Revamping regulatory framework critical to creating one crore jobs

According to a recent press release by TeamLease Services, regulatory changes are critical to creating one crore regular jobs. 

Elaborating on the need for regulatory reforms Ms. Sonal Arora, Vice President, TeamLease Services shared, “A revamp of the regulatory eco-system is extremely important to improve further the ease of doing business and raise the labor force participation in the formal sector. A few key but impactful regulatory reforms can raise the share of formal employment from the current 10% to nearly 40% and create one crore jobs."

Here are the fundamental regulatory changes that have been suggested by the staffing company: 

India has 44 fundamental labor laws. Many of these are outdated with little relevance. The multiplicity of rules and procedural delays impose unreasonable transaction costs on businesses. The labor codes should aim to standardize terminologies, definitions, and procedures which are currently varying across statutes. This would simplify and reduce the compliance burden for employers and will be a critical catalyst for job creation without diluting the safety, security, and health of employees.

Every company in India currently has multiple numbers that include Labor Identification Number (LIN)/Shram Pehchaan Sankhya (SPS), Corporate Identity Number from ROC, PAN Number, etc.

Adopting the PAN number as the UEN rather than creating a new series is logical because it is already used for Income Tax, Customs, Excise, and Service Tax.  Adopting PAN has many advantages; it allows all kinds of entities to obtain a number, the technology is already tested, and in place, it allows for the Aadhar linking of office bearers, it is already used by a large number of entities, it will not require any change in banking or tax systems, it will not require a new law to govern the issuance authority, and it does not require a new authority to host the UEN and run the system.

India has the highest payroll confiscation in the world -35% of salary is confiscated at the source for low wage employees in a cost-to-company world. More importantly, these deductions are massively regressive; the 35% for employees with wages of Rs 12,000 per month falls to a mere 2% for employees with wages of Rs 55,000 per month. 

 Salary deductions to such a high extent for entry-level workers which are difficult to enforce in the informal sector, lead to a massive disparity in Net Take Home salary between employees engaged in the formal sector and informal sector, thereby discouraging employees from seeking out opportunities in the formal area. While social security benefits are essential but salary belongs to employees, and we need to give our employees three important salary choices regarding:

• Choose whether or not to contribute the 12% employee contribution to Provident Fund
• Choose to pay their 12 percent employer contribution to EPFO or NPS (National Pension Scheme)
• Choose ESIC or Private Insurance

 Both Acts must be amended to give workers the chance to stay with the status quo or pay their benefits to alternate providers and choose their level of contribution (without changing the employer contribution).

Labour laws currently cost employers about 500 crore sheets of paper per year (about 6 lac trees), many lacs of working hours and mandate hugely inefficient banking transactions. Further, the government is not able to cross-reference this information and physical presence breeds corruption.

 The Shram Suvidha Portal must adopt the PPC – Paperless -Presenceless - a Cashless framework in the five interactions between employers and government and employees and government. This will not only help reduce the carbon footprint but also lead to improvement in ease of doing business.  Further, it will improve enforcement since online data can be easily cross-referenced for inconsistencies and anomalies. Online data can also be analyzed systematically for research, policymaking, and other purposes.

The Factories Amendment Bill 2016 (passed by Lok Sabha) needs to executed to keep pace with the global economy requirement, technological changes, integration of the global economy through trade, investment, financial engineering, multi-location value chain, the growth of information technology. Some of the much needed enabling changes pending for implementation include: Definition of Factory - Factory which employs 40 or more workers is defined as ‘factory’ deletion of Director as ‘occupier,’ provision for women working in night shift – voluntary and subject to conditions and Increase in Overtime hours ceiling.