Opinion
By Manish, High Commissioner of India to Republic of Cyprus
India stands at a pivotal moment in its economic journey. As the nation accelerates toward becoming a global economic powerhouse, the Government has undertaken a historic transformation of its labour laws—consolidating 29 fragmented labour statutes into four comprehensive Labour Codes. This landmark reform represents far more than bureaucratic streamlining; it embodies a strategic vision to empower workers, simplify business compliance, and create a contemporary regulatory framework that addresses the demands of a rapidly evolving economy.
The results speak volumes. Employment in India has surged from 475 million in 2017–18 to 643.3 million in 2023–24, representing a net addition of 168.3 million jobs in just six years. Simultaneously, the unemployment rate has plummeted from 6.0% to 3.2%, while 15.6 million women have entered the formal workforce. These statistics underscore the Government's commitment to inclusive and sustained labour empowerment—a commitment that finds its most articulate expression in the new Labour Codes.
The Architecture of Reform
The consolidation of 29 labour laws into four Labour Codes was not an arbitrary exercise but a carefully considered response to long-standing inefficiencies. The rationale was clear: simplify registration and licensing requirements, reduce compliance burdens, promote employment generation, and ensure comprehensive protection for workers. The centrepiece of this reform was the introduction of a "Single Registration, Single License, and Single Return" framework—a principle that fundamentally reimagines how businesses interact with labour legislation.
Enacted after extensive tripartite consultations between the Government, employers, industry representatives, and trade unions from 2015 to 2019, the four Labour Codes are the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020. Each addresses distinct dimensions of labour relations, collectively creating a holistic ecosystem that protects workers while fostering business efficiency.
The Code on Wages: Universal Protection and Fairness
The Code on Wages consolidates four earlier laws—the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976—into a unified framework that establishes universal minimum wage protection across both organized and unorganized sectors.
Previously, the Minimum Wages Act applied only to scheduled employments, covering approximately 30% of workers. This meant millions of workers, particularly in informal sectors, lacked statutory wage protection. The new Code fundamentally changes this. It establishes a statutory floor wage based on minimum living standards, with provisions for regional variation. Crucially, no state can fix minimum wages below this floor, ensuring nationwide uniformity and adequacy.
The Code introduces sophisticated wage-fixation criteria that consider workers' skill levels—unskilled, skilled, semi-skilled, and highly-skilled—geographic areas, and job conditions such as temperature, humidity, or hazardous environments. Women receive enhanced protection through explicit provisions prohibiting gender-based discrimination in recruitment, wages, and employment conditions.
Overtime compensation has been rationalized, with employers required to pay all employees overtime wages at least twice the normal rate for work beyond regular hours. Universal wage payment provisions now apply to all employees, regardless of earnings, while new protections prevent unauthorized deductions. The traditional "Inspector" role has been reimagined as "Inspector-cum-Facilitator," emphasizing guidance and advisory functions over punitive enforcement.
Perhaps most significantly, the Code introduces a more balanced approach to violations through compounding provisions for first-time non-imprisonable offences and decriminalization of certain offences, replacing imprisonment with monetary fines. This signals a shift toward compliance-oriented rather than punishment-oriented regulation.
Industrial Relations Code: Worker Protection Meets Economic Flexibility
The Industrial Relations Code, 2020 consolidates three earlier acts—the Trade Unions Act, 1926; the Industrial Employment (Standing Orders) Act, 1946; and the Industrial Disputes Act, 1947—with a forward-looking philosophy: the survival of workers depends upon the survival of industry.
The Code introduces Fixed Term Employment (FTE), permitting direct, time-bound contracts with full parity in wages and benefits. This innovation addresses a persistent problem of excessive contractualization while offering cost efficiency to employers. Significantly, gratuity eligibility now begins after one year, enhanced from the previous arrangement.
To support workers affected by restructuring, a Re-skilling Fund has been established, financed by industrial establishments at a rate equivalent to 15 days' wages for every retrenched worker. This contribution, credited within 45 days of retrenchment, represents a proactive commitment to worker transition and lifelong learning.
Trade union recognition has been rationalized through a new framework: unions with 51% membership receive recognition as the Negotiating Union, while below this threshold, a Negotiating Council is formed from unions with at least 20% membership. This strengthens collective bargaining while ensuring broader worker representation.
The Code expands the worker definition to include sales promotion staff, journalists, and supervisory employees earning up to ₹18,000 per month, broadening the scope of protection. The approval threshold for lay-offs, retrenchments, and closures has been raised from 100 to 300 workers, with states authorized to increase this further. This provision simplifies compliance while facilitating formalization of the labour market.
Reflecting contemporary work arrangements, the Code permits work-from-home in service sectors by mutual consent. Industrial disputes are now resolved through two-member tribunals comprising judicial and administrative members, with parties able to approach tribunals directly after failed conciliation within 90 days. A mandatory 14-day notice requirement for strikes and lockouts promotes dialogue and minimizes disruptions.
Social Security Code: Extending Protection to All Workers
The Code on Social Security, 2020 represents perhaps the most transformative aspect of labour reform. It consolidates nine existing social security acts and, critically, extends coverage to unorganized, gig, and platform workers—historically the most vulnerable segments of the labour force.
Expanded Employees' State Insurance (ESIC) coverage now applies pan-India, eliminating earlier regional limitations. Establishments with fewer than 10 employees may voluntarily opt in, while coverage is mandated for hazardous occupations. Employees' Provident Fund (EPF) inquiries are now subject to a five-year limitation period, with investigations to be completed within two years, providing greater certainty for workers and employers alike.
The inclusion of gig and platform workers through new definitions—"aggregator," "gig worker," and "platform worker"—marks a watershed moment. A dedicated Social Security Fund finances schemes covering life, disability, health, and old-age benefits for unorganized workers, with funding sourced through compounding of offences.
For construction workers and other vulnerable groups, expanded definitions of dependents now extend coverage to maternal grandparents and, for female employees, dependent parents-in-law. Gratuity eligibility for fixed-term employees has been reduced from five years to one year of continuous service.
Notably, accidents during commutes between home and workplace are now deemed employment-related, qualifying workers for compensation. This provision acknowledges the reality of contemporary work arrangements and expands the safety net.
Occupational Safety and Health: Creating Safer Workplaces
The fourth Code consolidates 13 central labour acts spanning factories, plantations, mines, and diverse worker categories. It establishes unified registration with a threshold of 10 employees and introduces a "one license, one registration, one return" framework.
The Code extends to hazardous work with flexibility—the Government can extend provisions to establishments with even one employee engaged in life-threatening occupations. Women now have the freedom to work in all establishment types and during night hours (before 6 AM and beyond 7 PM) with appropriate consent and safety measures.
A national database for unorganised workers, including migrants, will enhance job matching and skills mapping. Contract labour thresholds have been raised from 20 to 50 workers, with all-India licenses valid for five years. Establishments with 500 or more workers must form safety committees with employer-worker representation.
The Broader Impact: A Transformative Vision
These Labour Codes collectively address a fundamental challenge: modernizing India's regulatory framework to reflect contemporary realities. By simplifying compliance, protecting workers comprehensively, and fostering business efficiency, they create conditions for sustainable economic growth.
The reforms signal India's commitment to an empowered, prosperous, and Aatmanirbhar (self-reliant) future—one where labour lies at the core of development. They recognize that worker welfare and business growth are not opposing forces but complementary imperatives. As India advances its position in the global economy, these reforms ensure that progress is built on the solid foundation of fair wages, safe workplaces, and genuine social security for all workers.
The enactment of these codes marks not an endpoint but a beginning—the establishment of a modern labour ecosystem that empowers both workers and industry, paving the way for inclusive and sustainable progress in the decades ahead.
