The new Labour Codes seem to be revolutionary in their scope, focusing on major issues like “jobless growth”, wage uniformity, inclusivity. Entering into a new era with the goal of modernizing and streamlining a system that was previously thought to be antiquated and unduly complicated.
For many years, the nation was governed by more than 29 federal laws and 120 state laws, each with its own definitions and requirements for compliance. This overlapping structure frequently led to litigation, confusion, and a slowdown in industrial growth. The Government of India passed the Code on Wages (2019), the Industrial Relations Code (2020), the Code on Social Security (2020), and the Occupational Safety, Health, and Working Conditions (OSHWC) Code (2020) in order to boost digital economy and balance business with worker welfare.
The Second National Commission on Labour’s (1998) long-standing recommendations, which highlighted the necessity of simplification and consolidation, are addressed by the reforms. By establishing a cohesive, predictable, and contemporary legal framework, the new labour codes aim to close this gap. However, despite their expansive reach, the codes have generated a great deal of discussion, especially regarding job security- ‘hire & fire’ and retrenchment for businesses with fewer employees than before.
What’s New?
I. Higher Threshold for Layoffs and Retrenchments
The threshold for mandatory government approval for layoffs, retrenchments, and closures is raised from 100 to 300 employees under the Industrial Relations Code. Without prior authorization it will decrease bureaucratic delays, and increase the competitiveness of Indian industries. This reform has emerged as the most contentious modification. Where small scale industries benefit the unorganised ones might struggle.
Trade unions contend that the shift will greatly reduce job security in the organized sector and make it simpler for employers to cut staff. They caution that businesses may purposefully maintain fewer than 300 employees in order to avoid requesting permission for closures or layoffs.
II. Fixed-Term Employment Recognized and Regulated
The new codes establish fixed-term employment as a distinct category. Fixed-term workers will receive equal treatment with permanent workers regarding wages, social security, and working conditions. Employees will qualify for gratuity on a pro-rata basis after completing one year of service, marking a significant change from previous regulations. This measure seeks to mitigate exploitation by guaranteeing that temporary workers are afforded protections comparable to those of permanent employees.
III. Social Security Extended to Gig and Platform Workers
Recognising Gig workers and inter-state migrants formally to availing disability coverage, accident insurance, maternity benefits, and old-age protection. Mandating Digital aggregators to contribute 1–2% of their annual turnover, with a maximum limit of 5% of payments made to workers, as a Social Security Fund. Introducing a social security program through a government scheme proposed by the National Social Security Board (adequately representing gig workers and digital intermediaries) is a welcome move.
IV. Standardized Definition of “Wages”
Social security calculations are based on an individual’s wages. The Code on Wages establishes a standardized definition of wages applicable to all labour laws, thereby reducing ambiguity. According to this definition, allowances must not surpass 50% of total salary, thereby ensuring that basic wages constitute a significant portion of income. This enhances contributions to provident funds, gratuity, and other social security measures, thereby reinforcing long-term worker welfare.
V. Introduction of Inspector-cum-Facilitator
The traditional inspection system has been supplanted by the Inspector-cum-Facilitator model under the Codes. These officers inspect workplaces, investigate accidents, and provide guidance to employers for enhancing compliance. This objective seeks to mitigate harassment and promote safer, healthier work environments.
VI. Unified Coverage Under Code on Wage and OSHWC Code
The Code on Wages is applicable to all employees across various sectors, removing previous distinctions between industry types and extending timely payment benefits to the unorganized sector as well. The OSHWC Code consolidates various safety laws, establishing a consistent framework for working conditions, health standards, and safety measures.
VII. Flexibility while Regulating Contract Labour
The definition of contract labour has been clarified, and the threshold for applicability has increased from 20 to 50 workers. This alleviates compliance burdens for small establishments and enhances regulation in larger workplaces that extensively utilize contract labour.
IX. Faster Dispute Resolution Through Industrial Tribunals
The Industrial Disputes Act of 1947 established a framework for addressing labour matters through Industrial Tribunals and Labour Courts, resulting in overlapping jurisdictions and procedural delays. The Industrial Relations Code aims to simplify the existing framework by substituting labour courts with Industrial Tribunals. This consolidation aims to reduce confusion, speed up dispute resolution and bring greater consistency to decisions relating to employment disputes.
X. Minimum Wages for all employees
In the past, only certain scheduled industries were complying with the payment of minimum wages. Every worker must be paid at least the minimum wage under the new framework, regardless of whether they are contract-based, formal, informal, or employed in small or unorganized sectors. This gives all types of workers more legal protection.
XI. The National Floor Wage
A national floor wage, which serves as the lowest allowable wage level throughout India, will be established by the Central Government. States are required to set their minimum wages at this floor wage or higher. They cannot set wages below the national floor, ensuring uniform basic income protection and reducing regional disparities
Does it lesson Social Security and Job Security?
Critics argue that the codes do not lessen social security, in fact extend it to Gig & Platform worker. In the era of AI, taking over the jobs, makes ‘hire& fire’ easy leading to threat to job security. Of course the codes, lessen the procedural and criminal liabilities but persists in social security and safety. Stricter Compliance is needed to promote the ideology of “ Aatmanirbhar and vikshit bharat”.
(Views are personal)
