The clause allows companies to employee and sack up to 300 contract employees according to their business needs without giving them compensations.
In a bid to shed its anti-worker tag, the government is planning to do away with the ‘hire and fire’ clause it had introduced in the Industrial Employment (Standing Orders) Act.
The decision was taken after RSS affiliate Bharatiya Mazdoor Sangh (BMS) put forward its objections regarding the rule, sources in the Ministry of Labour and Employment said. BMS leaders had recently met BJP president Amit Shah regarding the same. “We were assured that changes in labour laws and reforms would be undertaken only after deliberating with trade unions. The BJP president also promised to strengthen mechanisms to settle issues,” a BMS leader said.
A ministry official said the decision had received support from political quarters. “If we can put together all initiatives, including a possible change to the number of people factories can hire or fire, the ministry will be successful in changing its image from anti-worker to pro-worker,” the official said.
The government had inserted the hire-and-fire clause in the Act through an amendment last year, ostensibly to promote the ease of doing business and reduce the role of middlemen. It had notified fixed-term employment only for apparel sector in February 2017, but it was extended to all sectors in March this year.
The clause allows companies to employee and sack up to 300 contract employees according to their business needs without giving them compensations. It states that a fixed-term employee “shall not be eligible for all statutory benefits available to a permanent workman in his period of employment” and that “no notice of termination shall be necessary in the case of temporary workman”.
The clause was inserted after lobbying by industrial and corporate groups who argued that it would give a big push to the government’s move to introduce ease of doing business. However, critics argued the move would make it easier for companies to lay off workers, which could have a bearing upon job creation in the country.
Job recruiters confirmed there had been mass layoffs of temporary workmen in recent months. “If you ask about bulk firing, we have not recorded such thing in mid or senior level workforce. But there are six to seven instances reported by a couple of textile companies and in gems and jewellery sector, where there were instances of bulk firing (above 100 workers) after March. Most of them were contract labourers and companies cited lack of order and credit crunch. Some bulk firings were also reported in the telecom sector,” a senior official from Naukri.com, a leading online job portal, told Express.
An official of the Gems and Jewellery Export Promotion Council said layoffs mostly “happen at lower level and with low-skilled workforce”. “Mostly they are hired on contract for short period of time (6-8 months), which depends on the order received by the companies. Lower order or poor sales directly impact layoffs,” he said.
The government is also considering others steps to improve its image, which includes better wages for contractual employees. According to sources, the ministry is also keen to introduce some changes in the EPFO and ESIC to make more employees eligible for pensions and provident funds. “The ministry also plans to ensure social security cover and make work environment better,” Labour Minister Santosh Gangwar had said at an International Labour Organization conference last week.

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