17th December – New Industrial Code 2019

The new Industrial Relations Code, 2019 provides a clear definition of how fixed-term employment should be looked at hereon.

Need for a new Code –

  • For companies, the task of re-skilling and the costs incurred include primarily the cost of re-skilling, wages and lost productivity while the employee retrains. The proposed re-skilling fund will help deal with the skilling challenges that both employers and employees face during transition between roles or organisations.
  • Given the new gig economy environment, employment has moved from a lifetime contract to a taxicab relationship.
  • The other aspects of the bill pave way for requirement-based hiring and promote setting up of more enterprises, thereby creating more job opportunities. Not only does this increase transparency and accountability but also leads to higher productivity.

Significance –

  • It would help to formalise, rationalise and simplify the process of having contractual employees at employers’ discretion.
  • The reform initiative would also protect the interest and benefits of employees in fixed terms as regular workers.
  • It provides clarity of law, and a road map has been defined in terms of fixed-term employment. This should help both employers and their employees, thus creating ease in doing business.
  • The code will open doors for providing employment to many labour market outsiders across industries.
  • It will also enable employers to hire employees for short-duration projects, employees interested in doing more than one job as well as when employers want to hire additional number of employees due to seasonal increase in business.
  • The proposed legislation will help create an ecosystem for job creation and will support startups seeking talent across skill sets with short-term engagements.

The pitfalls –

  • If an employer wishes to terminate an employee’s contract early, if such provisions are absent in an agreement— the fear of loss of employment may remain for the employee.
  • Currently, the non-renewal of a fixed-term contract constitutes a dismissal in law. Such aspects are now left open in the IR Code Bill 2019.
  • The proposed law has vested powers with the government officers for adjudication of disputes involving penalty as fines, thereby lessening the burden on tribunal.

Way forward –

Employers could go a step further and redirect the savings realised from automation and AI into skilling retrenched employees and converting them into an upgraded, productive workforce. The focus would be on creating agile workforces with transferable skills.


QUESTIONThe New Industrial Code 2019 promises to formalise the informal economy. Discuss the steps being taken under the new code and examine its effectiveness.

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