Understanding India’s New Labour Codes: Code on Wages, Social Security, and Industrial Relations Reforms
Labour laws in India have undergone a significant transformation with the introduction of the New Labour Codes. The government has consolidated multiple existing labour laws into four key labour codes to simplify and modernize regulations governing employment, wages, industrial relations, and social security.
The four new labour codes are:
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Social Security Code, 2020
- Occupational Safety, Health, and Working Conditions Code, 2020
These reforms aim to create a more employer-friendly and worker-centric labour law regime, ensuring transparency, ease of compliance, and enhanced social security benefits.
In this blog, we will explore what the new labour codes in India are, their key provisions, and how they impact employers and employees.
What Are the New Labour Codes in India?
The new labour codes in India are a set of laws enacted to simplify and unify the country’s complex labour laws. Previously, India had over 40 central labour laws and numerous state-level laws, leading to confusion and compliance challenges.
To address this, the government merged multiple laws under four codes, covering wages, industrial relations, occupational safety, and social security. This addition was as a consequence of the 2002 recommendations of Second Law Commission (1999).
These codes aim to:
- Streamline regulatory frameworks
- Ensure Universal social security
- Promote ease of doing business
- Enhance workers’ rights and benefits
These reforms are expected to have a long-term impact on the Indian workforce, businesses, and the economy.
1. Code on Wages, 2019
The Code on Wages, 2019 consolidates four major wage-related laws:
- The Minimum Wages Act, 1948
- The Payment of Wages Act, 1936
- The Equal Remuneration Act, 1976
- The Payment of Bonus Act, 1965
Key Provisions of the Code on Wages, 2019
- Uniform Definition of Wages: The code introduces a standard definition of “wages” to avoid disputes regarding salary components.
- Minimum Wages for All: Unlike earlier laws that covered only specific industries, the new law applies to all employees, ensuring universal minimum wage coverage.
- Timely Payment of Wages: Employers must pay wages on time, whether on a daily, weekly, or monthly basis.
- Equal Pay for Equal Work: The code mandates no gender discrimination in wages and recruitment.
- Bonus Entitlement: Employees earning below a certain threshold are eligible for bonuses.
Impact of the Code on Wages
- Employers need to restructure salary components to comply with the new definition of wages.
- Workers in unorganized sectors will now receive minimum wage protection.
2. Industrial Relations Code, 2020
The Industrial Relations Code, 2020 consolidates three major laws:
- The Industrial Disputes Act, 1947
- The Trade Unions Act, 1926
- The Industrial Employment (Standing Orders) Act, 1946
Key Provisions of the Industrial Relations Code, 2020
- Easier Hiring and Firing: Large firms (300+ employees) no longer need government approval for layoffs, simplifying business operations.
- Fixed-Term Employment: Employers can now hire workers on a fixed-term basis with similar benefits as permanent employees.
- New Trade Union Regulations: Trade unions must represent at least 51% of workers to be recognized for negotiations.
- Faster Dispute Resolution: The code establishes Industrial Tribunals to resolve disputes efficiently.
Impact of the Industrial Relations Code
- Encourages flexible hiring for businesses while protecting workers’ rights.
- Fixed-term workers now receive similar benefits as permanent employees, improving job security.
3. Social Security Code, 2020
The Social Security Code, 2020 consolidates nine laws, including:
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- The Employees’ State Insurance Act, 1948
- The Maternity Benefit Act, 1961
- The Payment of Gratuity Act, 1972
- The Unorganized Workers’ Social Security Act, 2008
Key Provisions of the Social Security Code, 2020
- Universal Social Security: Extends ESI (Employee State Insurance) and EPF (Employees’ Provident Fund) benefits to gig workers, platform workers, and unorganized sector workers.
- Maternity Benefits: Female employees get paid maternity leave for up to 26 weeks.
- Gratuity for Fixed-Term Employees: Fixed-term employees can now receive gratuity benefits, unlike before when only permanent employees were eligible.
- National Social Security Board: A centralized board will formulate schemes for gig and unorganized sector workers.
Impact of the Social Security Code
- Gig workers, like those working for Zomato, Swiggy, Uber, and Ola, now receive social security benefits.
- Women employees get stronger maternity protections.
- Fixed-term employees get equal benefits as permanent workers.
4. Occupational Safety, Health, and Working Conditions Code, 2020
This code replaces 13 laws related to workplace safety and conditions, including:
- The Factories Act, 1948
- The Mines Act, 1952
- The Contract Labour (Regulation and Abolition) Act, 1970
Key Provisions
- Mandatory Health and Safety Standards for all workplaces.
- Working Hours Regulation: Maximum 8-hour work shifts, with overtime pay.
- Free Health Check-ups: Employers must provide free annual health check-ups for workers.
- Migrant Worker Protections: Ensures equal benefits for inter-state migrant workers.
Impact of the Code on Occupational Safety
- Workers in hazardous industries get better safety protections.
- Employers must ensure better workplace conditions and safety measures.
Conclusion: What Do the New Labour Codes in India Mean for You?
The new labour codes in India aim to simplify and modernize the country’s labour laws, ensuring ease of doing business while also enhancing worker protections.
For Employees:
✔ Higher job security for fixed-term employees.
✔ Universal social security for gig and unorganized workers.
✔ Better workplace safety standards.
For Employers:
✔ Simplified compliance with fewer legal complexities.
✔ Greater flexibility in hiring and termination.
✔ Encouragement for formal employment.The implementation of these laws is expected to bring significant changes to India’s labour market. Employers and workers should stay informed and adapt to the new legal framework.