Suggestions on Labour Policy Reforms in Andhra Pradesh

Categories: Labour DayPolicy

The changing conditions of work and employment in the 21st century require a need to relook at the labour laws. In India, labour is on the concurrent list, allowing both the centre and states to pass legislations. This has led to a complex system of laws governing industries and workforce. In this paper, I examine the major changes to the industrial landscape in the context of Andhra Pradesh, focusing on reforms required for a more relevant labour policy.

Simplifying Labour Laws for Micro and Small Enterprises:

Currently, there are about forty four laws governing labour in India.

Theycan be divided into four categories – laws concerning conditions of employment, laws on wages, labour welfare and social security. This up a total of 44 laws. In addition to this, every state has separate regulations and legislations that all enterprises need to comply. This multiplicity of labour laws has created a very complex legal environment especially for the micro and small-scale enterprises (FICCI, 2014).

ILO’s survey in three Indian states on micro and small enterprises shows that enterprises most often avoided formal registration and compliance with labour laws because they felt it was too complicated and the process was too costly (Kannan, 2014).

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In some cases, they were also unaware of the requirements to run an enterprise such as registration, maintaining employment records and minimum wages to be given. The tendency of employing less than 21 workers in order to evade payment of EPF was also witnessed.

Hence, in the case of smaller enterprises, the complicated nature of the laws paves way for evading compliance and ignorance.

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We suggest that a separate set of simplified laws should be created that apply only to small and micro enterprises. This would reduce the difficulties in establishing small enterprises and help in compliance and labour welfare.

Contract Labour:

The Contract Labour Regulation and Abolition Act of 1970 is applicable only to “establishments in which twenty or more workmen are employed as contract labour”. The act was put in place to prevent exploitation of contract labour and provide them with better working conditions.

From my observations on the field in Andhra Pradesh and other South Indian states, In order to evade the provisions of this act, most contractors operate several establishments of not more than twenty labourers each. In order to curb this practice, the focus must be shifted to the employer (the establishment that employs contract labour) rather than the individual contractors. Any employer who engages more than 20 contract labourers must be made to source them from a single contractor. The accountability is hence on the establishment rather than the contractor. By making this a mandatory requirement for obtaining the license to operate for the establishment, the compliance with the Contract Labour Act can be ensured.

As per the act, the registration fee for the employer of contract labour and security deposits for contractor license increases depending on the number of contract workers employed. This is another major reason for evading compliance with the act. Hence, the labour department should reduce these fees with a focus on increased compliance with the act rather than collecting revenue from the employers and contractors.

License for flexi-staffing agencies:

The International Labour Organisation (ILO) defines flexi staffing as ‘services consisting of employing workers with a view to making them available to a third party, which assign their tasks and supervises the execution of these tasks’ (Convention 181). India has been witnessing a huge growth in the flexi staffing industry. Despite the general notion that flexi staffing reduces the creation of permanent jobs, research shows that 92% of companies would not hire permanent jobs if agency work was not available (WEC, 2017). In recent years, the industry is growing in India making it one of the top 5 countries worldwide with respect to the worker base (2.4 billion workers). Though the IT industry comprises of a huge chunk of the flexi staffing agencies in India, sectors such as government, hospitality, agriculture, retail and manufacturing also resort to flexible staffing.

However, with respect to legislation, flexi-staffing is non-existent in India. There are no legal definitions of the agencies operating, compliances or regulations. Most of the flexi-staffing related certificates and licenses have come under the ambit of state legislation. This brings up the need for a uniform recognition, registration and licenses for flexi-staffing agencies across all states and the different industries in India (ISF, 2014). China, which has the second highest flexi staffing work base in the world, has followed a similar process for its agencies. Any recruitment agency wishing to provide manpower services is required to apply for a business license with the Administration for Industry and Commerce. This is a nationally recognized license and can be used for providing services throughout the Chinese mainland (ISF, 2014).

Startup Policy

With the aim of having an entrepreneur in every household, the Andhra Pradesh Start Up policy 2014 has set high targets to foster innovation and entrepreneurship. Focusing on infrastructure, incubation and funding, the policy aims to create a startup friendly atmosphere (GoAP, 2014). Startups in the state are exempted from the payment of deposits for the items they manufacture and also from inspection of the labour department for the first 3 years of setting up. This essentially exempts startups from compliance with all labour laws in their initial three years.

But India has been noticing a worrying trend of startups laying off employees starting from the second year of setting up. Most startups do not venture beyond their inception stage and run on very less manpower. Some that grow at a large-scale are not able to capitalize on the momentum. Since compliance to labour laws is not mandatory, most startups look to stabilize themselves by cutting down on the number of employees. In such cases, the startup policy can mandate a necessary growth in employees for continuing to receive the benefits of the policy in their third year of setting up. This initiative would incentivise scaling up and provide better job security to the workers.

Automation and Job Transitions:

One major issue facing the labour market in the next decade is the loss of jobs due to automation. In India, several of the low to medium skilled jobs can be automated either partially or wholly. The already shrinking size of the agriculture workforce will be accompanied by a reduced workforce in sectors such as manufacturing and certain services such as office support, food preparation, and hotel and travel workers (McKinsey Global Institute, 2017).

However, the changing global scenario and the need for increased automation is slated to bring about new jobs that did not exist in the previous decade together with an increased demand for certain jobs due to demographic changes. Healthcare, advanced and automated technology, energy and energy efficiency related jobs are some of the sectors predicted to grow in the coming years. An increase in the number of aged population would bring about a greater need for jobs in healthcare and care for the aged. The current budget’s focus and commitment to healthcare through the health insurance cover for the poor would open up better healthcare options to a greater number of people creating an increased need for healthcare professionals. The country’s commitment to the Paris Climate Agreement would also see a boost to the renewable and clean energy sector. Andhra Pradesh has both huge potential and political commitment to renewable energy as seen in the solar and wind energy policy, 2015 drafted by the state . This points to a need to develop the relevant skills in the new workforce and re-skill the existing workforce to transition into such jobs. Though increased automation would see a decline of IT related jobs, the growing need for automation would improve scope for jobs in the development and deployment of new technology.

The share of Indian workforce in vulnerable employment (defined as self-employed without paid employees, usually a one-person enterprise along with family members) is predicted to reach 77% by 2019 (International Labour Organization, 2018). These informal, insecure jobs would be the first to give way to increased automation. In such a scenario, not only is re-skilling of the workforce necessary, but up-skilling of these low and unskilled labourers must be given the highest priority.

The state needs to come up with programs that would incentivize companies to re/upskill their workforce. In the case of Zoho Corp, understanding the need for upskilling, the company has taken its own initiatives. To sustain its workforce in a world of AI, they constantly analyse new and upcoming technologies that could impact the organization and promote their coders and engineers to learn these. By taking this lead, the company is not only reinventing itself to meet the future market but also ensuring their employees’ stability in an ever-altering labour market. Such initiatives, if recognized and incentivized by the government, would help workers to easily transition and reduce future frictions in the economy.


  1. FICCI. (2014). Suggested Labour Policy Reforms. Delhi: FICCI.
  2. GoAP. (2014). Reimagining Andhra Pradesh: Innovation and Startup Policy 2014-2020. Information Technology, Electronics & Communication Department, GoAP.
  3. International Labour Organization. (2018). World Employment Social Outlook: Trends 2018. Geneva.
  4. ISF. (2014). Indian Staffing Industry research 2014: Flexi Staffing in Government and Public Sector. Indian Staffing Federation.
  5. Kannan, K. (2014). Labour Laws and Growth of Micro and Small Enterprises – India. New Delhi: International Labour Organization.
  6. McKinsey Global Institute. (2017). Jobs Lost, Jobs Gained: Workforce Transitions in a Time of Automation. McKinsey & Company.
  7. WEC. (2017). Economic Report: Enabling work, adaptation, security & prosperity. World Employment Confederation.

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Suggestions on Labour Policy Reforms in Andhra Pradesh. (2022, Jan 02). Retrieved from

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