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India's Labour Laws: Jobs or Jitters?
10 Dec
Summary
- New labour laws raise mandatory approval threshold for lay-offs to 300 workers.
- Firms historically capped below 100 to avoid compliance costs.
- Contractualisation surged to 42% of formal manufacturing workforce by FY24.
India's revised labor laws, increasing the mandatory lay-off approval threshold from 100 to 300 workers, present a critical juncture for the nation's employment landscape. This reform could either propel firms beyond the 'missing middle' or exacerbate casualization.
Historically, regulatory hurdles discouraged mid-sized companies from expanding, leading them to cap their workforce below 100. The new 300-worker limit aims to reduce this regulatory drag, potentially encouraging growth in labor-intensive sectors. However, concerns remain about increased job insecurity, as contractual labor has already grown significantly.
The formal recognition of Fixed-Term Employment (FTE) offers hiring flexibility but mandates wage and benefit parity with permanent workers. While this may initially moderate costs, widespread adoption could lead to higher labor expenses and potentially short-term employment cycles rather than stable, formal jobs.
