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How formalisation of the temporary staffing industry will impact the economy?

The world is perfectly ‘imperfect’. Covid-19 pandemic has only accentuated this fact as millions of people lost jobs around the world. India too was hit hard as the raging pandemic forced lockdowns across the states as a result of which over 10 million jobs were lost in India. Out of this, the biggest chunk of people who lost jobs was the temporary staff across the industries. So, the most vulnerable, temporary workforce from the informal sector got the biggest hit as around 80% of them lost their jobs since 2020.

Nonetheless, the situation of the workers in unorganized sector has never been healthy and current pandemic made it worse. Continuous exposure to health hazards, lack of social security schemes, job instability, socio-economic stress, labour exploitation and absence of fixed income has always characterized the informal sector in India. Undoubtedly, Covid-19 comes as an eye-opener for the Indian employment ecosystem. A recent research by ILO indicates an increase of more than 56 percentage points in relative poverty for informal workers and their families in lower and low income countries.

India being a labour-intensive economy can progress through leaps and bounds with protective and forward-looking laws that take informal employment situation in account and opens new doors of inclusive growth for the entire ecosystem.

The strategic reforms in the Indian Labour Law are like silver lining in the cloud with a positive bearing on the socio-economic status of the 450 million workers employed in the informal sector in India who contribute to 50% of national income.

The measures like revision of the scope of EPFO, modification of the definition of inter-state migrants, creation of worker re-skilling fund, wage protection and entitlement to social security benefits relating to life and disability insurance, accident insurance, health and maternity benefits, retirement schemes, gratuity, old age and child care indicate towards formalization of the temporary staffing industry.

According to the annual report of Periodic Labour Force Survey 2018, nearly 49.6% workers in the non-agricultural sector were not eligible for any social security benefit. The formal employment structure mandates that the workers and their families fall under the purview of employee benefits scheme and contractual agreements which capacitate them to consume medical and healthcare facilities explicitly even after the retirement. Increased income for workers after formalisation will lead to better nutrition and improved medical coverage, this in turn will reduce absenteeism and sick leaves for the workers employed in the formal sector. Better health and medical coverage will directly lead to higher productivity thereby, giving an overall boost to the economy.

The increased financial security leads to higher purchasing power of informal workers thereby making them a crucial factor affecting demand and supply chain. With the enactment of new labour codes, the informal workers will also be inclined towards savings and investment as money is routed through proper banking channels thus pumping sustainability and stability in the economy. The offline cash transactions will be reduced which significantly impact the revenue of the government. The collection rates will improve as government will get GST for every billed contractual worker. The shift in the nature of employment to a contractual agreement can be a milestone for workers as they are paid fixed salaries with substantial benefits. This will ultimately increase the cash flow in the economy as all transactions get online putting country on the trajectory of growth.

In my opinion, this kind of employment restructuring would play a concrete role in strengthening the Indian economy as it brings the temporary workers in the mainstream and making them an important element of the economic equation.

Formalising temporary staffing will redefine the employment environment where millions of people can be readily recruited, trained and deployed across all sectors in the shortest time frame. Thus, this momentum can’t be underestimated as formalization not only improves the well-being of the workers and their families but also fosters the foundation of financial stature of our economy.  A well-thought trade-off between business and social interests can be achieved with the new labour codes while creating shared economic value for all the vested stakeholders.

Well, it won’t be superfluous to say that Indian employment sector will see glory in coming time as its lion share of workers will get their share of financial autonomy and social status.

I am glad, Weavings has been playing an important role in India’s economic growth journey. I am even happier that we have touched thousands of lives, helping job seekers build a brighter and promising future for themselves and their families. We will remain invested in the right earnest to propel India’s growth story to the next level.

 

Author

Ashish Talwar, MD, Weavings Manpower Solutions Pvt. Ltd.

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