Labour Reforms in Private Sector

The private sector is expanding. It cannot afford to be inward looking in terms of labour welfare and reforms. It is high time that the private sector takes the labour welfare into utmost consideration and gives top priority. The economy crisis and uncertainity can create unsolvable crisis. In these circumstances the private sector must take important precautions like compensation in case of retrenchment, insurance and provident fund for the laid off employees.

Gurcharan Das writes in The Times of India (19 September 2009)


Anyone travelling in India by air must have got a sinking feeling last week when Congress leader Sanjay Nirupam demanded that Jet Airways be
nationalised. He raised the spectre of the ugly days when Indian Airlines had a monopoly of the skies before 1991. This would have effectively turned Jet Airlines from one of the world's best airlines to one of the worst. Naresh Goyal, Jet's founder, on the other hand, was scared of his pilots forming a union because of his memory of the 1974 Air India pilots' strike which started the decline and fall of Air India.

The trouble in Jet Airways began when some of its pilots wanted to form a union. The management said "no", and sacked two of the leaders. In response, the other pilots went on 'mass sick leave', which left tens of thousands of passengers stranded, wondering who to blame for their undeserved suffering. This comes at a time when the aviation industry is going through very tough times.

The Mumbai high court ruled the strike illegal. After the dispute was settled last weekend, Justice D Y Chandrachud refused to drop the charges against the pilots. Reflecting the angry public mood, he wanted to prosecute the pilots for contempt of court. "Employees of public utility services...cannot hold the public to ransom," said the judge. The pilots' lawyer argued, "Pilots are an emotional lot and have a sensitive task." The judge countered, "Even doctors and judges have sensitive jobs."

The right to form a union is part of every democracy but should pilots, who earn Rs 3-4 lakh a month, be equated with downtrodden labour? Should persons who perform essential services in public transport, military, police and hospitals, be allowed to disrupt services? The judge obviously does not think so.

The Jet Airways affair is an opportunity to revisit our archaic labour laws, which hurt the interest of 90 per cent of India's employees while protecting an aristocracy like the pilots. Of course, labour laws are needed, but they should protect workers, not jobs. All governments try to prevent job losses but they never succeed. Companies have to survive in dynamic market conditions. In a downturn, orders are reduced from customers and the only choice before a company is to reduce its workforce or go bankrupt. Sensible countries, like those in Scandinavia, give employers the freedom to hire and lay off workers based on market dynamics. They protect workers who lose jobs through a well-designed safety net of unemployment insurance and retraining.

India's labour laws do the opposite they protect jobs, not workers. They assume that a job is for a lifetime, and do not allow employers flexibility to lay off workers in a downturn. Thus, Indian companies avoid hiring permanent employees, and 90 per cent of India's workers have ended up in the informal sector without any benefits or safety net. This is one of the reasons that the manufacturing sector has not become an engine of mass employment in India as it has in the Far East.

The answer is not to equate income security with job security. Let us begin by raising job retrenchment costs from the present 15 days' salary for every year worked to 45 or even 60 days. Second, amend provident fund rules so that employees can access their retirement accounts when they lose jobs. Third, raise the contribution to provident fund in order to provide a softer landing to job losers. Fourth, cover unemployed workers under a universal health insurance, such as the excellent Rashtriya Swasthya Bima Yojana. Finally, companies should pay for worker retraining and inflict pain on all employees before laying off some for example, cut executive salaries by 50 per cent, and worker salaries by 25 per cent. Unions will object of course, but the reform of unions has to be part of the solution.

The Jet Airways strike has presented us with a mirror to look at our labour laws, showing how we deceive ourselves, thinking that we are protecting labour when we are only protecting an aristocracy like the pilots.