Modi govt amends labour rules to encourage contract jobs

The move is aimed at giving companies more flexibility in hiring employees and expected to boost job creation—a shift from the earlier strategy of job security

Wed, Mar 21 2018. Remya Nair

The new labour rules allow companies to hire workers on contract for a fixed term, extending the labour contract rules first introduced in 2016 for the textiles and apparel industry. Photo: Pradeep Gaur/Mint

New Delhi: The Narendra Modi government has modified labour rules to encourage fixed tenure or contract jobs across all industries, signalling a shift in its employment generation strategy from job security to job creation.

The move is aimed at giving companies more flexibility in hiring employees and is expected to boost job creation. It will also help India climb the World Bank’s ease of doing business ranking as it removes restrictions on firing of employees.

The changes, made through a gazette notification dated 16 March, come at a time when the government is looking to address the problem of jobless growth—a major political challenge for the government ahead of the general election due in 2019.

The new rules allow companies to hire workers on contract for a fixed term, extending the labour contract rules first introduced in 2016 for the textiles and apparel industry.

Accordingly, the gazette proposes to replace “fixed term employment workmen in apparel manufacturing sector” in the Industrial Employment (Standing Orders) Central Rules, 1946, with “fixed term employment”. According to the rules, no notice of termination will be needed, irrespective of whether workers are contracted for a month, week or the duration of a specific project.

Further, workers won’t be entitled for any notice pay if the contract is terminated.

The rules assure that pay parity and statutory benefits will be applicable to fixed-term contract workers. Fixed-term workers who have served for three consecutive months will get two weeks’ notice and those who have not will be informed of the reason for their retrenchment in writing.

To protect existing permanent workers, the rules provide that no employer will convert the posts of permanent workmen into fixed-term employment.

These rules are expected to allow free labour movement and facilitate a hire-and-fire policy for companies, overriding the existing retrenchment requirements.

According to an International Labour Organization report released in January, while the overall unemployment rate in India is around 3.5%, it is much higher for the 15-24 age group or those believed to be first-time workers. The unemployment rate for this age group is expected to be 10.7% in 2019, up from 10% in 2014.