Will Hire and Fire at Will Labour Laws Work in the Indian Socio-Economic Context?

Why Indian Industry is Clamouring for Hire and Fire at Will Labour Laws?

In recent months, there has been lot of clamour from the Indian Corporates and MSMEs or the Micro, Small, and Medium Enterprises to the government to allow them to hire and fire workers and professionals at will.

Hire and Fire at Will labour policies are those that allow firms to lay off workers whenever they deem so or whenever the market conditions are bad without seeking permission from the government.

At present, Indian laws dictate some specific rules that govern the hiring and firing of workers.

These rules pertain to how Corporates and other units can only fire workers if they can prove that there is a legitimate business reason to do so.

Moreover, the laws also specify that workers should be given compensation as well. However, the ongoing economic recession wrought by the Covid Pandemic has heavily constrained Corporates and MSMEs as they can no longer sustain their operations and hence, they are asking for the government to allow them to downsize workers.

Indeed, the demand has been so vociferous that the Central and State governments are either passing laws or framing them to this effect.

Hire and Fire at Will Policies are Meaningless in the Absence of a Safety Net for Workers

Having said that, a key question that must be asked is whether such Hire and Fire at Will policies work in the Indian Socio-Cultural-Political- Economic context.

For instance, while it is common in the West for firms to hire and fire at will, there are many experts who believe that this does not work in India.

This is because in India, there is no concept of Unemployment Assistance or Dole as it is also known wherein the government provides monetary assistance to the unemployed workers.

Contrast this with the situation in the West where governments provide the same to those who have been rendered jobless.

Moreover, the Social Security and the Safety Net for laid off workers is not as robust as it is in the West and even the Provident Fund is usually not enough for this.

Therefore, there must be adequate due diligence done before the Indian governments at the Centre and States pass laws to this effect.

In addition, there must be specific safeguards for the workers being laid off by giving them enough severance pay and other benefits so that they have a cushion to support themselves and their families in the aftermath of being fired.

Do Hire and Fire at Will Labour Policies Work in the Indian Socio-Political Context?

Moreover, there are specific cultural and political factors at play here as well. For instance, being fired or laid off from the job has negative cultural connotations in the Indian context.

Haven’t we all heard about our relatives talking disparagingly about others who have been fired or laid off from their jobs?

In addition, the Indian Economy is not as Market Developed as those in the West where culturally, socially, and politically, there is broader acceptance of the fact that corporates fire worker at will depend the state of the economy.

On the other hand, in India, we have not yet reached a state where the general population is attuned to market movements.

Further, there are strong political lobbies that agitate on behalf of the workers unlike in the United States where once powerful labour unions have been weakened over the years.

Indeed, one can go as far as to say that the Political Economy of India is not yet structurally, culturally, and politically aligned to the Hire and Fire at Will policies.

Of course, this is changing as India moves to reform its economy further and hence, the question now is how to implement such policies going forward.

Implementing Hire and Fire Policies in a Humane and Just Manner with a Human Face

To start with, the Central and State governments have to get their act together and ensure that there are adequate social safety nets for the laid off workers.

Moreover, even if such laws are passed, they should not absolve the Corporates and MSMEs from showing legitimate and genuine reasons why they should lay off workers.

For instance, some Indian Corporates, including Marquee firms routinely resort to underhand firing of workers by asking them to put in their papers en masse instead of officially laying them off so that they can evade paying them the benefits of severance pay.

In addition, the government also has to ensure that the MSMEs that are usually the worst culprits as far as Hire and Fire at Will policies are concerned and rein them in so that there are all safeguards are followed.

Moreover, there must be some sort of governmental assistance to laid off workers.

If paying Dole is not possible, there must at least a Universal Basic Income kind of assistance wherein the laid off workers are able to support themselves and their families before they find a job. Indeed, unless these protections are put in place, the government should not hurry up.


Last, it remains to be asked as to why those Corporates with adequate Cash Reserves must lay off workers when they are not stopping paying Dividends to their Shareholders.

In other words, Labour is as much a factor of production as is Capital and hence, there must be an effort to protect the interests of both instead of mollycoddling the later alone.

To conclude, given these constraints, it is our view that while Reform is good and should be welcomed, it must be done with a Human Face and in a Humane Manner in order to ensure fair Social Justice.

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