Companies will soon be required to pay for re-skilling retrenched workers

Companies will soon be required to pay for re-skilling workers — a sum which will go directly into their bank accounts within 45 days of their retrenchment.

The Industrial Relations Code Bill, 2019, introduced by Labour and Employment Minister Santosh Kumar Gangwar in the Lok Sabha on Thursday, has proposed that the government set up a re-skilling fund for workers affected by retrenchment or closure of units.

The fund will be formed through contribution from employers equivalent to ‘15 days of wages last drawn’ by workers being retrenched. “The fund shall be utilised by crediting 15 days’ wages last drawn by the worker, who is retrenched, within 45 days of such retrenchment,” according to the Bill.

In a major step towards improving harmony between workers and employers, the Union government has proposed to empower trade unions with bargaining powers to negotiate with companies in case of an industrial dispute.

A trade union, which has the formal support of 75 per cent workers in an establishment, will act as the ‘negotiating unit’ within the establishment to resolve disputes. In case unions fail to get 75 per cent workers as their members, a negotiating council will be formed, which will have a member representing all trade unions.

This is important in case an establishment has multiple trade unions. In many establishments, workers are associated with various trade unions and there have been many cases in which unions have protested against non-recognition by the management.

Currently, there is no provision for recognition of trade unions in India’s central labour laws at the establishment level while resolving an industrial dispute.

However, some experts found the proposal to be stringent. “The objective of the Bill says that it wants to promote the concept of a sole bargaining agent. But the condition of getting 75 per cent membership is so stiff that the idea is self-defeating in nature. No trade union in the world will be able to garner that level of support,” K R Shyam Sundar, professor of human resource management at XLRI-Jamshedpur, said.

Though there is a fundamental right to form unions and a statutory right to get it registered, there is no corresponding legal obligation on employers to recognise a particular trade union, even if it meets the terms of registration. Typically, managements refuse to recognise small or regional trade unions.

The refusal of employers to recognise trade unions has been a trigger for many industrial disputes in India.

In 2009, there was a long stand-off between the workers and management of MRF’s Tiruvallur plant in Tamil Nadu over recognition of a trade union.

In 2011, Maruti Suzuki’s Manesar plant had witnessed a 13-day stand-off, with the workers demanding recognition of a new trade union. The workers complained the trade union recognised by the company wasn’t representative of them.

In the Industrial Relations Code Bill, the government has gone back on its 2015 proposal to allow factories with up to 300 workers to retrench, lay off or shut shop without seeking the government’s permission. At present, factories with up to 100 workers can do so.

However, it has proposed to give executive powers to the state governments to ease retrenchment norms. By doing this, the Bill has proposed to ensure both Centre and state governments do not have to go through Parliament or legislative assemblies, respectively, to increase or decrease the threshold for providing flexibility to employers. This provision, which was a part of the Industrial Disputes Act of 1947, was one of the contentious provisions in the present law.

It further has a provision to safeguard the amendments brought in by various states to ease retrenchment norms. States such as Rajasthan, Haryana, Madhya Pradesh, Andhra Pradesh, Uttar Pradesh, and Jharkhand have increased threshold of retrenching workers or shutting shop without seeking official permission from 100-300 workers.

In a bid to avert flash strikes, the government has proposed that unions in all establishments will have to give a notice period of 14 days. At present, workers employed in ‘public utility services’ units are required to do so.

Sundar said that the proposal to give states to frame its own rules for easing retrenchment norms ‘can be whimsical’ as the law-making process will be weakened from a democratic set-up to an executive power.


  • Centre has enabled state governments to ease retrenchment norms through executive order
  • The state governments’ move to ease retrenchment norms will be safeguarded
  • Legal framework to hire workers on a fixed-term contract by introducing fixed-term employment across the country
  • Fixed-term workers to get equal rights as a regular worker in an establishment
  • Re-skilling funds to be set up for retrenched employees; employers to contribute 15 days of wage for each retrenched worker
  • Trade unions to get bargaining power as these will be recognised at the level of establishment for the first time

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel