Syllabus: GS3/Economy
Context
- Recently, the Union government fully operationalised the four Labour Codes by notifying the corresponding rules through more than 30 Gazette notifications.
About Four Labour Codes
- Background of Labour Reforms in India: India’s labour laws were complex and fragmented, compliance-heavy, difficult for businesses to navigate, and inadequate for the informal workforce.
- The government consolidated 29 labour laws into four broad codes between 2019 and 2020 to improve the Ease of Doing Business.
- The Codes came into force in November 2025, while the Rules notified in May 2026 complete their implementation framework.
- The four Labour Codes are:
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Code on Social Security, 2020
- Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020
- The government has generated intense debate between the government, employers, trade unions, and opposition parties regarding labour flexibility, workers’ rights, and social security protections.
Key Features of the Labour Codes
- Major Provisions of Code on Wages, 2019
- Universalisation of Minimum Wages: The Code extends minimum wage provisions to all employees across organised and unorganised sectors.
- Floor Wage: The Central government may fix a national floor wage after considering minimum living standards, food requirements, clothing, housing, and other socio-economic factors.
- States cannot fix wages below the national floor wage.
- Working Hours:
- Daily wage employees: 8-hour workday
- Weekly work limit: 48 hours
- Wage Slips: Employers must provide wage slips either electronically, or in physical form.
- Major Provisions of Code on Social Security, 2020: The Code consolidates laws relating to Employees’ Provident Fund (EPF), Employees’ State Insurance (ESI), maternity benefits, gratuity, gig and platform workers.
- Inclusion of Gig Workers: Gig and platform workers are formally recognised under social security legislation for the first time.
- Changes in Existing Rules: The Rules amend several frameworks including Employees’ State Insurance (Central) Rules, 1950 and EPF Appellate Tribunal Rules, 1997.
- Major Provisions of Industrial Relations Code, 2020:
- Recognition of Trade Unions: A trade union with at least 30% membership in an establishment can be recognised as the sole negotiating union.
- Other Features: Simplified dispute resolution, provisions for fixed-term employment, and stricter conditions for strikes and lockouts.
- Occupational Safety, Health and Working Conditions Code, 2020: The OSHWC Code aims to regulate workplace safety, health standards, welfare measures, and working conditions.
- It merges laws governing factories, mines, contract labour, and migrant workers.
Related Key Issues & Concerns
- Dilution of Workers’ Rights: Trade unions argue that the Labour Codes weaken collective bargaining powers and make it easier for employers to hire and terminate workers.
- Ambiguity in Minimum Wage Fixation: The Rules do not clearly define uniform criteria for fixing minimum wages, raising concerns about wage disparities across States and sectors.
- Restrictions on Trade Unions: Stricter provisions related to strikes, union recognition, and dispute resolution are viewed as limiting labour activism and democratic negotiation rights.
- Increased Labour Flexibility vs Job Security: Provisions such as fixed-term employment may increase flexibility for industries but can reduce long-term job security for workers.
- Concerns over Working Hours: Though capped at 48 hours per week, apprehensions remain regarding extended daily work hours and possible exploitation of workers.
- Weak Social Security Coverage: Despite inclusion of gig and platform workers, clarity on implementation, funding, and delivery of benefits remains inadequate.
- Implementation Challenges: India’s large informal workforce and weak labour inspection mechanisms may hinder effective enforcement of the Codes.
- Federal Concerns: Since labour falls under the Concurrent List, differences in State-level Rules may create uneven implementation and labour standards.
- Fear of Informalisation: Industries may increasingly rely on contractual and temporary labour, reducing permanent employment opportunities.
- Limited Stakeholder Consultation: Trade unions allege that several of their recommendations were ignored, leading to protests and concerns over participatory policymaking.
Way Forward
- Need for Balanced Labour Governance: The success of labour reforms depends on balancing economic competitiveness, worker protection, and social security expansion.
- Suggested measures are wider stakeholder consultations, strong grievance redressal systems, robust labour inspection mechanisms, universal social security architecture, and digital transparency in wage payments and compliance.
