COVID-19 and its impact on Employment in India

impact on Employment

Impact on employment due to COVID-19

The outbreak of Covid-19 has led to a global pandemic, resulting in global lockdown. India has been under lockdown since March 14th, 2020 as the Government of India declared the deadly virus as a “notified disaster”. And the lockdown has left the economy in crumbles.

The pandemic has catastrophically affected earnings and employment of the working class globally, along with their economy. 6.7% of the working hours are expected to be wiped out in the Covid-19 crisis globally in the second quarter of 2020 which is approximately equivalent to 195 million full-time workers. According to the Centre for Monitoring the Indian Economy (CIME), India’s unemployment rate has shot up to 27.1%, and which means that almost 120million people have been left unemployed because of the pandemic in the April which was only 6.74% in the by the second week of March.

According to this new data released by CIME, India’s unemployment rate is almost four times the rate of unemployment in the United States. In the urban areas, the unemployment rate has been massive compared to rural areas, which also included the majority of the Red-Zones due to the cases of Covid-19. In urban areas, the rate has been 29.22%, whereas, in rural areas, it was 26.16%.

Ever since the lockdown started from March 24th, economic activities have taken the worst hit from it, and that is most likely to affect the GDP of India for this financial year. Since 90% of the population of migrant workers is employed under jobs that are informal and temporary; they were the first ones to be hit with the wave of unemployment as public transport was suspended, and construction was stopped, which were mainly the two sectors where these workers were employed under.

But the lockdown has not only affected minimum wage workers having informal, and temporary jobs but also the employees who work full-time, formal and permanent jobs. Small and medium businesses are most likely to close their business wholly. And large companies from various sectors have started discharging and downsizing their employees to counter the loss they have incurred.  

Payment of Wages during the period of Lockdown                                                                     

On March 20th, the Ministry of Labor and Employment asked the entire employer’s association by issuing an advisory to not lay off their employees, or cut wages of their workers considering the lockdown. It was also stated in the advisory that all the employers of the public and private establishments should not reduce their employees’ wages.

The government resorted to issuing an advisory instead of a formal order or direction that mandated payment of the wages during the lockdown as according to the labor law statute such as the Payment of Wages Act, 1937, it governed the employers on how much wages to pay to their workers or employees.

And it is also very important to note that according to various provisions in the Industrial Dispute Act, 1947 it is stated in a very clear and detailed manner in sections 25C and 25M that in case of certain occurrence including a natural calamity, the employers have the right discharge an employee and reduce their wages to almost half their original wage upto the period of 45 days, and after 45 days, no wages are to be paid to the worker.

Measures taken by the Government to protect workers during Covid-19 pandemic (Pradhan Mantri Garib Kalyan Yojna)

On March 26th, the Finance Minister, Ms. Nirmala Sitharaman announced a relief package for the underprivileged and poor population of the country of INR 1.70 lac crores which is under the Pradhan Mantri Garib Kalyan Yojna. Under the scheme ‘Pradhan Mantri Garib Kalyan Yojna’, heath worker benefits, food support, and wage benefits would be given.

It included that the Government would be contributing the shares of the provident fund contributions of the employers and employees for the next three months wherein a particular establishment or organization there are up to 100 workers working for them. And the majority of the workers have a monthly salary of INR 15,000 or less.

All health care workers working in Government hospitals and Health Care Centres, including nurses, ward-boys, ASHA workers, safai karamcharis, paramedics, technicians, doctors, and specialists would be benefitted from this scheme. According to thisYojna, if any healthcare worker while treating patients with the virus meets with an accident, or is injected with the virus, then he/she shall be compensated with an amount of INR 50 lakhs. Approximately 22 lakh health workers are expected to be covered under this scheme to fight the pandemic.

Certain benefits to farmers are also mentioned in this scheme. The first installment that was essentially due in 2020-2012 would be paid in the month of April 2020 itself. And it would roughly cover around 8.7 crore farmers.

5 kg wheat or rice, and 1 kg of preferred pulses would be provided to approximately 80 crore poor people for free every month for the next three months.

This scheme will also be benefitting 20 crore women holding Jan Dhan accounts, and would be provided with INR 500 per month for the next three months.

Measures to be taken by the Government to restart the economy

The Ministry of Home Affairs issued a notification on April 15th, discussing the various conditions under which the activities could be started again in non-containment zones. And anyone found violating any of these directives would be attracting severe penalties under the National Disaster Management Act, 2005 (NDMA). The Centre is considering amending the Factories Act, 1948 which will allow the companies to stretch the working hours of the workers to 12 hours per day for six days a week that would amount to 72 hours in total from the existing 48 hours. But this move had been opposed by India’s Central Trade Unions (CTUs).

 These notifications surround themselves with various legal defects. Section 51of the Factories Act, 1948 states that no adult worker should be allowed to work for more than 48 hours a week; and no worker shall be allowed to work for more than 9 hours a day (S. 54).

 According to Section 59, workers should be paid twice the ordinary wage rate for more hours that they have worked. And Section 56 stipulates that the total spread over, including the rest period, shall not be more than 10.5 hours a day.

Section 65(2)(3) empowers the state governments to ament certain Sections such as Section 51-52, 54, and 56 of the Factories Act, 1948 provided that the number of hours of work in a day shall not be exceeded, the spread over that includes rest intervals also shall not be exceeded by 13 hours a day, and the total number of hours to be worked in a week shall not be exceeded by 60 hours.

And out of the four states—Rajasthan, Gujarat, Punjab, and Himachal Pradesh, that have implemented these notifications to extend the working hours of workers, only Punjab has correctly exercised Section 65, as others have extended the total working hours to 72 hours per week which is questionable and goes against the law. 


Subsidizing employers for the payments that they made to their employers or workers during the period of the shutdown would be the only way to tackle the problem that the industry is facing and to prevent a complete collapse of the businesses. In the absence of such subsidies, all businesses would be forced to turn bankrupt, which in turn will increase unemployment, and this will impact the workers working in informal as well as formal workplaces. 

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