How Laborious are Labour Laws?

Posted by: on Oct 28, 2011 | 3 Comments

Although the Indian economy is thriving, the upsetting part is that the Indian labour is not partaking in the boom. The employment in the country is not expanding as fast as the increasing working-age population. The wages aren’t rising as fast as the per capita income either. There are several reasons for this dismal scenario, but one of the most important factors is the ill-conceived and complicated labour laws in India.

Issues with Indian Labour Laws

Labour laws emerged as a result of employers’ attempt to restrict the power of workers and keep the labour cost low. As the labour segment in the country was oppressed very badly, the government had to intervene to maintain balance in the industrial sector. The problem is, the labour laws in India are numerous, ambiguous and complex. At present, there are as many as 45 labour laws at the centre and approximately four times more at the state level. Moreover, these laws promote litigation, rather than resolution of problems.

Breakdown of Labour Laws: The Case of Maruti

The recent strike at Indian biggest car manufacturer, Maruti Suzuki, is an example of how Indian labour laws fail to appropriately address the needs of the workers. The strike, which left four major Maruti production plants idle for five consecutive days, resulted in a 20.8 percent drop in sales in September 2011 from a year earlier. Several other Indian auto companies have been hit by the labour unrest this year, including General Motors. In March, some workers at the GM factory in Gujarat went on a strike for as long as three months.

There is mounting dissatisfaction among Indian workers that they are not reaping enough benefits from the financial success of their employers, and that too at a time when the inflation in the country is as high as 10 percent. The union workers are also irate about the increasing employment of contract labourers, who are paid much less than regular workers and can be easily laid off without the need for any government approval. In some factories, the contract workers make up over half the staff.

Labour Laws in India: The Need for Flexibility

The need of the hour is to have laws that allow employers to enter into different types of contracts, which are not only profitable to them, but also the workers. For instance, some workers may opt for higher wages but can be asked to quit with a very short notice, while others may get a relatively lower wage but benefit from a longer notice period. This kind of an employment setup will help to offset the labour unrest that happens during a volatile market.

There is also a great need to improve India’s slow legislative framework, which significantly hinders the process of dispute resolution. According to the Ministry of Labour, as many as 30,000 labour law related cases have been pending for more than 10 years.