Labour Codes in India

The implementation framework for India’s labour reforms has been completed with the notification of rules under the four Labour Codes. While the government views these reforms as a major step toward simplifying labour regulations and improving the ease of doing business, trade unions and labour experts have expressed concerns regarding several provisions and the absence of adequate safeguards for workers.

About the Four Labour Codes

India consolidated 29 central labour laws into four comprehensive Labour Codes to create a simpler and more unified legal framework.

The Code on Wages, 2019 seeks to ensure universal wage protection by extending the provisions relating to minimum wages and timely payment of wages to all employees across sectors.

The Industrial Relations Code, 2020 regulates trade unions, industrial disputes, layoffs, retrenchment, and introduces the concept of Fixed-Term Employment (FTE).

The Code on Social Security, 2020 aims to expand social security coverage to organised, unorganised, gig, and platform workers.

The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 consolidates laws relating to workplace safety, health, welfare measures, and working conditions.

These reforms have been projected as an effort to balance economic efficiency with labour welfare.

Key Promises of the Labour Codes

One of the major objectives of the labour reforms is the simplification of labour laws. By replacing 29 fragmented legislations with four comprehensive codes, the government aims to reduce legal complexity and compliance burdens for businesses.

The Code on Wages promises universal wage protection, ensuring that all workers, irrespective of their sector, are entitled to minimum wages and timely payment.

The recognition of Fixed-Term Employment (FTE) under the Industrial Relations Code is intended to promote the formalisation of employment, allowing employers greater flexibility while extending statutory benefits to temporary workers.

The Social Security Code seeks to broaden social protection by including gig workers, platform workers, migrant labourers, and unorganised workers, thereby adapting labour welfare systems to the changing nature of employment.

Similarly, the OSHWC Code establishes common standards relating to occupational safety, welfare facilities, working conditions, and the prevention of workplace hazards.

The reforms also aim to promote industrial harmony through streamlined dispute resolution mechanisms and stronger collective bargaining arrangements.

Major Concerns Associated with the Labour Codes

Concerns over Fixed-Term Employment

One of the most debated aspects of the reforms relates to Fixed-Term Employment (FTE). The law does not prescribe any minimum tenure for contracts or limit the number of renewals. Critics argue that employers may repeatedly renew fixed-term contracts instead of creating permanent jobs, gradually replacing regular employment with temporary arrangements. This could increase employment insecurity and weaken long-term labour protections.

Ambiguity in Wage Determination

Another concern relates to the absence of a clear distinction between the concepts of floor wage and minimum wage. The framework also lacks transparent criteria and adequate consultation mechanisms with States for wage fixation, potentially leading to inconsistencies and disputes.

Issues with Hourly Wage Calculations

The growing gig economy has raised questions regarding the applicability of hourly wages. Unlike traditional full-day employment, workers paid on an hourly basis may not find work for the remaining hours of the day. International labour standards generally treat hourly work differently from conventional employment, suggesting the need for separate mechanisms for determining such wages.

Inadequate Protection for Gig and Platform Workers

Although the Social Security Code recognises gig and platform workers, it continues to treat them largely as self-employed individuals. The absence of clearly defined employer-employee relationships leaves social security obligations of digital platforms ambiguous. Consequently, millions of workers engaged in app-based services remain vulnerable despite their growing contribution to the economy.

Lack of Clarity on Gratuity Insurance

The rules do not clearly specify the implementation mechanisms, employer responsibilities, or insurance modalities relating to gratuity payments. This creates uncertainty and weakens an important safeguard against the non-payment of retirement benefits.

Weakening of Trade Union Recognition

Labour organisations have also expressed concerns that stricter recognition criteria may make it difficult for smaller unions and newly formed worker groups to represent employees effectively. This could reduce the scope for collective bargaining and weaken labour representation, especially in large industrial establishments.

Expansion of Contract Labour and Informalisation

The OSHWC Code does not clearly distinguish between core and non-core activities, creating ambiguity regarding the employment of contract labour. Critics fear that permanent production activities may increasingly rely on contract workers, thereby accelerating informalisation and reducing job security.

Missing Occupation-Specific Welfare Measures

Several welfare provisions available under earlier laws appear to be absent in the new framework. For instance, specific requirements relating to housing facilities and medical services for plantation workers have not been adequately retained. This has raised concerns about the dilution of occupation-specific protections for vulnerable groups of workers.

Way Forward: Strengthening Labour Protection in India

India's labour reforms must balance economic flexibility with social justice. Fixed-term employment should be regulated by prescribing minimum contract durations and limiting repeated renewals to prevent the replacement of permanent jobs with temporary arrangements.

A transparent and evidence-based wage determination mechanism is necessary to clearly distinguish between floor wages and minimum wages while eliminating gender-biased consumption norms.

The protection of gig and platform workers requires clear definitions of employer responsibilities, mandatory social security contributions by digital aggregators, and the provision of health, accident, and retirement benefits.

Similarly, the use of contract labour should be restricted in core production activities through clear legal definitions and stronger enforcement mechanisms.

Trade union participation must be strengthened by reviewing recognition thresholds and encouraging social dialogue and collective bargaining. Effective implementation of gratuity insurance mechanisms and accessible grievance redress systems would further enhance worker protection.

Finally, occupation-specific welfare provisions, particularly for vulnerable workers such as plantation labourers, must be preserved, while labour inspection and enforcement systems should be modernised and strengthened.

Conclusion

The four Labour Codes represent one of the most significant labour reforms in independent India, seeking to simplify regulations and adapt to the changing nature of work. However, concerns regarding employment security, gig worker protection, trade union rights, and welfare standards highlight the need for a more balanced approach.