Labour issues in India


  • Under fire from trade unions over multiple issues, the government decided to put its ambitious labour reforms on the backburner. The G20 summit has also praised the initiative for promoting labour reforms in its Hamburg Action Plan.


  • Labor protection legislation is one of the basic features of welfare state and aims at providing social justice. The main aim of such laws should be to create more, safer, and rewarding jobs for the labor.
  • This includes standards on minimum wages, working conditions, overtime controls, right against unjustified retrenchment, strengthening of Labor unions, Right of worker to compensation in case of accident at work place, post-retirement benefits, Personal progress , skill development ,Social security and Dignified and respectful job etc.
  • Issues which arise from point of workers and industries

Challenges faced by labours:

  • Contract labour is a serious assault on worker’s right.
  • Privatisation and FDI are other areas of concern for organsied labour.

Problems associated with labour :

  • Huge Informal Sector:

India have about 85 -90 % of the workforce employed in informal sector on which these laws are not applicable. These are micro firms employing as low as 5-10 persons. These employers are discouraged to expand their businesses, by such huge number of regressive laws. Neither they have understanding of laws to that level and services of Lawyers to ensure compliance is much expensive.

  • Huge majority of workforce get no formal training. This results in low productivity and low value addition
  • Entry and exit Barriers for firms and Job security for workers
  • This issue is of retrenchment, Law for this provides that government approval should be taken before retrenchment of the workers (in case industrial dispute act apply). As a rule for good economic environment, there should least entry and exit barriers for Firms in any business. But in addition, social security of the workers is indispensable. It should be notice that a businessmen will scale down his operations almost only in face of losses or in drive of modernization.

Solutions to labour reforms :

  • Social safety net for workers in order to enable capacity building of workers. Social security should be provided by means such as Insurance Pensions, Provident Funds.
  • The Government needs to present in above areas particularly in case of startups and small scale industry.
  • The growth is extremely important for Industry.
  • In UK government provides safety net to employees of startups.
  • Disinvestment and FDI : Trade unions time and again have resented privatization. Government has been ideal employer in pre liberalization era. PSE’s one of the main objectives was to provide employment even at cost of economy but this very policy was result of demise of PSEs. Same is true for FDI.
  • India’s Demographic Dividend: India is expected to generate 51 million jobs till 2019, it is imperative to streamline all laws, to facilitate manufacturing sector in India so as economy could absorb new human resource inflow. Further, there’s expected increase in productivity of agriculture sector, which will result substantial shift to industry
  • The challenge is highlighted in the new round of rural distress. It shows once again that the only viable way to break the cycle of distress is through labour-intensive industrialization, as was done in so many other Asian countries, including China.
  • Making the Indian labour market less rigid

Recent labour reforms:

  • There are a amendments in Apprenticeship Act – In apprentice system, trade workers, engineers (both diploma holder and graduates), 10+2 passed vocational students, need to undergo training in industry to enhance their skill.
  • On completion of this they become regular workers. For this they get stipend in form of remuneration.
  • New amendment increases Stipend to 70 % of wage of regular unskilled worker in first year, 80% in second year. Non engineers can also be appointed, and their total number could be up to 10 % of the total workforce. Now students other than engineering can also seek apprenticeship. About 500 new trades are added.
  • Factories act – Overtime (normal hours increase) , better working conditions, Allows women for overnight work provided there is adequate safeguards and transport facility.
  • Self Certification of docucments which aims to eliminate troublesome submission procedures, under which returns was to be certified by officials.Now by self-certification method, compliance will be checked randomly through firms/employers selected by computer.
  • Apprentice Protshan Yojana and the Effective Implementation of revamped Rashtriya Swasthaya Bima Yojana (RSBY) for labour in the unorganized sector were also launched.
  • Shramev Jayate : Skill development of youth would be created through initiative under ‘Shramev Jayate’. It is one of the most important elements of
  • The “Make in India” vision and aims to create an opportunity for India to meet the global requirement of skilled labour workforce in the year ahead.
About Hamburg Action Plan:

  • It is adopted at the G20 Summit.
  • The Action Plan said that India is introducing labour market reforms to provide security to workers, increase female participation in the workforce and make doing business easier in the country.
  • The G 20 Summit assumes significance in the wake of India trying hard to improve its global
  • The Hamburg Action Plan sets out the group’s strategy for achieving strong, sustainable, balanced and inclusive growth.
  • It will help in boost confidence and contribute to shared prosperity.
  • The Action plan has been developed against a backdrop of improving growth and job prospects.
  • The Action Plan noted that weak productivity growth, income inequality, and ageing populations represent challenges to the growth in the long run.
  • It included new policy actions to tackle challenges in economies, focusing on initiatives that foster inclusive growth, enhancing resilience and further the G20 efforts to implement structural reforms.
  • In the action plan, the G20 members resolved that they will continue to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve the goal of strong, sustainable, balanced and inclusive growth, while enhancing economic and financial resilience.
  • The Action Plan also outlined new actions to tackle the issues of beneficial ownership, correspondent banking and remittances, anti-money laundering and combating the financing of terrorism, fossil fuel subsidies and data gaps.
  • The action plan took note of various steps being taken by the member countries including on monetary policy and enhancing resilience of the respective economies.
  • On promoting inclusive growth, the Action Plan noted that the inequality within many countries had increased until the mid-2000s and the member countries are introducing further measures this year to promote inclusive growth and raise the living standards of all their citizens.


  • The World Bank ranked the country at a low 130th position last year, an improvement of just one position from the previous year.
  • The government wants India to be ranked in the top-50 nations in terms of ease of doing business. The next update to the ranking is expected later this year.
  • The areas where India ranks poorly as per the World Bank ranking include starting a business, dealing with construction permits, registering property, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
  • In Ease of doing Business report India ranked 134 out of the 189 countries.

Important laws related to Industrial relations : 1-Employee state insurance Act: ESI card is issued, insuring worker against any incident at work. There is also ESI corporation. 2-Employees Provident Fund and Miscellaneous provisions Act This is mandatory for establishment employing more than 20 people 3-Factories Act, 1948. 4-Child Labor (prohibition and regulation) Act – prohibits children below age of 14 to work in hazardous jobs. There are demands for complete ban on child employment 5-Industrial Disputes Act – One important provision – Industries employing more than 100 people cannot terminate employment before approval of government. There is strong demand from industry to revise this limit, to facilitate easy entry and exit. 6-Minimum Wages Act. 7-Bonded Labor system ( Abolition) Act – System in which onetime payment was made by employer to supplier or leader of group and whole season’s or year’s services of labor was taken. 8-Contract Labor (Regulation and Abolition) Act, 1970 – Contract labor is indirectly employed by an establishment through a contractor or agency. So their relation with principal organization becomes ambiguous. They are generally discriminated against direct employees in terms of wages, job security, status etc. This act attempts to abolish it in certain circumstances and to bring them at par with direct employees 9-Apprentices Act, 1961

Legal Status:

  • The Article 246(with 7th schedule) of the Indian constitution puts the issues related to labour and labour welfare under the concurrent list.
  • However, the exceptional matters related to labour and safety in mines and oilfields and industrial disputes concerning union employees come under Union List.
  • Our constitution has many articles directed toward their interests for eg. Article 23 forbids forced labor, 24 forbids child labor (in factories, mines and other hazardous occupations) below age of 14 years.
  • Article 43A was inserted by 42nd amendment – directing state to take steps to ensure worker’s participation in management of industries.
  • There are approx. 144 central and state laws, most or all of which seek compliance from industries.

The three major central laws that have been centre of reform talks are:

  International Labor Organization

  • Founded in 1919 as result of Treaty of Versailles, it became first specialized agency under United Nations in 1945. Its vision is to secure humane working conditions for workers and to attain social justice for them universally. In short it carries ‘Decent Work Agenda’
  • It has produced about 189 legally binding conventions on member countries and more than 200 non-binding recommendations. It is also global center for research and study on work and labor.
  • It also gave 4 core standards on labor which are part of general human rights as per UN declarations. These are –

1- Freedom of Association, Right to organize and Right to Collective Bargaining 2- Abolition of forced labor 3- Minimum age of employment and abolition of child labor 4- Prohibition on workplace discrimination and Equal pay for men and women for work of equal value.

Government’s initiatives

  • The Labour Ministry soon likely to ratify two key international conventions on child labour marking an important step towards eradicating child labour. The move followed amendment to Child Labour Act.
  • India has so fare retified 45 conventions of International Labour Organisation, out of which 42 are in operation.
  • Complement abolition of child labour is one of the goal of government under Nation’s Sustainable Development of 2030.
  • The Centre has made changes to the draft of the Factories Act, 1948, to allow states to take a call on the number of workers a unit has to employ to be covered under the law.
  • Rajasthan has been the pioneer in labour reforms. It has relaxed the provisions of the Factories Act, Industrial Disputes Act, Apprentices Act and Contract Labour Act.
  • Madhya Pradesh has amended at least 20 labour laws, including 17 central ones, such as the Industrial Disputes Act, Factories Act and Shops and Establishments Act.
  • The Maharashtra law department has amended the Contract Labour (Regulation and Abolition) Act to make it applicable only to establishments in which 50 or more workers are employed.


  • The government needs to bring more investor-friendly labour laws at the national level and reforms such as deregulating labour laws.
  • Governments should maintain balance between workers’ rights and industrial growth by legislation.
  • The reforms need inclusive growth, so that its various implications on laborers are also addressed.
Print Friendly and PDF