Employers favour administrative labour reforms over legislative ones

New Delhi, August 29, 2022

Report reveals that just 20% of fixed-term employment contracts are renewed

Unlike legislative reform measures, awareness of administrative labour reforms is much higher among members of the four major employers’ associations, according to a joint report by the V V Giri National Labour Institute and Indian Institute of Public Administration.

This shows the popularity of the administrative reforms undertaken by the states meant to reduce the compliance burden and promote ‘Ease of Doing Business’, the study on the impact of labour reforms undertaken by states showed.

However, the report also highlighted that one concern was that only 20 per cent of fixed-term employment (FTE) contracts get renewed, which implies that 80 per cent of FTEs either “graduate to unemployment or inactivity after their contract duration gets over”.

Views of associations

The report solicited the views of four major employer associations – Associated Chambers of Commerce and Industry of India (Assocham), the Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI), and PHD Chamber of Commerce and Industry (PHDCCI) – on four legislative reforms. These were the increase in threshold under the Industrial Dispute Act (1947) from 100 to 300; increase in threshold under Factories Act (1948) from 10 to 20 (with power) and 20 to 40 (without power); increase in threshold under Contract Labour (Regulation and Abolition) Act, 1970 from 20 to 50; and, Introduction of FTE contracts in textile and apparel sector.

Likewise, it also sought their views on the four major administrative reforms — self-certification of compliance; single-window clearance; transparent inspection system; and, online filing of registration, returns and licences.

FTE contracts

The report noted that the number of FTE contracts were on the rise in the country. While only 3 per cent of all new recruitment by the member firms of CII comprised FTEs, nearly half of the all new jobs created by FICCI members were FTEs.

These contracts helped both in creating new employment opportunities, formalisation of jobs, and improving productivity, the respondents said.

Scheme usage varies

While awareness was high, the proportion of members availing of these facilities varied. Between 80 per cent and 100 per cent of the members of all the four associations availed of the online filing of applications for registration, licence and returns. But for the self-certification scheme (SCS) and single window schemes, the percentage share of members availing of these facilities was not encouraging, except for those affiliated to FICCI, the report notes.

All the employers association reported that the introduction of SCS benefited their members and they described the interface of administrative compliance under the SCS as satisfactory and an excellent industry friendly reform. Members reported benefits such as reduction in administrative burden, transaction and compliance cost, the report notes.

Regarding single window clearance scheme, only two employers’ associations, FICCI and PHDCCI, responded. While FICCI said 60-80 per cent of its members regularly avail of the scheme’s services, less than 20 per cent of PHDCCI members did so. The most commonly availed services under the scheme were clearances related to real estate, tourism, manufacturing, automobile, and MSMEs.

Transparent inspection system

The Shram Suvidha portal is the only mode of TIS that is being practised as per all the four employers’ associations. The employers association shared that their experience was good.

While FICCI and PHDCCI completely agreed that TIS had increased compliance, CII and Assocham provided a more neutral response and stated that they neither agree nor disagree with the proposition. Notwithstanding, all the four associations were emphatic in stating that the introduction of TIS reduced human biases and ensured hassle free operation of establishments.

The level of awareness and usage of online filing of registration, returns and licences was highest among all the four administrative reforms studied. All four associations rated the OFRLR interface as either satisfactory, very good, or excellent and reported that 80-95 per cent of their members used it.

[The Business Standard]