One of the largest labour
reforms in independent India has been announced by the government with the
implementation of all four codes. In order to make labour laws more
transparent, effective, and appropriate for the quickly evolving economic
landscape of today, these codes seek to achieve a balance between the rights of
workers and the convenience of doing business,
This blog explains the
reform in detail – why it was needed, what each code contains, how it will
impact India’s workforce, and the challenges ahead.
WHY LABOUR LAW REFORM WAS NEEDED
India’s labour laws have historically
evolved over many years, producing a large number of statutes that frequently
overlapped and caused confusion. Consolidation and reform were necessary for a
number of reasons:
1-Overlap and complexity -
Previously, 29 central
labour laws regulated a number of topics, including social security, wages,
industrial disputes, and safety. This produced: several definitions, conflicting
clauses, over – compliance and paperwork, companies that operate between states
face challenges.
The new codes create regulatory
clarity and reduce misunderstanding by combining various regulations into four
comprehensive categories.
2- Business Ease -
Long compliance producers
were a common problem in India’s business. By streamlining labour regulations,
the reform makes it simpler for businesses, startups, and industries to
function without having to continually deal with complicated legal issues.
3- Safeguarding Employees in a Changing Economy -
Conventional labour
legislation did not sufficiently address: workers in the gig economy, workers
on platforms, the unorganized sector, contractual work. Millions of workers are
now covered by legal and social security frameworks, which also increase
protections.
4- Encouraging Economic Development -
A simpler labour regime fosters investment, boosts
industry, and increases the country’s competitiveness globally.
OVERVIEW OF THE FOUR LABOUR CODES
The four labour codes
are:
1. Code
on Wages, 2019
2. Industrial
Relations Code, 2020
3. Code
on Social Security, 2020
4. Occupational
Safety, Health and Working Conditions (OSHWC) Code, 2020
Together, they lay the
foundation for a unified, transparent labour system.
1-CODE ON WAGES, 2019
The Code on Wages
consolidates four major laws:
- Minimum Wages Act
- Payment of Wages Act
- Payment of Bonus Act
- Equal Remuneration Act
Major features: -
→ The Universal Minimum
Wage – Every worker is entitled to a statutory minimum wage, regardless of
whether they work in the organized or unorganized sectors.
→ The National Floor Wage
– States are prohibited form setting wages below a floor wage that the federal government
may establish. This guarantees consistency throughout India.
→ Simplified Definition of
Wage – Earlier, there were disagreements because different laws defined wages
differently. By standardizing the definition, the new code lessens legal
disputes.
→ On - time Payment - The
code guarantees worker’s financial security by enforcing stringent deadlines
for wage payments.
Effects: -
a)- Wage protection for
workers is improved.
b)- Uniform definitions
result in less litigation for employers.
c)- Increases wage
distribution transparency.
2. Industrial Relations
(IR) Code, 2020
This code merges:
- Trade Unions Act, 1926
- Industrial Employment (Standing
Orders) Act, 1946
- Industrial Disputes Act, 1947
Major features: -
→ Modifications to Layoff
and Retrenchment Regulations – Previously limited to 100 employees, companies
with up to 300 employees are now permitted to lay off or reduce staff without
prior government approval. The goal is to give industries flexibility.
→ Acknowledgment of
Labour Unions – The IR Code clarifies: - receiving acknowledgement, union’s
obligations, mechanisms for resolving disputes, the Negotiating union’s
introduction.
To ensure speed and
transparency in collective bargaining, workers will only be represented by one
major negotiating union (or council).
→ Simplified Dispute
Settlement – The new system shortens the time it takes to resolve labour disputes.
a)- Businesses have more
operational flexibility.
b)- Compensation and
notice regulations continue to provide security for workers.
c)- Improved structures
for collective bargaining appear.
3. Code on Social Security, 2020
This is one of the most
transformative codes because it widens the safety net for millions of workers.
Major features: -
→ Social Security for all
– Social Security benefits are available to all workers, whether they are gig,
platform, formal, or informal.
→ Gig and platform are
included – Employees of platform such as online businesses, freelance
platforms, food delivery apps, and taxi apps are identified and given security.
→ Social Security Fund –
Plans will be funded by a special fund for: unorganized labourers, gig labourers,
workers on platforms, increased advantages.
→ Schemes could consist
of: - benefits of maternity, protection for the elderly, benefits for
disabilities, medical and health insurance, pension and PF.
Effects: -
a)- There is coverage on
India’s sizable informal force.
b)- Legal recognition is
granted to gig workers.
c)- Platforms and
employers are both accountable for the welfare of their employees.
4. Occupational Safety, Health &
Working Conditions (OSHWC) Code, 2020
This code brings together 13 laws related to working
conditions, health, and safety, such as:
- Factories
Act
- Mines
Act
- Plantations
Labour Act
- Contract
Labour Act
Major Features: -
Standardized Safety
Guidelines – Unambiguous guidelines for working conditions and safety in mines,
factories, construction sites, and other sectors.
Required Health Examinations
– Periodic medical checkups are required for workers in hazardous sectors.
Control of working hours –
The code governs: hours of work, extra time, weekly vacations, plans for leave.
Contractor Licensing –
The code streamlines procedures by introducing a single license for businesses
employing contract labour.
Board of National
Advisors – National safety regulations will be supervised by a central
organization.
Effects: -
a)- Safer places to work.
b)- Decreased mishaps.
c)- Improved health care
for employees in high – risk industries.
OVERALL IMPACT FOR IMPLEMENTING THE FOUR
LABOUR CODES
1 – Benefits for Workers -
a)- Minimum wages that are guaranteed.
b)- Increased social security.
c)- Increased safety at work.
d)- Acknowledgment of gig and casual workers.
e)- Better working conditions and less exploitation.
a)- Unambiguous
regulatory structure.
b)- Hiring and layoff
flexibility.
c)- A single, universal
definition of “wages”.
d)- Easier to grow a
company across states.
3 – Benefits for the
Economy -
a)- An increase in
investment.
b)- Motivation for new
businesses.
c)- Higher output as a
result of contented employees.
d)- Increased youth and
female labour force participation.
e)- Conformity to global
labour norms.
CHALLENGES AND CONCERNS
Although the codes have
advantages, there are drawbacks as well:
1 – State- level
Execution – Labour is a concurrent list subject. For the codes to function
properly, states must notify their regulations. Certain states might lag behind
or have differing interpretations of the provisions.
2 – Trade Union Concerns –
Unions are afraid of: - diminished ability to negotiate, easier layoffs for
businesses, restrictions on the right to strike in some industries.
3 – Transition to
Compliance – At first, small enterprises may find it difficult to transition from
the previous legal framework to the new one.
4 – Practical implementation
for gig and informal workers – The following factors determine whether the
Social Security Code is successful: - appropriate registration, finance,
consciousness, coordination of the government.
CONCLUSION
India’s labour law system
underwent a radical change with the adoption of the Four Labour Codes. India
has made significant progress toward a more inclusive, effective, and
contemporary regulatory framework by combining 29 complicated and antiquated
laws into four simplified codes.
These changes are
expected to improve worker protection, stimulate economic expansion, and foster
a climate that is conducive to business. However, successful implementation,
collaboration between the Center and the states, worker awareness, and industry
modifications are critical to their success.
All things considered,
India is getting closer to a future with safer workplaces, more secure workers,
and easier, more logical regulations for businesses thanks to the new labour
laws.
Stay tuned for more legal updates – only on
Law vibes blog.
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