Seeking a concerted approach

The Indian Staffing Federation (ISF), the apex body representing India’s fast growing contract staffing industry, has unveiled India@Work: Vision Next Decade, a blueprint for formalisation of India’s vast informal workforce and implementation of labour codes in the country. ISF’s vision paper comes at a time when India prepares for an economic surge, though the growth has been uneven and leaving millions of workers seeking government policy/subsidy support.

ISF’s Vision paper urges for the formalisation of a vast informal workforce of over 400 million in the country, which could be driven through organised staffing companies. The report cites that India, with almost 85 per cent of informal labour, generating more than half of the country’s GDP, requires a shift towards structured, formal employment. While the government is trying to address issues for the migrant workers, ISF is going beyond stop-gap solutions, inviting inclusion through formality in the labour market. A noticeable distinction was seen during the pandemic, when the formal workforce, comprising less than 15 per cent of the total, had access to their social security, which aided them in overcoming the challenges, says the report.

Key recommendations made in the paper by ISF include removing employment bottlenecks, urgency to action, implementation of the four labour codes in India, policy changes and encouraging schemes, consideration of employment services as ‘merit services’, with lower GST slab tax rates at 5 per cent with ICT benefits, instead of the current 18 per cent and linking of skilling initiatives to employment.

Helping India rise

 “ISF stands by its pledge to provide end-to-end employment solutions to build a formal India, where improving access for underprivileged workers is one of the core focuses,” says Lohit Bhatia, president, Indian Staffing Federation, commenting on ISF’s visionary aim to ‘help India rise’. “We will be looking majorly on three crucial aspects to address the challenges posed – increasing the social security ambit; improving the concept of in-hand wage and implementation of labour codes; and minimising any obstacle to a favourable working condition.”  

“Incorporating data-driven methodology, ISF is bound by its commitment to adopt any new possibilities by implementing newer tools and technology for better results,” asserts Manmeet Singh, vice-president, Indian Staffing Federation. “The plan is to harness information sourced from government-provided LIN and Jan Dhan Bank accounts to monitor and boost the formal labour sector”.

“The plight of lower-income and semi-skilled workers underscores the pressing need for concerted action,” adds Suchita Dutta, executive director, Indian Staffing Federation. “Income inequality and rising poverty levels serve as stark reminders of the challenges we face. With 85 per cent of India’s workforce operating in the informal sector, it is imperative to initiate a structural shift towards formalisation to ensure equitable opportunities and sustainable livelihoods for all.”  

According to the ISF, as India prepares for an economic surge, the pick-up in industrial activity is still uneven, leaving millions of labour/workers seeking government policies/subsidy support. There is a visible imbalance that cannot be ignored any further. Millions of livelihoods have come to be dependent on the government-sponsored financial support system towards informal and unorganised workers.

Pent-up demand, on one hand, is driving the consumer spend, pushing sectors like ecommerce, consumer goods, logistics, hospitality, travel and tourism while on the other hand, labour-intensive sectors like manufacturing, goods and transport services, construction and real estate face extreme lack of access to formal employment structures. It is evident that most sectors is likely to be deeply impacted with this prolonged gap indirectly, rising a great wage and social protection problem in near future.

The labour market has been severely hit at record speed, particularly so for lower-income and semi-skilled workers, who do not have many options. With activity in labour-intensive sectors worsening, income inequality and increasing poverty are two looming challenges arising for the informal and unorganised sector.

ISF believes that India’s collective institutions of protective labour legislation and wage setting system have created significant rigidities and inflexibilities in labour markets and it is an empirical issue. There are concerns among policy makers and academics alike that the collective institutions of restrictive labour legislations in the labour market, has hampered output, investment and formal employment expansion. The proposition is to remove the bottlenecks, so that 400 million informal employees can expect transition to formal employment.

Past challenges and wage disparity have led to acceptance of differential treatment without protection ‘as a norm’ for daily wage workers, labourers, construction workers – leading them to remain in informal employment. Employers who are not able to adhere to the laws of the land like providing minimum wages, social security, GST, have encouraged such form of employment by creating a perception for workers that they are getting more ‘in-hand’ salary. The current rigidities and inflexibilities play a large role for the labour market constraints that make effective protection of labour and any initiative for adjustment/changes practically impossible. The whole system acts as a disincentive towards future formal employment creation.

The federation is also of the opinion that the government can bring encouraging schemes that will formalise the workforce. The current initiatives could be extended, whereby the lower contribution in social security at the hands of the entry level worker can also include MSME workers, daily wagers, gig and platform workers and domestic workers.

Social security 

It also says that schemes can be introduced for ESIC contribution whereby the government can motivate more workers to be brought into the social security ambit with a similar three years of contribution. This will also motivate employers to bring many informal workers into formal employment. Most of these schemes can be funded by reduced MNREGA and Ayushman Bharat schemes, as naturally the benefits of increased social security require much lower spends on government benefit schemes for daily wagers.

“The incidental coverage of nearly 400 million additional individuals will mean healthcare coverage of nearly 10x of the current ESIC coverage at nearly 38 million beneficiaries,” says the statement. “The impact in healthcare of covering additional 400 individuals can add investment in Indian healthcare to easily cover 500-bed hospitals across all 740 districts in the country.”

Besides, the government, according to the ISF, should focus to linking the skilling to employment. The initiatives can be propelled from district levels, wherein skill companies can be prompted to mobilise daily wagers, train and move them to first-time formal employment across sectors like construction, mining, transportation and manufacturing. For these industries, the scheme on social security support should be immediate.

Despite widespread reforms, including trade policy reforms and recent revival packages announced, a key issue that often emerges in policy discussions is the lack of labour market reforms. Specifically, some sectors will be benefitted by dedicated labour, higher retention, increased productivity at plants/construction sites, lower absenteeism due to health-related issues. Qualified labour that can be trained for higher order roles in future, thereby assisting in worker retention and enhanced skilled category workers. The sectors that can drive large number towards formalisation are SME and MSME, construction sector, manufacturing goods and transportation sector.