India has launched one of its most ambitious labour reform initiatives, transforming a complex web of 29 labour laws into four simplified and modern Labour Codes. These reforms aim to strengthen workers’ rights, promote economic growth, and create a fair, future-ready labour ecosystem.
Released in line with India’s vision of an empowered and Aatmanirbhar Bharat, the reforms come at a time when the country’s labour market has shown remarkable progress. Between 2017–18 and 2023–24, employment surged from 47.5 crore to 64.33 crore—a gain of 16.83 crore jobs. The unemployment rate fell from 6.0% to 3.2%, and more than 1.56 crore women entered the formal workforce, reflecting inclusive growth and expanding social protection coverage.
Why Labour Law Codification Was Needed
India’s earlier labour regulations were spread across numerous legislations, many dating back to the pre-Independence era. This created compliance challenges, enforcement hurdles, and outdated rules that no longer matched India’s fast-changing economic landscape.
The four Labour Codes aim to:
- Simplify compliance by removing the overlap of multiple laws
- Modernize regulations for contemporary workplaces
- Promote job creation through an investor- and worker-friendly environment
- Strengthen enforcement with transparent, digital systems
- Ensure universal social, wage, and health security
These Codes resulted from extensive consultations with employers, industry bodies, workers, and trade unions over several years.
An Overview of India’s Four Labour Codes
1. The Code on Wages, 2019
The Wage Code consolidates four wage-related Acts to ensure uniformity and fairness across sectors.
Key Highlights
- Universal Minimum Wage: Every worker, in both organised and unorganised sectors, now has the right to minimum wages.
- National Floor Wage: States cannot set wages below a centrally determined floor wage.
- Timely, Transparent Wage Payments: Provisions apply to all employees, even those earning above ₹24,000 per month.
- Gender Equality: No wage or employment discrimination based on gender or transgender identity.
- Mandatory Overtime Pay: At least twice the regular wage.
- Inspector-cum-Facilitator: Focus on guidance rather than punitive policing.
- Decriminalization: Many offences now carry monetary penalties instead of imprisonment.
2. The Industrial Relations Code, 2020
This Code merges provisions from three earlier laws to streamline industrial harmony and dispute resolution.
Key Highlights
- Fixed Term Employment with Benefits: FTE workers receive equal wages and benefits, including gratuity after one year.
- Re-skilling Fund: 15 days’ wages deposited for retrenched workers to support re-employment.
- Trade Union Recognition: 51% membership gives a union negotiating status.
- Higher Threshold for Lay-offs/Closures: Raised from 100 to 300 workers for prior government approval.
- Work-from-Home Provision: Enables flexibility in service-sector jobs.
- Direct Tribunal Access: Speedier resolution after failed conciliation.
- Notice for Strikes: Mandatory 14-day notice to ensure dialogue.
- Digital Records: Electronic filings for transparency.
3. The Code on Social Security, 2020
This far-reaching Code integrates nine social security laws and expands protection to all workers, including gig and platform workers.
Key Highlights
- ESIC Coverage Everywhere: No more “notified areas”; even small establishments may opt in voluntarily.
- Time-bound EPF Processes: Five-year initiation limit and faster inquiry timelines.
- Reduced EPF Appeal Deposit: Down to 25% from the earlier 40–70%.
- Gig & Platform Worker Inclusion: Aggregators contribute 1–2% of turnover to support social security.
- Social Security Fund: Financing schemes for unorganised, gig, and platform workers.
- Expanded Family Benefit: Includes maternal grandparents and parents-in-law.
- Uniform wage definition for consistent calculation of PF, gratuity, and other benefits.
- Accidents During Commute Covered: Deemed employment-related.
- Digitized Compliance: Mandatory online records and returns for businesses.
4. The Occupational Safety, Health and Working Conditions Code, 2020
This Code consolidates 13 laws to ensure safer workplaces and simplified operating procedures.
Key Highlights
- Unified Registration: One electronic registration for establishments, replacing multiple registrations.
- Hazardous Work Coverage: Even a single-worker unit can be brought under safety rules.
- Simplified Licensing: One license, one return for all.
- Wider Definition of Migrant Workers: Ensures portability of benefits and annual travel allowance.
- Women’s Employment: Women can work in all sectors, including night shifts, with safety conditions.
- National Database for Unorganised Workers: Helps provide jobs, skill mapping, and benefits.
- Revised Factory Thresholds: Reduced burden on small units by raising employee thresholds.
- Safety Committees: Mandatory for units with 500+ workers.
- Working Hours: Standardised at 8 hours/day and 48 hours/week.
- Victim Compensation: 50% of penalties directed to injured workers or families.
- Decriminalization: Penalties replaced with monetary fines to encourage compliance.
How the Labour Codes Transform India’s Labour Market
Together, the Labour Codes promise a reformed ecosystem that:
- Reflects modern work patterns—gig work, digital economy, flexible employment
- Provides universal wage, health, and social protection
- Encourages business growth with simpler compliance
- Improves transparency with digital registrations and risk-based inspections
- Strengthens worker safety and welfare across sectors
- Promotes gender equality with inclusive and progressive provisions
- Enhances employment generation by reducing procedural barriers
Conclusion
India’s new Labour Codes mark a historic shift toward a streamlined, equitable, and investment-friendly labour system. They balance the twin priorities of worker welfare and enterprise efficiency. By simplifying outdated regulations, expanding social security, modernising safety standards, and embracing digital governance, the Codes lay the foundation for a more inclusive and sustainable future of work in India.
These reforms reaffirm India’s commitment to creating a labour ecosystem that empowers workers, supports industry, and accelerates national growth.