Informal economy needs compensation: Lohit Bhatia

Enterprises of scale in sectors like IT and BFSI have long enjoyed enough compensation. They have been provided with additional allowances & benefits that offer financial inclusion and some measure of social security.

However, the same has not been the case for industries like manufacturing, goods & transport, and warehousing that house a large informal workforce.

In today’s job market, staffing employment, seasonal employment, gig work, and flexi-work are all modes of employment that exist. But these do not fall under the purview of traditional labour laws.

New Labour Code

In order to provide the same degree of flexibility to the core sectors as is accessible to the services sector, it was imperative that our labour laws be redrafted in line with the changing times.

The government’s rolling out of the New Labour Codes is a much-anticipated move that will help boost business continuity and job creation across industries, in particular MSMEs and start-ups.

With more streamlined labour laws implemented, there is likely to be a reduction in administrative hassles and the cost to comply will reduce, allowing larger setups in these industries.

Increased investment in traditional sectors will also help enable entrepreneurs to take the risk and deploy more blue and grey collar workers, bolstered by regulatory support.

In line with the government’s vision for Aatmanirbhar Bharat, these reforms also help improve ease of doing business by streamlining compliance processes and allowing for greater flexibility in hiring.

In addition, these regulations will play a role in formalising a large part of the unorganised sector, and help create social security for over 50 crore workers across the country.

Uplifting informal sector

Uplifting the informal segment and providing them the same opportunity that is available to knowledge economy workers is a welcome change. The amount that is to be realized from the contributions to social security, with the reforms coming into effect, can allow massive investment in social infrastructure such as healthcare that can be extended universally, without additionally burdening the exchequer with supplementary schemes.

Employment generation “merit service”

In order to further supplement the job market, we encourage the government to recognise employment generation as “merit services”, under the Central Goods & Services Tax Act, which would allow for a reduction in the tax slab that is currently applicable, i.e. from 18% to the lower slabs of 12% or 5%.

For contract staffing firms that fulfil the manpower requirements of large companies in various sectors, operating margins are often very slim, which leads to a crunch on working capital.

Lowering the tax slab on the same will free up capital for seamless operations, and help ease the compliance burdens on many companies that rely on staffing firms to meet the same.

This will not only benefit the staffing and HR industry, but also employers across sectors by providing them an agile mode of hiring, which will in turn boost job opportunities.

(Lohit Bhatia is President – Workforce Management, Quess Corp. Views expressed are personal)