Labour Code Reforms
Syllabus Areas:
GS I - Society
GS II - Polity and Governance
GS III - Economy
In a landmark move, the Central Government has notified and operationalised all four Labour Codes, marking India’s most comprehensive overhaul of labour regulations since Independence. These Codes—enacted between 2019 and 2020—had remained pending due to prolonged consultations, opposition from trade unions, and delays in rule-making by some States.
The rollout gained momentum after the government secured strong electoral mandates in key States such as Bihar, Maharashtra, Haryana, and Delhi, prompting a renewed push for structural reforms. With over two dozen States now ready with draft rules, the Centre decided to move ahead.
These reforms replace 23–29 fragmented labour laws, many dating back to the 1930s and 1950s, and aim to modernise India’s labour ecosystem, boost job creation, and make India more competitive at a time when global companies are diversifying production away from China toward manufacturing hubs like Vietnam and Bangladesh.
Scope of the Four Labour Codes
The four Codes notified are:
- Code on Wages, 2019
- Merges four laws on wages and bonuses.
- Provides statutory right to minimum wages.
- Introduces a national floor wage to reduce interstate wage disparities.
- Ensures timely and written appointment letters to all workers.
- Industrial Relations Code, 2020
- Modernises laws on trade unions, industrial disputes, and employment conditions.
- Aims at improving ease of doing business and reducing compliance burden.
- Social Security Code, 2020
- Extends universal social security to organised, unorganised, gig, platform, contract, and migrant workers.
- Aggregators/platform companies must contribute 1–2% of turnover towards gig workers’ social security.
- Occupational Safety, Health and Working Conditions Code, 2020
- Consolidates 13 laws on health, safety, and workplace conditions.
- Mandates annual health check-ups (paid by employer) for workers aged above 40.
- Provides single registration, licence, and return submission system nationwide.
Major Reforms Introduced
- Worker-Centric Provisions
- Minimum wage guaranteed across sectors; national floor wage to be notified by Centre.
- Timely payment of wages becomes enforceable legal right.
- Appointment letters mandatory → ensures transparency, formalisation of employment.
- ESIC coverage expanded:
- Mandatory even for establishments with one employee in hazardous processes.
- Pan-India ESIC network strengthened.
- Reforms for Women Workers
- Women can work night shifts and in all types of work, subject to consent & mandatory safety measures.
- Strict provisions for gender parity and gender-neutral workplaces.
- Reforms for Gig, Platform & Migrant Workers
- For the first time in Indian law, gig and platform work are defined and recognised.
- All such workers brought under the ambit of social security schemes.
- Allows portability of welfare benefits across States for migrant workers.
- Benefits for Fixed-Term Employees
- Fixed-term workers entitled to all benefits of permanent workers:
- leave
- medical benefits
- gratuity (proportionate)
- social security
- Fixed-term workers entitled to all benefits of permanent workers:
- Simplification & Structural Modernisation
- Replaces 23–29 fragmented laws dating back decades.
- Single licensing system for establishments.
- Inspector-cum-facilitator model for ease of compliance.
- Faster dispute resolution through two-member tribunals.
- National OSH Board established to harmonise safety standards.
Promises & Expected Impact
Government’s Perspective
- PM called it the “most comprehensive and progressive labour-oriented reform since Independence.”
- Aims to build a future-ready labour ecosystem, strengthen rights, and boost job creation.
- Expected to make India a more attractive manufacturing hub amid global supply-chain shifts.
Industry Perspective
- Simplified labour framework brings certainty, flexibility and reduced compliance burden.
- Addresses investor concerns about outdated labour laws.
Trade Unions’ Stand
- Ten Central Trade Unions called the Codes “anti-worker and pro-employer”.
- Protests continue over fears of:
- easier hire-and-fire norms
- dilution of collective bargaining
- increased contractualisation
Federal Dynamics
- Labour is in the Concurrent List, so both Centre and States must frame rules.
- If a State does not notify its rules, it will be bound by Central rules.
- All States except West Bengal have issued draft rules.
Why This Reform Matters Today
- Comes at a time of global economic headwinds.
- Seeks to formalise India’s largely unorganised workforce.
- Aims to balance worker welfare with business flexibility.
- Crucial for India’s ambition of becoming a global manufacturing powerhouse and achieving Viksit Bharat
Prelims Questions:
1. With reference to the Code on Wages, 2019, consider the following statements:
- It introduces a statutory national floor wage which all States must follow.
- It makes issuance of appointment letters to all employees mandatory.
- It merges four existing labour laws into a single Code.
Which of the statements given above is/are correct?
2. Consider the following statements regarding the concept of “floor wage” under the Code on Wages:
- It is set by the Central Government.
- States cannot fix minimum wages below the floor wage.
- States are mandated to keep the same minimum wage as the floor wage.
Which of the above statements is/are correct?
3. With reference to the four Labour Codes, consider the following:
- Labour being in the Concurrent List means both Centre and States must frame rules.
- If States fail to notify rules, Central rules automatically apply.
- West Bengal is the only State yet to issue draft rules.
