Undoubtedly, the government’s recent decision to raise the minimum wage and announce a social security package is a welcome development for workers, who have been reeling under growing financial hardship. The announcement to set up a social security fund, to which employers and employees contribute 20 percent and 11 percent receptively of their basic salary, is a most impressive move and something that has long been a top demand of the employees. 

But the way employers have opposed the increment, describing it as unilateral action that goes against the understanding reached between employee unions and employers’ associations, is likely to further complicate already soured industrial relations. Issuing separate press statements, both the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI) have rejected the increment on the ground that it is more than the amount agreed between major trade unions and employers’ associations.

Furthermore, they have argued that the government’s announcement is mysteriously silent on a package of mechanisms aimed at arresting industrial unrest. Both the FNCCI and CNI rejected the government announcement, claiming that it has not incorporated an agreement signed about two months ago by all major trade unions to declare Industrial Peace Year for four years and follow standard procedures before launching any industrial action. But the labor union leaders on the other hand claim that the increment is in accordance with the understanding reached earlier.

Whatever may be the arguments and counter-arguments, an undeniable fact is that Nepal’s inflexible labor laws are one of the biggest obstacles to accelerating industrial development and this is turning away domestic investment, to say nothing of foreign investment. Several studies have concluded that Nepal is at the bottom in the South Asian region not only in terms of industrial relations but also when it comes to labor productivity gauged against unit labor cost. It is a fact that the Labor Act, which was passed in 1992, has failed to satisfy either the employers or employees.

The former argue that the Act heavily favors laborers at the cost of core business interests thus preventing industry from becoming competitive, while the latter say that self-centric businessmen are reluctant to enhance workers’ welfare.

There is virtually no disagreement that Nepal’s labor unions are heavily politicized and the militant nature they have often demonstrated is obviously disturbing. The Nepal Enterprises Survey reckons that 9.28 percent of firms consider labor regulations the main obstacle to additional investments. Against this background, we urge all three stakeholders--trade unions, employer associations and the government, to take up the issue seriously and ensure earliest solution.

Published on: 25 May 2011 | Republica