Page 28 - Plastics News October 2020

Gains from labour codes shall drive MSMEs forward

Rituparna Chakraborty result in acts of omission. The attempt to reduce these
variances across the labour codes definitely benefits
Balancing between formal job creation and protecting
worker's rights must have been challenging for our public smaller businesses who may not have the luxury of
investing in large internal legal experts.
policymakers as it's the heart of all debates around
labour reform. We recently witnessed all four labour Promotes entrepreneurship by providing room to fail –
codes become the law subsuming 29 of the Central Now one requires government permission for layoffs and
labour codes. While we are seeing ongoing debates on its retrenchment only if the number exceeds 300 and
impact on employers, employees, informal workforce contrary to the popular view that this shall encourage
and the economy – let's try and focus on how this impacts hire and fire, it actually creates room for MSME to aim
small businesses – whether we end up with more dwarfs higher and grow from being dwarfs to adults without the
then babies. Segregation of Small businesses (MSMEs) as burden of failing.
of June 1, 2020, under micro enterprises, small
Allows flexibility by legitimising various types of
enterprises and medium enterprises is done through a
employee supplementation – With creating bold
combination of investments and turnover.
legislations, on one hand, acknowledging all forms of
While India is using investment and annual turnover as livelihood – permanent employees, fixed-term
the criteria to classify MSMEs, globally, the number of employees, contractual employees and gig workers and
employees is the most widely used criteria for classifying on the other creating tight guard rails to upload the
MSMEs. It is an important exclusion as employee interests of all stakeholders it has provided MSMEs with
thresholds play an important role in understanding the wings to fly.
impact of the labour codes. Hence it is important to call
There are however some sore points for MSMEs in the
out that the various provisions of the labour code shall
labour codes which includes:
impact each of the above three category of small
Cost of compliance for safety norms has increased –
businesses differently. However, for easy comprehension
Clearly, the stringent safety norms that all
let me attempt some noticeable benefits and challenges
establishments have to follow as per the code shall
for small businesses on account of the freshly minted
impact the MSME employers more than the larger
labour codes.
companies. While its need from the workers perspective
Some of the key benefits shall include:
is obvious however it would lead to cost explosion for
Codes prescribe size-based thresholds – Most of the MSMEs.
labour laws apply to establishments over a certain size
High penal provisions – Across all four codes the penal
(typically 10 or above). These size-based thresholds is a
provisions have become quite steep whether it is in
considerable positive that shall help small business to terms of penalties as well as in terms of jail terms. This
reduce their burden of compliances enabling them to
would definitely be a setback for those MSMEs.
stay competitive and thrive.
Recently our Finance Minister Nirmala Sitharaman said,
Lower cost of compliance – Simplification,
“Atmanirbhar Bharat doesn't mean India becomes
rationalisation and greater digitalisation shall help
inward-looking or isolate itself – that will not happen. It
MSMEs save considerable operational costs by reducing
is just a focus on being self-reliant and grow local brands
their cost of compliance. Previously the cost which went
and businesses.” It is true MSMEs need access to capital,
in compliances did not translate into any benefit for favourable tax policies, government regulations,
employees. The new reform will help address that.
promotional policies – however labour laws would
Lesser complexity – Previously several laws with differing remain an important driver for the success of MSMEs.
definitions often used terms like “appropriate Hence we shall celebrate the small gains the labour
government”, “worker”, “employee”, “wages”, codes have for our local brands and small businesses with
“establishment” – resulting in varying interpretations. its imperfections.
This would lead to complexity in compliance and often
(Courtesy: F.E)

October 2020 28 Plastics News