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MSMEs

Published on: Oct. 15, 2020, 12:33 p.m.
Labour reforms to immensely boost the contract staffing sector
  • Will the Labour Bill create more jobs in the country?; Photo: Sanjay Borade

By Arbind Gupta. Assistant Editor, Business India

The Occupational Safety, Health and Working Conditions (OSH) Code Bill, 2020, one of the four Labour Code Bills, which have now been passed by Parliament, is going to revolutionalise the contract staffing industry in the country. The Indian flexi-staffing industry has been urging the government for quite some time now for putting in place some regulatory framework which can help it grow in a more formal and organised manner.

The OSH Code, 2020, will consolidate and amend the laws regulating the occupational safety, health and working conditions of persons employed in an establishment and related matters. The government has, under the code, allowed a single licence for staffing firms to hire workers on contract across different locations instead of multiple licences needed earlier. It has increased the threshold limit of contractor employees from 20 to 50 under the OSH Code, while opening up hiring of contract workers in all areas will ease the compliance for employers.

The OSH Code is one of the four labour codes which the Centre is bringing as part of the major labour reforms where 29 Central laws are subsumed into four broad codes on wages; industrial relations; occupational safety, health and working conditions and social security. While the Wage Code Bill was passed by Parliament last year, the remaining three codes have been passed recently.

“This is a proud moment for India and many congratulations to the efforts of the government to bring the progressive changes into reality. The collective bargaining of workers and employees is not in the thousands of laws and legislations that are impossible to govern, tough to implement and monitor, but in the economic benefit of creating enhanced demand.

Market forces that offer greater employment demand and more opportunities for formal gainful employment with social security and financial inclusion are better suited for worker’s rights than the lack of formal employment but only protection of laws,” says Lohit Bhatia, president, Indian Staffing Federation (ISF), the apex body for the country’s fast-growing flexi-staffing space.

Growth opportunities 

Bhatia adds, “India needs growth of formal employment which will encourage entrepreneurs to invest in India and provide growing employment opportunities. Among the four important labour codes, OSH Code which subsumes the Contract Labour Act, has brought regulation of contract staffing industry to reality. Contract staffing is the only industry which asked to be regulated.

The Code will allow organised growth for contract staffing industry; bring ease of doing business for principal employers, wage and social protection for the contract workers. 

“ISF had been seeking regulations for the contract staffing industry for long. This gives an opportunity for ease of doing business for principal employers through work continuity, credibility building through proper compliance for staffing companies, employment letter and electronic payment transfer for workers giving them dignity of labour and ensuring timely remittances of taxes to government.

This is one to win all challenges plaguing us for long and is a progressive action,” states Suchita Dutta, executive director, ISF, which has 100 member staffing companies that annually represent over 1.1 million contract workforce across industries.

ISF is formed to provide a platform for organised employment, work choice, compensation, social security and health benefits for the temporary workforce. The temporary workforce constitutes a sizeable segment of India’s total workforce.

Members of ISF have generated employment for over 9 million employees over the past 10 years and are among the largest contributors towards Provident Fund remittances under the Social Security Benefits. Currently, the total organised staffing sector represents over 3.3 million contract workers annually.

The labour Code on OSH, as per staffing industry sources, will bring the contract staffing companies as a stronger compliance partner to not only the principal employers but also to the government. 

The staffing companies which will clear the qualifiers will be granted licence to operate by the appropriate Central or state government, which means they will be able to provide work continuity to their user companies for five years without administrative bottlenecks. However, they are of the view that the stringent safety laws may increase the overhead costs for principal employer as per the safety and health code, even as it is a well-recognised need.

Experts are of the view that principal employers across industries will be able to benefit from pre-licensed staffing companies, which will help bring ease of business and efficient management. The ambit will grow beyond the current limited space to benefit the SME and MSME industries, construction sector workers, manufacturing industry and goods and transportation sector among many others.

The grant of Central or state operated licence, will not only expedite the work but also increase the potential of protection for all stakeholders involved. 

Over 85 per cent informal workers will have a safety net as they become part of the formal workforce, while principal employers will be safeguarded as the staffing companies share the responsibility along with them to ensure compliances; and the government will be able to route the subsidies to better managed activities, thus reducing their burden.

“To bring further employment push there are increased flexibility to employ contract workers in core activity. The added acknowledgement that contract workers required during seasonal spikes is a welcome change and has addressed the needed flexibility,” says Dutta. 

“The comprehensive reforms promise to reset the entire regulatory framework to benefit millions of workers and provide enterprises with flexibility, transparency and clarity,” says Chandrajit Banerjee, director general of the Confederation of Indian Industry.

However, all trade unions, including the RSS-affiliated Bhartiya Mazdoor Sangh, have objected to sweeping powers given under the Codes to bureaucrats.

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