Cutting labour cholesterol

After textiles reforms, 24x7 shops is another

Though it is early days yet, the CMIE-BSE unemployment index that had been rising steadily over the past few months has fallen in June. While part of it could be seasonal and related to agriculture, India’s largest temping agency, TeamLease, finds a 20-30% increase in the positions that companies want it to fill up over the past six months. In this context, will the new rule to allow shops to operate 24x7—each state will now have to take a call on the new central rule—move the employment needle and, if so, by how much? In itself, the move is unlikely to do much since it is difficult to see a large proportion of shops wanting to remain open 24x7, which is really how employment will be generated—staying open for a few more hours will generate more overtime payments but, though welcome, that can be done with the same workforce. What is important, however, is that this is yet another move by the government to clear regulatory cholesterol while keeping away from the political hot potato called Chapter V-B which deals with firing workers—the plan is to let state governments do this and some like Rajasthan have already allowed this for firms that employ less than 300 workers.

The textiles policy announced last week saw the first set of big changes such as fixed-term contracts—this will allow firms looking for temporary employees to move away from the existing contractor system that is open to abuse—and changes in provident fund rules. For one, the government will take care of the full employers’ costs for new employees for a limited period and, two, those earning under R15,000 can opt out of EPFO; the budget also links tax-breaks with employment instead of just capital investments. With the country’s second-largest trade union, the Bharatiya Mazdoor Sangh (BMS) cooperating with the government, the textiles policy may just sail through without too much of a problem. An RSS affiliate, BMS is also not going to join the other trade unions’ strike on September 2, though that was announced before the textiles policy or the pay commission award that most unions have said was a pittance—BMS also cooperated on the Coal India stake sale, which augurs well for the government. In which case, the government could well think of extending the textile policy to other sectors.

Also on the anvil, though the exact timing is not certain, are changes in the EPFO law that make it optional for companies to join the New Pension Scheme (NPS) instead—with a 4% annual charge, for essentially just buying G-Secs, and offering lower returns than the NPS, EPFO is a very expensive fund. Making payments to the Employees State Insurance Corporation (ESIC) are also likely to be made voluntary, with employers free to choose other insurance options—with a payments ratio of under 50%, it is obvious ESIC payments are very high. A Universal Enterprise Number (UEN) for companies, like an Aadhaar for individuals, in place of the 12-14 different numbers for different sections of the labour law—and another 13 for other compliances such as income tax—will also go a long way in making life easier for fir ms; chances are the PAN number will be used as the UEN. With small but steady steps, the government may well be able to fix many of the problems entrepreneurs have with India’s labour laws.