Focus on implementationOver the past month, Parliament has ratified two crucial bills. The Social Security Bill was endorsed on July 24 and the Labour Bill less than two weeks ago.
Over the past month, Parliament has ratified two crucial bills. The Social Security Bill was endorsed on July 24 and the Labour Bill less than two weeks ago.
The process of introducing the Social Security Bill and amending the Labour Act 1992 began more than half a decade ago. The process was initiated after the two-and-a-half-decade-old Labour Act was deemed obsolete, as it did not protect the interests of employers.
Employers, who create jobs, are crucial for the economy. But while protecting their interests, rights of employees should not be neglected.
This was when the government decided to introduce a flexible Labour Act for employers, while creating a mechanism to compensate employees who could suffer losses because of an accommodating labour law. Thus began the process of framing the Labour Bill and the Social Security Bill together. It is encouraging that both the bills have been ratified around the same time.
One of the highlights of the new Labour Bill is the provision on ‘no work, no pay’. Employers have long been demanding inclusion of this provision in the labour law after a growing number of employees started halting production in the name of protest and demanding wages for the period when they did not work.
The new Labour Bill also includes flexible provisions regarding the laying off of employees if their performance is not satisfactory and if a firm is under severe financial stress.
Job losses and payment denials generally exert psychological pressure on employees. This problem is addressed by the Social Security Bill, which includes provisions on mandatory enrolment of employees in social security schemes to entitle them to compensation.
So, the two bills, which complement each other, have created a win-win situation for both employees and employers. This is expected to raise confidence of investors, both domestic and foreign.
One of the reasons for low private investment in the country is rigid labour laws. The government itself has identified this as one of the four binding constraints to higher economic growth. (The other three are: uncertainty of policy implementation, power shortage and high transport costs.) No wonder, many firms, including multinational company like Colgate-Palmolive, have terminated operations in Nepal in the past.
But again introduction of laws does not guarantee everything in Nepal, because the government often fails to implement them properly. This generally builds tension and erodes confidence in the government. If the government wishes to attract domestic and foreign investment and put Nepal in the league of middle-income countries within 2030, it should seriously implement the newly enacted laws.