The New Labour Codes in India: A Paradigm Shift in Labour Reforms

India has witnessed one of its most significant labour reforms since independence with the codification of its numerous labour laws into four comprehensive labour codes. These reforms aim to simplify, modernize, and rationalize the complex web of labour laws that had governed the employment ecosystem in India for decades. The four new labour codes are:

1. The Code on Wages, 2019

2. The Industrial Relations Code, 2020

3. The Occupational Safety, Health and Working Conditions Code, 2020

4. The Code on Social Security, 2020

This legislative overhaul consolidates 29 central labour laws into four codes, thus reducing ambiguity, increasing compliance, and improving ease of doing business while attempting to balance the rights of workers and the interests of employers.

Background and Need for Reform

India’s earlier labour law regime was scattered across dozens of statutes enacted over the years. These laws often overlapped, were sometimes contradictory, and created compliance challenges for businesses—especially micro, small, and medium enterprises (MSMEs). Workers also found it difficult to understand and assert their rights due to the fragmented legal landscape.

With a growing economy, the government felt a pressing need to:

• Promote uniformity and transparency.

• Attract foreign and domestic investment.

• Formalize the labour market.

• Improve working conditions.

• Extend social security to gig and platform workers.

Overview of the Four Labour Codes

1. The Code on Wages, 2019

Objective: To regulate wage and bonus payments in all employment sectors.

Key Features:

• Universal Minimum Wage: Replaces the Minimum Wages Act, 1948. Now, a floor wage will be fixed by the Central Government, below which no state can set its minimum wages.

• Timely Payment of Wages: Ensures timely payment without gender discrimination.

• Definition of Wages: A uniform definition of wages for all labour laws reduces litigation and ambiguities.

• Coverage: Applies to all employees across industries—organized or unorganized.

2. The Industrial Relations Code, 2020

Objective: To consolidate laws related to trade unions, conditions of employment in industrial establishments, and industrial disputes.

Key Features:

• Fixed-Term Employment: Legalizes fixed-term employment across sectors with equal benefits as permanent workers.

• Trade Union Recognition: Introduces provisions for the recognition of negotiating unions.

• Strikes and Lockouts: Requires a 14-day notice period before a strike or lockout, making industrial relations more predictable.

• Layoff, Retrenchment & Closure: Establishments with 300+ workers now need prior government approval, up from 100 previously.

3. The Occupational Safety, Health and Working Conditions (OSH) Code, 2020

Objective: To regulate health and safety conditions of workers in all establishments.

Key Features:

• One License, One Return: Simplifies registration and licensing with a single electronic return and license for all establishments.

• Applicability: Applies to establishments employing 10 or more workers, and all mines and docks.

• Working Hours: Fixes daily working hours at 8, weekly at 48. Provides flexibility for 4-day workweeks (12 hours/day).

• Women in Night Shifts: Allows women to work night shifts with consent and safety measures in place.

• Welfare Provisions: Mandates facilities like canteens, restrooms, first-aid, etc., based on establishment size.

4. The Code on Social Security, 2020

Objective: To extend social security benefits to all employees, including those in the gig and platform economy.

Key Features:

• Coverage Expansion: Includes unorganized, gig, and platform workers under the social security net.

• Universal Account Number (UAN): Ensures portability of benefits such as PF and ESI.

• Funds and Schemes: Allows the government to frame schemes for provident fund, pension, insurance, and maternity benefits for various categories of workers.

• Gig Workers: Enables creation of social security funds for gig and platform workers through contributions from aggregators and the government.

Benefits of the Labour Codes

For Workers:

• Greater Protection: Improved definitions and wider coverage ensure more workers are protected.

• Social Security: Extension of welfare benefits to gig and platform workers is a major inclusion.

• Equal Remuneration: Gender equality is promoted with safeguards in wage and working conditions.

• Safety and Health: Focus on occupational safety and better working conditions.

For Employers:

• Ease of Compliance: Simplified registrations, unified definitions, and digital processes make compliance easier.

• Predictability: Provisions related to strikes and dispute resolution enhance predictability.

• Flexibility: Legalization of fixed-term employment and working hour flexibility boosts productivity.

For the Economy:

• Formalization of Workforce: Bringing more workers into the formal sector helps in better data collection, taxation, and planning.

• Investment Boost: Labour market reforms are seen positively by investors seeking predictable regulatory environments.

Challenges and Criticisms

Despite their progressive intent, the new labour codes have faced criticism:

• Worker Representation: Trade unions claim the codes tilt in favor of employers, particularly in ease of layoffs and diluted provisions for strikes.

• Implementation Gaps: Rules under the codes are yet to be fully notified by several states, delaying their nationwide implementation.

• Gig Worker Coverage: The mechanism and financing of social security for gig workers remain unclear and underdeveloped.

• Enforcement Capacity: Labour departments in many states lack the manpower and infrastructure to implement the new laws effectively.

Current Status (as of 2025)

While the four codes have been passed by Parliament and received Presidential assent, their nationwide implementation has been delayed. Labour being a concurrent subject, both central and state governments need to notify rules. Many states are yet to finalize and notify their respective rules, making the rollout uneven.

The central government is actively working with states to expedite the process and ensure uniform implementation, possibly in a phased manner.

Conclusion

The new labour codes in India mark a transformative step towards modernizing the country's labour regime. They promise to bring clarity, consistency, and inclusiveness into the employment ecosystem. However, the true test lies in effective implementation, capacity building, and continuous dialogue between all stakeholders—government, employers, and employees.

India’s ambitious labour reforms have the potential to enhance both economic efficiency and social justice, but this will require sustained political will, administrative readiness, and social consensus.