RECESSION v. RETRENCHMENT

Periodic fluctuation in the rate of economic activity, as measured by levels of employment, prices, and production is the business cycle and downward trend in the business cycle characterized by a decline in production and employment can be called Recession. Recession may confine to one country or one region. Due to globalization, recession in one country will have substantial impacts on other countries. In economics, a major downswing in the business cycle characterized by sharply reduced industrial production, widespread unemployment, a serious decline or cessation of growth in construction, and great reductions in international trade and capital movements.

Recession becomes severe where there is a prolonged depression. If downswing is sustains for longer duration in the business cycle then the recovery will consume considerable amount of time. It is there in history too, it happened in U.S. soon after the New York Stock Market Crash of 1929 and lasted until about 1939. By late 1932 stock values had dropped to about 20% of their previous value, and by 1933 11,000 of the U.S.'s 25,000 banks had failed. These and other conditions, worsened by monetary policy mistakes and adherence to the gold standard, led to much-reduced levels of demand and hence of production, resulting in high unemployment (by 1932, 25–30%).

INDIAN SCENARIO

At any point of time, any person can have some advantage of economic slowdown? Apparently not, but there is a chance that employer can use the recession as a tool for sacking their employees. In every organisation the expenditure on salary is a bigger exchequer. Growth of the organisation demands the intellectual brains at the same time it increases the financial liabilities on salaries and allowances. It is true that the eminent and efficient personalities can bring the new and enhanced business but the consumption of time for desired results may vary as per the market conditions.

LEGAL ASPECTS

As per the Constitution, India is a welfare state. Constitution given validity to the existing laws which are not ultra virus to the any provision of Constitution and empowered Government to make welfare legislations. Industrial Dispute Act of 1947 is considered as welfare legislation which enumerates rights and remedies of the workers in the industries and liabilities of employer. The basic intention of legislatures to enact this law is to advise the employers to make a policy on retention strategies.

The application of said Act is limited to the industries defined by Sec 2(f). Industry means any systematic activity carried on by co-operation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not,--

(i) any capital has been invested for the purpose of carrying on such activity; or

(ii) such activity is carried on with a motive to make any gain or profit, and includes—

a. Any activity of the Dock Labour Board established under section 5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948);

b. Any activity relating to the promotion of sales or business or both carried on by an establishment. but does not include—

1. Any agricultural operation except where such agricultural operation is carried on in an integrated manner with any other activity (being any such activity as is referred to in the foregoing provisions of this clause) and such other activity is the predominant one. Explanation.--For the purposes of this sub-clause, "agricultural operation" does not include any activity carried on in a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951); or

2. Hospitals or dispensaries; or

3. Educational, scientific, research or training institutions; or

4. Institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service; or

5. Khadi or village industries; or

6. Any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or

7. Any domestic service; or

8. Any activity, being a profession practiced by an individual or body or individuals, if the number of persons employed by the individual or body of individuals in relation to such profession is less than ten; or

9. Any activity, being an activity carried on by a co-operative society or a club or any other like body of individuals, if the number of persons employed by the co-operative society, club or other like body of individuals in relation to such activity is less than ten.

Workers are defined in the Industry means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—

(i) Who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or

(ii) Who is employed in the police service or as an officer or other employee of a prison; or

(iii) Who is employed mainly in a managerial or administrative capacity; or

(iv) Who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.

This Act applies to the workers those who wages less than Rs.1600/-. Strike is the weapon in the hands of workers, in the same way lay off is the weapon of the employer. But if there is an inability of providing work to the worker he has to go for retrenchment.

Retrenchment means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include—

(a) Voluntary retirement of the workman; or

(b) Retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or

(bb) Termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or

(c) Termination of the service of a workman on the ground of continued ill-health.

The Act is enacted in 1947, when the industrialization was at its paramount. Intention of legislatures was to protect the workers from unfair labour practices from the employers. The object of the industrial dispute Act, 1947 is to make provision for the investigation and settlement of industrial disputes and for certain other purposes.The Act is primarily meant for regulating the relations of employers and workmen, past, present and future. The principle aim of this Act is to encourage collective bargaining and to maintain industrial peace by preventing illegal strike and lockouts and to provide lay-off and retrenchment compensation. Hence the worker’s rights are protected by an Act.

NEW ARENA

In the present business world, intellectual brains are hired by the business establishment after realizing the immense requirement through different brainstorming sessions and marathon interviews by eminent personalities from different field. When a person is absorbed by the organisation after copiousness exercise, it makes the employee and others to presume that he has some job security. But due to non professional approach of certain CEOs the employees in top and medium level gets unexpected sack for reducing the financial burden of the organisation in the form of salaries. This type of approaches is common in the organisations which are build and grown in short span of time.

GROUNDS

Companies are incorporated by registering the Company under The Companies Act of 1956. As the liability of the members of the company is limited by the share, for every business incorporation formation of the company is the best method. Till 1980s the concept of the general public about the company was, it may be a manufacturing or production establishment. To have production and manufacturing units it is expected that the establishment will have some immovable fixed assets besides their different securities. But in the present era due to advancement of technologies persons do not have wealth or better business knowledge and culture can establish a business organisation. To be entrepreneur, present technological advancement and different new segments of business allows people with less capital to embark on a business. The capacity of raising the funds, effective utilization of men, material and money, brand building strategies, welfare measures, employees accession ability, project development visions etc. will lag in this type of business establishments.


REMEDIES

The word ‘Employer’ has to be re-defined. New enactment is required which describes the quality of the person who can employ others. It should be as per the ability of the person in the areas of knowledge, business ethics, family backgrounds, educational qualifications and fund raising capacity. Policy of retaining the employees in every organisation in all levels of employment has to be drafted in Standing orders and it should be registered. The employer should strictly adhere the rules specified in that. Multi national companies enters into different segment of business, but Education, Health, Public Distribution System etc. should be governed with ethics than extraction of money.


EPILOGUE

India is a country believes in relations, to maintain relations in the world of business code of professional ethics has to be followed. To have professional ethics in a business, the person of same profession only should be allowed to start the business in that area. If there is any deficiency of such professionals in any particular branch of profession and there is an urgent requirement, Government should establish a public sector to cater the needs in that branch. Effect of economical slow down and industrial disputes can be tackled effectively for the business establishments which have sound support and vision. Newly formed organisations which have no sound backgrounds in industry will be instable in such economical disorder and which inturn affect the employees. It is the time which warrants to have effective legislation for new definition on ‘Employer’. An enactment like ID Act can be enacted in other areas of employment where employer is compatible to adhere the rules established by such Acts.

Sreerengan VR

NEED OF LAW AT RIGHT TIME

The prohibition of smoking in public place came into effect by the decision of Hounurable High Court of Kerala and now it is expected to implement it to whole India. Smoking is considered as the root cause of many diseases and World Health Organization has taken effective steps to give awareness to the public about the ill effects of tobacco. WHO has been educating the public through different media that the smoking not only affects the individual but the other non smoking persons also due to the inhalation of smoke generated from the cigarette.

Besides WHO, different institutions of the Government and other social organisations conducted many health programmes to educate the citizen about the ill effects of smoking. Slogans like “Smoke at one end and a fool at another end” “You take a filtered smoke and compel others to take unfiltered smoke” etc. were used by the different agencies and media to educate the people in the past decades. These efforts have not gone futile. We could see the drastic trim down in the strength of smokers even before the enactment of this law.

In the seventies the following reasons mainly influenced the youngsters and college students to initiate the habit of smoking:-

a) Style
b) Belief that it will increases status or dignity
c) Belief that others will consider him as a man in his teenage.
d) Addicted or Unavoidable

Before two decades more than 70% of the people in a work place used to hold a burning cigarette after the combined lunch. But nowadays the younger generation is not crazy on smoking. Elders think that the health of their children or grand children can be deteriorated by lighting the cigarette in house. Presently most of the people live in a molecular family and the parents have one or two children. In the molecular family the father and mother are not so cautious in their growth but they are more particular on health, education and overall development of their children. In present decade the day to day activities of the parents are totally depend on the welfare of their children. At this social scenario the parents are curtailing their own needs, happiness, enjoyment and providing all such entertainment and absolute care on their children. Such care is very high when we compare to the past generations.

These may be an additional reason for drastic diminishment of smokers in our country especially in Kerala. Presently the number of smokers is very less because the younger generation is not interested to take such type of habits and elder generation has also given up by considering the health of the family. Hence I have few questions in mind whether this is the time to enforce a law prohibiting the smoking or should it have been implemented decades back when the smoking was very common?

Is this Law effectively enforceable?

I feel that the intention of the Law makers of this law at this time is to safe guard the health of the non smokers. But whether mere enactment of this law will fulfill the purpose? The smokers will trace some lonely or covered area for their activity. That usually is the public toilets or bathrooms. These places are crowded by the smokers and non smokers and all are bound to inhale big quantity of tobacco smoke delivered by the smokers in that place. In this situation the purpose of enacting such law may not give the fruit.

What should have been done?

Before prohibiting the smoking in public place smokers should have been given specific place in the public for smoking. Covered areas with transparent glass should be placed and should by earmarked for smoking at public places. Smokers should be allowed to smoke before banning, means smoking at specific place only is allowed. As the number of smokers is less the users of smoking zone also will be less.


Is smoking the present burning issue?

I personally feel smoking is not that a big issue in the present days when compared to others like:-

a) Panparag/ Gutka/ Liquor/ Narcotic Substances
b) Obesity
c) Illegal use of Mobile phones
d) Corruption
e) Family matters

Consumption of Panparag/ Gutka/ Liquor/ Narcotic Substances is affecting the person but not the health of the family hence the users are drastically increasing especially the younger generation. But it has much adverse effect in the family and the society when compared to the smoking. It affects the wealth of the family and increases crime in the society. The government should take necessary steps to provide family entertainment areas by constructing public parks with play ground for children. People will prefer spending their evenings with the family without any expenditure if facility is available. That can reduce the over crowding at liquor shops in the evening. Awareness should be made to have family entertainment in the evenings and holidays. The objectives of the clubs have to be reviewed. It should not be considered as the place for drinking. Spitting all around after consuming panparag is adversely affecting the healthy environment and upcoming Indian tourism. Adequate spittoons should be provided in public place and non users of spittoons among gutka consumers should be heavily fined.


Obesity is the result of high tech jobs; it invites the unhealthiness and illness to the earning member of the family. If an earning member scrambles to the illness the state will have an additional burden. For becoming a developed country it is mandatory to prevent additional financial burdens to the state, hence within short span of time as per the economical status of a family the earning member should have adequate insurance policies so that state can be relieved from such type of burdens. Small health clubs can be associated with every IT company or the organization.

In the present era the legislatures and executive machinery should be vigilant on unauthorized usage of camera phones. Usage of camera phones without any restriction becomes threat to the privacy of the girls and ladies in the public places. In public transports people put on the mobile speakers in high volume and listen to songs even though there is a facility for head phones. It gives sleepless nights and spoils the calm atmosphere of co-passengers. Law making body or executive machinery or judiciary can now make a law to restrict the same. Often the law makers and thinkers say we have strong cyber law and that is sufficient to give protection to this type of activities. It is true that the police have a section to investigate cyber crime but it is not enough for stopping or restricting the crimes committed through mobile camera phones. It is possible by implementing some methods like:-

a) Police person should start a continuous search programme of mobile photos.

b) Police persons should be empowered to seize the mobile phone of any suspected person at any time and he should be able to check the photos and messages. If any thing unusual is found he should retain the phone and charge a case.

c)Department heads or anybody authorized by such heads in every institution, organization, industries etc, should have the same power.

d)Any other person if he feels that there is an activity by a person with his camera mobile phones which is against the principles of our society then he should be able to arrest such person and hand over to the police person.

e)Using speaker phones in public place should be banned.

If law entrusts right for search and arrest, that will create fear in the mind of the people and they may withdraw from attempting such crime.

Nothing to say about corruption because it has become a practice and immensely merged with our blood. Article 51A of The Constitution should be exhibited in all institutions, organizations, government offices, private establishment etc to make awareness to the people of India and should be made enforceable before the court of law. The younger generation is not that influenced by corruption but certain white hairs in government sector are fully immersed in corruption and they think that it is their right to ask bribe. Frequent and detailed enquiry of their personal wealth by income tax department and vigilance can diminish such activities. It should be made applicable to politician also. Judiciary should ask the details of investigation by such departments regularly as Honourable High Court is supervising the investigations.

Increasing number of divorce cases are inviting instability to the society. Most of the cases are originated from the families either women is employed or she is hailing from a wealthy family. The importance of family life and the necessity of family structure in the society should be taught to the lady employees by the HR department or any authority of the respective organisation. Awareness should be made into the mind of the every woman in the society that her husband is the most dependable person in the world and not family courts or advocates. Dependability is mandatory for the existence of the society. No employer should ask the lady employees to work beyond normal working hours and their working hours have to be stipulated. They should be allowed to spend sufficient time along with their children and husband. Week ends should be made compulsory off to all the employees to keep up the family structure.

Present generation is educationally advanced and they can understand the good and bad and they are ready and willing to say no to all the habits which may affect adversely not only to him but to their family. But some steps should be taken for giving awareness on the issues listed above.

This is the crucial time for law making body and judiciary to think of an act to these maters and executive machinery should plan and implement the effective measures in these areas. If the law is made after the importance of these matters is diminished, then the purpose of making such law also may be defeated.

Let us arise awake and act to remove social evils and let the legislatures, judiciary and executive machinery make and implement law which is a need to tackle the current issues.



SREERENGAN V.R.
Asst. Professor
Ramaiah Institute of Management Sciences
New BEL Road
Bangalore - 54

CFC - AT WHAT COST?

Controlled foreign corporation (CFC) legislation is designed to prevent the accumulation or transferring of profits and income by foreign corporations to or from abroad. The absence of such legislation, gives free and ample opportunity to the residents to set up corporations abroad to lower their tax burden. CFC legislation will remove the shield of the foreign corporations and the profits or income generated and transferred will be taxed. The legislation will empower the authorities to pierce into the accounts of transfer and tax the income which is transferred. Presently corporations operating abroad are retaining earnings and the corporation’s home country may not ever see the funds flow from the corporation to the shareholders. It amounts to defer or evade taxation. Comments from The American President, Barack Obama on outsourcing have some nexuses with CFC. But foods for thoughts before enactment on CFC are:-

1. Post recession time is the right time for such enactment?

2. Whether it will affect on FDI?

3. If it affects on FDI whether it will affect on development and progress of industries?

4. Whether it will give adverse effect on present and future employment opportunity?

5. Which are the areas the exceptions required?

India is taking steps towards implementing CFC, but it requires detailed study on identification of corporations and their taxable income. Corruption may be the next huddle for the execution of provisions made in such enactments. Besides that situation necessitate the detail thinking on Foreign Direct Investment. Due to liberalisation policy announced in the early 90’s, Indian market and industry realized the global standards and it could rise to the world class requirements. This was made possible by the investment of foreign industries and individuals in the form of fund and technology. It is true that CFA is mandatory and it will give an additional financial exchequer to the country but if it affects on FDI then industries may get a set back. Such a set back may not be affordable now as industries are recovering from long persistent economic slow down or recession. The present scenario is the time of post recession. Any decision which adversely affects the industries may in-turn affect the economic growth of the country and such decisions are unwelcome at this point of time.

SREERENGAN V.R.
Asst. Professor
Ramaiah Institute of Management Sciences
#193, New BEL Road, Bangalore