This news report is unusual because it is the Prime Minister who said: “We need to consider the possible role of some of our labour laws contributing to rigidities in the labour market, which hurt the growth of employment on a large scale,” he said at the 43rd Indian Labour Conference (ILC) in New Delhi. “Is it possible that our best intentions for labour are not actually met by laws that sound progressive on paper but end up hurting the very workers they are meant to protect?”…….“Our regulatory framework in the labour sector should encourage investment in labour-intensive industries,” Singh said.

The truth is that there are two major issues that the government is not willing to address. First, how the industry can adjust its size to ups and downs of market demand. Second, how to regulate the use of contract labour.

The two are related. Total protection to permanent workers leads to high employment of contract labour in industry.

The employers have no way of adjusting size of the organisation unless they resort to Voluntary Retirement Schemes. The corporate world has seen good, bad and ugly practices in this area. Some have closed down their establishments gracefully, treating workers with respect and showing understanding of their situation. Others have shown scant respect to human angle and handled it mechanically. Given the large number of in and around Mumbai the fears of the trade unions are not misplaced.

If you are employing less than 100 workers, no permission is required to retrench or lay-off workers. The law requires employers to apply for retrenchment, lay-off or closure if they are employing more than 100 workers at their factories. This needs to be changed to allowing retrenchment [or lay-off] of certain percentage of workers [say 10%] without the requirement of permission. That offers some flexibility, though not total flexibility.

In the absence of reasonable freedom, violation of law is the inevitable consequence though not justifiable. Moreover the Governments have withheld permissions even in genuine cases in the past for the fear of political backlash.

The employment of contract labour began to avoid employment of permanent workers. It then went much beyond that purpose. Today some industries employ 90% of their workforce through contractors! Even white collar employees are now on contract.

It is interesting that this news is followed by another one, here it is: “Adecco India, the Indian arm of the €14.8 billion Adecco Group, the global leader in HR services and a market leader in India has announced that it has become the first ever HR firm in India to scale the 100,000 peak in the number of temporary staff on its rolls. The company crossed the magic number in November, 2010.  Sudhakar Balakrishnan, Managing Director and CEO of Adecco India, commenting on the achievement, said, “It is a proud moment that we put 100,000 people to work everyday and with this milestone, I am extremely delighted that Adecco India is one of the largest private sector employers in the country. Our employees are today placed in some of the leading global and domestic majors, not only at entry level but also in senior and middle levels.  With an extensive network of 80 branches, we are closer to our clients and associates across geographies. This enables our customers to further expand their services and business to tier II and III cities as Adecco can provide them a head start to penetrate these cities with the right talent. In 2011, Adecco India plans to expand its branch network to 120 offices.”

He further added, “Flexible employment has witnessed positive growth in the last couple of years and has had great acceptance by candidates and employers, this can change the future of work in India for good and positively impact the economy.”

Jai Ho!!

Vivek