Latest Government Policies Affecting Hiring & Employment in India

The Indian government continuously introduces new policies to regulate and improve the job market. These policies aim to ensure fair labor practices, boost employment, enhance job security, and align workforce needs with economic goals. Additionally, they help in addressing emerging challenges such as automation, the gig economy, and labor rights in the digital age. The government also focuses on upskilling and reskilling initiatives to meet the evolving demands of industries. In this blog, we will explore the latest government policies affecting hiring and employment in India and their implications for employers and employees alike.

1. The New Labour Codes

The Indian government has consolidated 29 labor laws into four labor codes: The Code on Wages, The Industrial Relations Code, The Occupational Safety, Health and Working Conditions Code, and The Social Security Code. These labor codes aim to streamline compliance, improve job security, and enhance employee benefits.

Impact on Hiring & Employment:
The labor codes impact various aspects of employment, including working hours, wages, and social security benefits. One significant change is the redefinition of ‘wages,’ which affects how bonuses, provident fund contributions, and gratuities are calculated. Employers must adjust their payroll structures to comply with these changes. Additionally, the new laws mandate increased job security, making it slightly more challenging for employers to terminate employees arbitrarily. The increased social security coverage benefits gig workers and contract employees, improving their financial stability and work-life balance. However, small and medium-sized enterprises (SMEs) may find it challenging to adapt due to increased compliance costs.

2. Atmanirbhar Bharat Rojgar Yojana (ABRY)

The Atmanirbhar Bharat Rojgar Yojana was introduced to incentivize employment creation in the post-pandemic recovery phase. Under this scheme, the government subsidizes the provident fund contributions of newly hired employees and their employers in companies that meet specific hiring criteria.

Impact on Hiring & Employment:
ABRY has encouraged businesses to hire more employees, especially those earning lower wages, by reducing the financial burden on employers. Organizations with a workforce of up to 1,000 employees receive full EPF contributions for new hires, while those with over 1,000 employees receive partial support. This policy has boosted employment in various sectors, particularly in manufacturing and services. It has also provided job security to workers who lost employment during the pandemic. However, the scheme’s benefits are temporary, and long-term employment sustainability remains a concern. Employers may need to prepare for increased workforce costs once government support ends.

3. Gig and Platform Workers’ Social Security

With the rise of the gig economy, the Indian government has taken steps to provide social security benefits to gig and platform workers under the Social Security Code. This is a significant move to formalize and secure the employment of gig workers, including those working for food delivery, ride-hailing, and freelance platforms.

Impact on Hiring & Employment:
This policy mandates companies employing gig workers to contribute towards their social security funds. It improves job stability, offers health benefits, and provides accident coverage, making gig work more attractive. However, it also increases operational costs for companies relying on gig workers. Businesses may need to restructure payment models or reduce gig worker hiring to balance these costs. On the positive side, improved job security and benefits could lead to increased workforce productivity and loyalty, benefiting both employees and employers in the long run.

4. Production Linked Incentive (PLI) Scheme

The PLI scheme aims to boost domestic manufacturing and attract foreign investment by providing financial incentives to companies that increase their production capabilities in India.

Impact on Hiring & Employment:
The PLI scheme has led to job creation in various industries, including electronics, pharmaceuticals, textiles, and automobiles. Companies benefiting from the scheme have expanded operations, resulting in increased hiring across skill levels. Additionally, the policy has encouraged skill development and upskilling programs to meet growing industry demands. However, the challenge lies in ensuring that employment generated under this scheme is sustainable and not just short-term. The scheme also requires companies to meet specific production targets, which may create pressure to maintain workforce efficiency.

5. Reservation in Private Sector Jobs

Several Indian states, including Haryana and Andhra Pradesh, have introduced laws mandating job reservations for local candidates in private sector jobs.

Impact on Hiring & Employment:
These reservation policies ensure local employment opportunities, reducing regional unemployment rates. However, they also pose challenges for businesses, particularly multinational and large domestic firms, which prefer hiring based on merit rather than location. Employers may need to adjust recruitment strategies to comply with these laws while maintaining workforce quality. The policy could also lead to wage inflation and talent shortages in some industries where skilled labor is scarce locally. While it benefits local job seekers, it may discourage businesses from expanding in states with strict reservation policies, affecting overall economic growth.

Conclusion…

The latest government policies affecting hiring and employment in India aim to balance worker rights with business growth. While these policies create better work conditions and job security, they also increase compliance responsibilities for employers. Businesses must stay updated and adapt to these changes to ensure sustainable hiring practices and workforce management. As these policies evolve, their long-term impact on India’s employment landscape will become clearer.

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Images sourced from Freepik.