India’s archaic laws pose a stumbling block to imitate its neighbour China!!
Karma Global Rebuilds Compliances for Businesses with Robust Integration as Cost of Non Compliances Could Be More Than Cost of Compliances!!!!!
Karma Global, high tech enabled Organization since last 2 decades, has gone para legal a year ago, acquiring immense knowledge of legal concepts in its journey of tying up with Sundeep Puri Associates and Advocates.
The Legal team of Karma Global advises all its valuable 500+ clients on all contentious and non-contentious matters and and the advisories are always given in a ‘resourceful and innovative” manner with sound solutions for every issue that gets tabled before us.
Our experts and expertise is seen as a trusted guide for resolutions on every complex matters such as notice period, grievance handling, negotiation, arbitration and adjudication, internal disciplinary investigations and inquiries, employee severances and reduction in workforce exercises, employee policies, social security legislations and compensation and benefits, payroll, outsourcing and regulatory compliances.
Karma Global has immense capabilities and competencies to jump into action on critical issues without much delay. Its shared values and culture for empowering people’s behaviour, is a matter of pride which encircles every aspect with good management practices.
Its resourceful team of over 200 direct staff spread across all locations and territories is very responsive to every call and mail which is a part of the great place to work environment that binds all of them with the shared mission of the organization.
So in this regard, besides the business profile of Karma relating to labour laws, it will now focus whole time also on legal and para legal issues and matters with the collaboration of Sundeep Puri & Associates who are already into legal matters such as disputes, litigation, and court cases.
India’s archaic laws pose a stumbling block to imitate its neighbour China!!
A debate is needed on what India can learn from China.
Let us examine the communalities between India and China
There are commonalties between India and China. They both represent ancient civilizations, are located in Asia, and are the only members of the billion-plus population club.
Let us also see how are they different
The two countries are markedly different from each other in most other respects. India, with multiple ethnicities, languages, and faiths, is pluralistic – a feature that inspired the “subcontinent” label.
China is essentially homogenous. India has a history, indeed an innate culture of liberalism reflected in the democratic institutions that have survived and, to some extent, flourished in the country, post-independence. This contrasts with one-party polity in China and intolerance towards opposition.
How does legislation work differently in Canada, India and China?
Countries employ varying degrees of devolution of power to subnational governments. Different policy areas may also be treated differently as well.
In Canada, for instance, labour policy is almost solely determined by provincial governments, while communications policy is under federal responsibility.
India and China have developed differing systems to deal with labour policy.
In India’s 1950 constitution, labour is found under what is called the Concurrent List, which enables both the central (federal) and state governments to enact legislation in this area.
What this joint jurisdiction, in combination with the Indian practice of industry-specific regulation, means in practical terms is that there is a plethora of considerations to take into account to understand local policy environments.
In practical terms, Indian labour law is easiest to understand by considering federal law on labour as applying to large industrial establishments, through such acts as the Factories Act, the Mines Act and the Employees’ State Insurance Act. Etc.
Also, states can formulate labour law through their respective Shops & Commercial Establishments Acts, which regulate working conditions for smaller businesses, including restaurants and cinemas.
China, on the other hand, recognises the supremacy of national law in labour. However, under this national law Chinese province do have the discretion to promulgate individual regulations, although they must follow its general guiding principles.
Let us now see what stops India from replicating China’s success story
India has most likely pipped China as the most populous country on Earth, amid cries of wasted demographic dividend and the potential to emerge as a manufacturing behemoth.
In the base case scenario, if replicating China’s success story is one of the bars, India needs to pay heed to companies seeking uniformity and modernisation of labour laws.
India’s labour codes have long been criticised for favouring job security, rather than job creation, a remnant of socialist-era policymaking.
Prohibition of contract workers, strict laws pertaining to employees’ termination, and unionising are some examples.
“India’s current labour laws are strewn with redundancy, and overlap, creating a high compliance burden. Although many states have already issued rules and draft notifications are available, the government has yet to implement the new labour codes,” as was reported.
Among India’s 63 million enterprises, only 1 million are formal enterprises, covering their workforce under labour laws. 62 million enterprises are small and informal and more than 90% of India’s labour force works in them. As a result, less than 10% of India’s workforce benefits from the labour laws.
It is reported that India’s current labour compliance framework, employers face a host of challenges like several different permutations of minimum wages, and numerous registrations/licenses/exemptions under different acts. There is vast scope for physical interaction between the employer and the government inspectors. “The prospect of indictment compels companies to negotiate with inspectors, as bribes are a price worth paying to avoid disruption of production schedules or loss of staff time, which would result from additional visits,”.
It has been said that “The legal objective of penalising corporations or business owners should be deterrence, not retribution,”
Policy clashes between Centre and State
In their bid to pose as a credible alternative to foreign companies adopting a China Plus One strategy, Indian authorities have shown a willingness to tweak archaic laws.
As per law, any policies and regulations regarding labour in India must be agreed upon by both the Centre and the states. In 2019 and 2020, 29 central labour laws were amalgamated, rationalised, and simplified into four labour codes.
The four labour codes on social security, industrial relations, wages, and Occupational Safety Health & Working Conditions (OSH) have already been cleared by Parliament. However, they can be implemented only when the Centre and states notify the respective rules since labour is a concurrent subject.
However, the Centre and states are seen as being apprehensive about passing a major reform such as this with elections coming up thick and fast in 2024. Experts told ET that with multiple state elections in 2023, followed by the General Elections in 2024, the labour reforms may not even see “the light of the day”.
Cupertino-based Apple Inc’s assertion of its India plans as it seeks to move away from China is being seen by many as a stamp of approval by a mammoth player trusting India and its system, which has often been termed lethargic.
Financial Times reported Apple and its supplier Foxconn lobbied for labour reforms in Karnataka, paving the way for 12-hour shifts, as well as night-time work for women, similar to company practices in China.
News agency Bloomberg reported that the tech company is seeking changes in labour laws, and Gujarat, Uttar Pradesh and Andhra Pradesh are likely to follow suit.
It further reported that Tamil Nadu is set to make certain changes that are likely to replicate laws similar to those in China. Chief Minister MK Stalin on May 1 announced that the Factories (Amendment) Act 2023, which allowed flexible working hours for industries up to 12 a day, from 8 hours, has been withdrawn in the interest of workers.
Stalin said the controversial Act has been rolled back following apprehensions expressed by several trade unions.
The window to tap into the promise that the 1.428 billion people may be shorter than most would expect, as India’s population could start declining in 2047 and fall to 1 billion people by 2100, according to UN estimates.
Prime Minister Narendra Modi called for transforming India into a developed economy by 2047 when India completes 100 years of Independence.
Willingness to go through with reformed labour codes, devoid of apprehensions of a repeat of the farm laws, might be the stepping stone to truly heralding the ‘Amritkaal’ for India.
China, Bangladesh, Vietnam have all been progressive and India should gain from agile labour laws.
The pandemic and onset of technology have created new opportunities of employment, such as work from home, part-time employment, contract workers and gig workers. This provides opportunities for women and students to partake in India’s economy while simultaneously empowering them. The new labour codes need to recognise contract labourers and make provisions for them. Sharp spikes typically govern services such as IT/ITeS and e-commerce activities. Unlike traditional manufacturing, these industries witness increased activity during festivals, holiday seasons, and sales. Adopting measures to recognise and promote contract working will aid business during phases of increased activity while providing part-time employment to many Indians.
As India pushes for global leadership, it must discard antiquated practices and apply an agile approach to facilitate growth. One such example is standing orders. Standing orders were devised to protect factory workers by stipulating conditions, such as working hours. The rigidity of such measures will affect the service industry, particularly businesses with global clients. Working according to client time zones, establishing patterns specific to projects, and options to work remotely will be hampered if sectors such as finance, consulting, IT/ITeS and E-commerce are not exempted from notifying standing orders. Moreover, IT/ITes sector has in place robust grievance mechanisms and adhere to global work culture practices and hence should be exempted. Multiple surveys show that IT/ ITeS companies are recognised as great places to work due to their employee-first practices and policies.
A critical factor to the success of industry in a free-market economy is its operational independence. Major economies across the world, including those of the USA, China and Japan, have a five-day work week. Studies have found that employees who dedicate more time to recreation are happier employees and work more efficiently. This benefits the health of both the employee and the establishment. In this context, an 8-hour work day will force companies to operate on a 6-day work week model which will compromise employee satisfaction and also hamper hiring, as companies will be reluctant to engage people on over time. The number of hours should be capped at 48 hours, with a 10/12-hour daily limit to aid operational flexibility. With the new codes already providing for flexibility in working hours, states need to ensure the same does not become exploitative.
A large number of businesses in India recruit employees from across the country through remote working facilities. As per the laws, an employer needs to register an establishment in every State where it has employees under the Shops and Establishments Act(s). This results in an avoidable increased compliance burden, increases the costs for business with no additional productivity, and hinders the ease of doing business for the industry. The new codes need to implement a single unified S&E registration.
One of the defining legacies of this government has been the push to digitize India and make it a global leader. India’s goal to become a trillion-dollar economy can only be achieved by establishing codes to foster growth and jobs and income of workers, which would in turn drive security and stability of employees. The service industry driven by technology-intensive sectors such as IT/ITeS, e-commerce, financial services and consultancy has immense potential. The labour laws need to promote employment, quality of employment and income in these sectors by enabling businesses operating in this sector.
Proprietary blog of Karma Global Tech Management LLC
This blog has been collated and compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, besides adaptation, illustration, derivation, transformation, collection as well as auto generation from various sources, for its monthly newsletter Issue 12 of June 2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – Kush@karmamgmt.com / yashika@karmamgmt.com