The government announced the new reforms in the labour code last week. The latest reforms were brought under the Code on Wages (2019), the Industrial Relations Code (2020), the Code on Social Security (2020) and the Occupational Safety, Health, Working Conditions (OSHWC) Code (2020).
Seemingly, with the new laws, the government is focusing on the key areas like ensuring physical and psychological safety of women and hazardous industry workers, formalisation of gig workers and financial wellbeing of the employees.
The compilation of the fragmented laws seems to be based on certain key themes which are empowerment of women, formalisation of labour, compliance and compensation and benefits.
ThePeoplesBoard has compiled a list of the latest alterations which have been made to the labour laws of India, along with the key takeaways, as mentioned below:
| Table 1 | ||
| Code on Wages 2019 | ||
| Features | Old Law | New Reforms |
| Coverage of
Minimum Wages |
Applied only to specific
“scheduled employments,” covering around 30% of workers |
All employees in organised and unorganised sectors have a statutory right to minimum wages |
| National Floor Wage | No statutory National Floor Wage | Central government sets a National Floor Wage; states cannot set minimum wages below this level |
| Timely Wage Payment | No mandatory compliance for timely payment across all sectors. | Wages must be paid by the 7th of the next month |
| Gender Equality | No mandate on equal pay | Mandatory equal pay for equal work for all genders |
| Compliance Burden | Complex system with multiple registrations, licenses, and returns for different laws | Single registration, single license, and single return system |
| Documentation | No universal requirement for appointment letters | Mandatory appointment letters and wage slips for all workers, including contractual and gig workers |
Compensation and benefits: Drawing references from Table 1 in further detail, the shift may temporarily disrupt salary structures in industries that relied on variable pay to manage statutory outflows. But in the long term, it sets the stage for more predictable, stable and equitable workplace compensation. Some of the key takeaways from this code are:
- For companies in the IT/ITES industry, release of salary is mandatory by the 7th of every month.
- Equal pay for equal work made mandatory for all genders
- Export sector fixed term workers to receive gratuity, provident fund (PF), and other social security benefits as the permanent staff.
- Every worker will be entitled to the right to timely wage payment and no unauthorised wage deductions or no wage ceiling restrictions will be allowed.
- National Floor Wage has been introduced to ensure no worker receives a wage below the minimum living standard as per the city.
- For the audio-visual industry, overtime work beyond prescribed hours must be consent based and payment should be at least double the normal wage rate.
- The fixed-term employees will be entitled to gratuity after just one year, instead of five.
- The hazardous industry workers should receive a free annual health checkup.
| Table 2 | ||
| Code on Social Security, 2020 | ||
| Features | Old Law | New Reforms |
| Coverage of Workers | Primarily covered organised sector workers; unorganised workers had limited, separate schemes. | Expands coverage to all sectors and formally recognises gig workers, platform workers, and unorganised workers for the first time. |
| Gig/Platform Workers | Not defined or covered under any specific social security legislation. | Defined and eligible for specific social security schemes through a dedicated Social Security Fund funded by government and aggregators. |
| Gratuity Eligibility | Gratuity generally required 5 years of continuous service for permanent employees. | Fixed-term employees are eligible for pro-rata gratuity after just one year of service. The 5-year rule for permanent employees remains unchanged. |
| Definition of ‘Wages’ | Inconsistent definitions across different laws, often allowing employers to structure salaries to minimise statutory contributions. | A uniform definition mandates that allowances exceeding 50% of total remuneration are added back to ‘wages’, ensuring higher statutory contributions (PF, gratuity, etc.). |
| Commuting Accidents | Accidents during the commute to or from the workplace were generally not considered “in the course of employment”. | Such accidents are now covered and make the employee/family eligible for compensation/ESIC benefits. |
| ESIC Coverage | Coverage was limited to specific geographic areas/notified sectors. | Extended nationwide; voluntary coverage options for smaller establishments. |
Formalisation of labour: Under the code mentioned in Table 2, companies need to abide by mandatory appointment letters, universal minimum wages, and bringing gig and platform workers within the social security net are all designed to reduce informality.
- Mandatory appointment letters and payslips: Earlier organisations weren’t mandatorily required to provide written appointment letters with designation, wages and social security details to the employees. But the new reforms have made it mandatory for clarity, transparency and other entitlements.
- Gig and platform workers: For the first time, “gig work”, “platform work” and “aggregators” have been defined. Aggregators are required to contribute to welfare funds creating a route to social security for a previously excluded workforce.
| Table 3 | ||
| Occupational Safety, Health and Working Conditions (OSH) Code, 2020 | ||
| Features | Old Law | New Reforms |
| Applicability Thresholds (Factories) | Applied to factories with 10+ workers (with power) and 20+ (without power). | The threshold increased to 20+ workers (with power) and 40+ (without power), reducing burden on smaller units. |
| Applicability to Establishments | Coverage was fragmented, limited to specific sectors like factories, mines, plantations, etc.. | Universal coverage for all establishments employing 10 or more workers and all mines/docks, regardless of size if hazardous activities are involved. |
| Compliance & Registration | Multiple registrations, licenses, and returns were required under different Acts. | Single electronic registration, single license, and single annual return across all four Labour Codes. |
| Health & Medical Coverage | No universal requirement for free annual health check-ups. | Mandatory free annual health check-ups for all workers above 40 years of age. |
| Working Hours & Leave | Annual leave eligibility required 240 days of work in a year. | Eligibility for annual leave reduced to 180 days of work in a year. Maximum 8 working hours/day and 48 hours/week mandated. |
| Overtime Wages | Overtime rules varied by sector and law. | Mandatory overtime pay at twice the normal wage rate for work beyond prescribed hours, with worker consent required. |
| Inter-State Migrant Workers | Coverage was limited; no portability of benefits. | The definition expanded to include self-employed migrants. Ensures benefits portability (PDS, ESI) and a national database. |
Women empowerment: The OSH Policy, as highlighted in Table 3, highly encompasses women in the Indian workforce. Further to boost participation of women in the workforce, the new code has ensured resolution of harassment, discrimination, and wage related disputes. It also clarifies that women will be allowed to work in night shifts with their consent across all the industries including mining and hazardous, given their employers make necessary arrangements.
- Paid maternity leaves have also been increased from 12 to 26 weeks for the first two children, 12 weeks for subsequent children, along with provisions for remote working after the period of leave upon mutual agreement between the employer and the employee. It also mandates a creche facility in all establishments with 50 or more workers.
- It extends 2 weeks of paid leaves for tubectomy operations.
- In addition, the new law is also going to extend support to mothers with miscarriage with six weeks of paid leave.
- With the latest amendments, women in any industry will be allowed to work on the night shifts, but only with their written consent. Earlier, the regulations around making arrangements for women to work on the night shifts varied from state to state. However, the new code mandates all the companies to offer services such as transport, installation of CCTV cameras, security guards and functional internal complaint committees.
Other than the women centric policies, the code also covers the mining workers. It treats certain commuting accidents as employment-related, subject to conditions of time, and place of employment. Their work hours have been set to 8 to 12 hours per day, 48 hours per week to ensure health and work-life balance.
| Table 4 | ||
| The Industrial Relations Code 2020 | ||
| Features | Old Law | New Reforms |
| Fixed-Term Employment | Not formally defined, leading to reliance on contract labour with potentially fewer benefits. | All fixed terms employees entitled to the same benefits (wages, hours, gratuity after one year) as permanent workers on a pro rata basis |
| Definition of “Strike” | The definition was less specific; notice requirements only applied to “public utility services”. | Extended to all industrial establishments, requiring a mandatory 60-day notice. It now explicitly includes “mass casual leave” by 50% or more workers on a given day. |
| Trade Union Recognition | No statutory provision for recognizing a sole negotiating union, often causing inter-union rivalry. | A union with 51% or more membership is recognized as the sole negotiating union. If none meets this, a negotiating council is formed. |
| Dispute Resolution | Often involved a slow, fragmented process via Labour Courts and Industrial Tribunals, requiring government official reference. | Streamlined with two-member Industrial Tribunals (judicial and administrative members) for quicker resolution. Allows direct application to the tribunal after a failed conciliation within 90 days. |
| Worker Welfare (Retrenchment) | Retrenchment compensation was the primary benefit. | Introduces a Worker Re-skilling Fund, requiring employers to contribute 15 days’ last-drawn wages for a retrenched worker to aid in re-skilling, in addition to compensation. |
| Compliance | Multiple registrations, licenses, and returns across different laws, leading to a high administrative burden. | Aims for a single registration, license, and return for all four Labour Codes. Promotes electronic records and an “Inspector-cum-Facilitator” system |
Compliance: The labour ministry has designed the framework to ensure compliance across multiple levels. From timely wage payment to formalisation of the gig workers, compliance has been paid attention to, in every section of the labour code. Some of the key areas mentioned above such as mandatory appointment letters, annual health checkup of the mine workers, timely wage payment, overtime for workers in the audio-visual industry, etc, ensure better compliance and transparency. Some other key compliance checkpoints are:
- Timely resolution: Disputes of harassment, discrimination, and wage should be settled on time.
- Lay-off and Retrenchment: The threshold for establishments that require prior government approval for lay-offs, retrenchment, or closure has been increased from 100 to 300 workers. This provides greater operational flexibility for employers to scale up their businesses.
As per PIB, the Ministry of Labour and Employment stated that many of India’s labour laws were framed in the pre-Independence and early post-Independence period which were fundamentally different. “While most major economies have updated and consolidated their labour regulations in recent decades, India continued to operate under fragmented, complex and in several parts outdated provisions spread across 29 Central labour laws,” the statement read.
For a hugely diverse workforce like that of India, application of the new labour law will certainly take time. However, given the complexities of it, defining the success rate will be determined by time.
