Around 90% of India's estimated 47-crore workforce are not entitled to get any sort of benefit or compensation in case they are laid off in the wake of the Covid-19 pandemic, experts said.
Unlike retrenchment, lay-offs are temporary suspensions. Employers lay off employees in different circumstances, including when they find revenue generation difficult like the present situation. Work from home is not an option for India's 84% of the workforce as their roles are mostly outbound, according to Rituparna Chakraborty, co-founder, Teamlease.
Under the extant rules, employees belonging to the unorganised sector, which employs over 80% of India's working population in 2017-18 as per the National Statistical Office (NSO), can’t claim any compensation in case of lay-offs. In a similar situation, one half of the remaining workforce belonging to a step higher than the workmen level is also bereft of any benefit.
The other half, 4.52 crore in number, is entitled to get half of their salary for a maximum of 45 days in case the employer seeks lay-off. But beyond 45 days, their employers are not bound to pay them even half of the salary.
The unorganised sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services and operated on a proprietary or partnership basis with less than 10 workers. These sects are not covered under any social security benefits.
Of India's 47.12 crore workers in 2017-18, 24.21 crore are self employed, including own account workers, employers and unpaid family labourers. The remaining is almost evenly distributed between salaried employees and casual labourers.
The self-employed category includes those who work for themselves and do not sell their labour to anyone else in return for wage. Salaried employees are those who receive predetermined wages/salary on a regular basis. Casual workers include those who are hired for very short time period on daily or monthly basis. Salaried employees are better off in qualitative terms as they receive predetermined wages/salary with or without other benefits like social/job security.
Trilegal, which provides labour law advice to clients, said a large number of enterprises, mainly belonging to the service sector that have been impacted by Covid-19, may resort to salary cuts for employees. Lay-offs may follow next if the current situation prevails for some more time; while retrenchment will be the last resort.
According to Atul Gupta, partner, Trilegal, "Unlike some developed nations, India does not offer any unemployment insurance to a vast majority of its workforce. There are limited schemes under the Employees’ State Insurance Act (Rajiv Gandhi Shramik Kalyan Yojana and Atal Beemit Vyakti Kalyan Yojana) that offer unemployment benefits, but these too only apply to limited individuals-those working in the organised sector establishments and whose wages don't exceed Rs 21,000 per month and who meet minimum prior contribution criteria of at least 2-3 years of regular ESI contributions before they are unemployed. Daily wage earners do not fall in this category."
"In case of retrenchment due to Covid-19, workman category employees with one year or more of continuous service would be entitled to 15-day wage for every year of service or part thereof in excess of 6 months. They would also be entitled to minimum one month notice or pay in lieu. Other benefits may be available like leave encashment and gratuity (if employed for 5 years or more)," said Gupta.
Factories, mines and plantations which employ 100 or more workmen in most Indian states need prior government permission for lay-offs or retrenchments, subject to limited exceptions.
Lay-off or retrenchment compensation won't be available by law to non-workman category staff unless the company has a policy to this effect. Such benefits also won't be available to self-employed individuals who are impacted by a recession or individuals in the unorganised sector who work on jobs on a temporary basis or for short durations. Lack of a comprehensive unemployment insurance can significantly impact such individuals.
RP Yadav, chairman, Genius Conusltant, said there should not be any lay-off or retrenchment in a situation like this now as it is an extraordinary international crisis. In case, one has to take such measures, it should pay at least double of statutory norms.
Labour expert KR Shyam Sundar of XLRI said, "There is a serious need to devise broader social protection policies for even normal business problems, but for emergencies such as this, the proposed social security code and industrial relations code present an opportunity to devise broad-based social protection."