.

Other measures include disallowing outsiders from becoming office-bearers of trade unions in the organised sector.

Also, several restrictions proposed on calling a strike.

Government officials said the real issue was not whether permission was  sought by companies having 100 or 300 employees.

In any case, there are very few companies that have an employee base of more than 100.

The ease of doing business would improve if the process of granting permission was transparent and time-bound, they added.

“One of the proposals being considered is of deemed approval.

If any permission is not granted within a particular time-frame it should be deemed as granted,” Aggarwal told Business Standard.

The ministry is working on a national floor level for minimum wages.

It could entail amending the Minimum Wages Act.

The idea of a national floor was first mooted by the National Commission on Rural Labour in 1991.

Accordingly, a national floor was fixed at Rs 35 in 1996 and subsequently revised. The government is now considering a broad-based floor for all workers, below which wages will not be allowed to be paid.

Though the national floor is a non-statutory requirement on the part of states, it serves as a template for them to set their own minimum wages.

The Centre’s list of scheduled employment includes 45 areas whereas the states have their own lists.

The Union government is planning to make the national floor for minimum wages a statutory requirement with a widened scope.

While the national floor for minimum wages is likely to ensure one form of security, the other could be a decent severance package to be offered to employees in the event of retrenchment.

One proposal is to ensure that retrenched employees receive full wages for 45 days for every year of service put in.

“Suppose someone has worked for five years in a company, he will be entitled to 225 days of full wages.

“That should be enough to sustain him till he gets a new job and may also help him acquire necessary skills for a different job,” Aggarwal added.

On social security, the government has undertaken the task of reforming the Employees’ Provident Fund Organisation and the Employees’ State Insurance Corporation.

Even workers in the unorganised sector will be linked with the EPFO and ESIC.

The government is in the process of issuing smart cards to workers in the unorganised sector.

These workers will receive the benefits of pension and health insurance.

“The roll-out of smart cards will happen soon,” Aggarwal added

About 400 million workers, roughly 87 per cent of the country’s working population, are estimated to be part of the unorganised sector.

Guidelines have already been issued by the government to ensure they are made part of the EPFO on ESIC. Some government organisations have started the process of enforcing the new regime.

The thinking in the government is that while the whole world is passing through a phase of economic turmoil, India offers hope.

The current crisis may well have a ‘transformational’ potential if right policies are implemented, according to government officials.

Incidentally, the labour secretary is a member of the group of secretaries that is tasked with presenting transformational ideas to Prime Minister Narendra Modi on how to accelerate the pace of employment creation in the country.

The group is readying a set of ideas.

KEY PROPOSALS

• Companies with up to 300 employees to be allowed to retrench staff without government's permission. Earlier, the ceiling was 100
• If an employee is retrenched, they would be given salary of 45 days for each year in series. If they have worked for five years, compensation would be five times the 45 days salary.
• Labour ministry is proposing to increase minimum wage

Illustration by Dominic Xavier/Rediff.com