The New Labour Codes Uphold Interests Of Both Employees And Businesses

Are they heralding a transformative change? Are they a jolt towards a paradigm shift in the labour ecosystem? 

As India pursues its ambition to challenge China’s dominance in global manufacturing, the greatest obstacle has long been its archaic labour laws and rigid colonial-era regulations that deter investment and industrial growth.

With about 450 million workers already in the labour force and a continuing addition of 10-12 million youth every year, India offers abundant, cost-competitive manpower for global assembly lines and production hubs.

However, despite having such a large labour base, the country lagged behind China. 

Unlike China, India makes labour reform politically sensitive, often sparking fierce protests and resistance by trade unions.

In its endeavour to achieve the aim of Viskit Bharat, the Narendra Modi government has taken a courageous and decisive step: consolidating 29 outdated laws into four progressive labour codes that balance flexibility for employers with stronger protections and social security for workers, paving the way for the nation to emerge as the world’s next manufacturing powerhouse.

The Code on Wages focuses on wage security and timeliness; the Industrial Relations Code pertains to employer-employee disputes and employment models; the Code on Social Security expands benefits and portability; and the Occupational Safety, Health, and Working Conditions (OSHWC) Code tends to workplace safety and health standards.

Maintaining A Balance

The new codes aim to create a balance between the interests of the workers and the ease of doing business.

On the one hand, the Central government has defined universal minimum wages for all workers (organised and unorganised sectors), with a national "floor wage" set. The Code of Wages simplifies wage compliance with a single return system. This comes as a big help for the big businesses, as it reduces the burden of compliance.

Similarly, the new Industrial Relation Code raises the threshold for government approval on layoffs, retrenchment, and closures from 100 to 300 workers. It also recognised fixed-term employment and benefits for FTE workers. This includes gratuity after one year (this used to be five years before). 

Code on Social Security

The Code on Social Security not only provides for portable benefits via Aadhaar-linked systems for provident fund, but also includes maternity benefits, disability support, and family pensions with broader definitions. On the other hand, it helps employers with a one-stop registration for social security compliance.

Similarly, the Occupational Safety, Health, and Working Conditions (OSHWC) Code introduces practical, modern safeguards alongside operational flexibility. It caps daily working hours at 8–12, and weekly hours at 48, mandates free annual health check-ups for employees above 45, and permits women to work night shifts (unless with their consent), and the employer ensures transport, security, and safe facilities. For businesses, the biggest relief is the single registration and licence system that replaces a maze of earlier approvals, sharply cutting red tape and compliance costs while maintaining stronger safety and welfare standards.

India’s Labour Ecosystem

Yet, India’s labour ecosystem awaits a deeper transformation: a fundamental shift in mindset. For decades, both the old laws and the attitude of labour officials were overwhelmingly pro-worker, often to the point of hostility toward employers. 

Large corporations have consistently stayed away from labour-intensive manufacturing, haunted by the spectre of unending disputes. Powerful unions have used intimidation as a weapon, fully aware that the mindset within the labour law machinery shields workers and penalises employers.

True ease of doing business will be realised only when labour department officers view themselves as neutral facilitators of industrial harmony, not as enforcers pressuring businesses to pay off erring workers. Unless there is an overhaul of the labour law system, followed by a change in the mindset of the labour inspectors and enforcement officials, the new labour codes will not be able to draw the kind of results that have been envisaged. 

(The writer is a senior lawyer. Views are personal.)