Author: Aishi Naskar, Heritage Law College

This article explores the comparative and philosophical divergence in recent labour law reforms undertaken by India and the European Union (EU) in response to globalization, digitalization, and the rising prominence of the gig economy. The primary objective of this study is to analyse the foundational policy drivers which are India’s focus on 'Ease of Doing Business' and the EU’s commitment to the 'European Pillar of Social Rights' and assess how these divergent regulatory philosophies translate into specific legal provisions concerning industrial relations, social security, and wage standardization. The methodology employed is primarily analytical and doctrinal, involving a systematic review of India's four new Labour Codes (2019–2020) and key EU Directives like on Pay Transparency, Work-Life Balance, and Platform Work. The key arguments developed here state that while both jurisdictions aim for modernization, India's reforms prioritize labour market flexibility and simplification to attract capital, whereas the EU's reforms prioritize regulatory standardization and social protection to bolster worker rights and combat inequality. The major finding reveals a significant difference in the treatment of capital and labour: India's codes largely consolidate employer interests, notably by raising retrenchment thresholds, while the EU's Directives strengthen collective bargaining and the predictability of employment, suggesting that a fundamental paradigm shift in the governance of the world of work is underway, characterized by distinct regional approaches to balancing economic growth and social justice. 

Keywords 

Labour Law Reform, India Labour Codes, European Social Model, Ease of Doing Business, Social Security, Comparative Law. 

The landscape of global work is undergoing a profound transformation, driven by technological disruption, shifting economic priorities, and the rapid expansion of non-standard employment forms such as gig and platform work. This environment has compelled major economic blocs to undertake fundamental labour law reforms aimed at modernizing antiquated statutory frameworks, albeit with differing philosophical underpinnings. The Republic of India, grappling with a complex web of over 44 central and myriad state labour statutes, recently moved to consolidate these laws into four comprehensive Labour Codes. Concurrently, the European Union (EU), guided by the principles enshrined in the European Pillar of Social Rights, has introduced a series of robust directives intended to enhance social protection, enforce work-life balance, and regulate new forms of digital work across its member States. The research problem addressed by this paper is the resulting juxtaposition of these reform efforts specifically, whether the two largest democratic economic entities- India, focuses on developmental state objectives and the EU is committed to its social market economy. These are converging towards a universally recognized standard of ‘decent work’ or are diverging along paths shaped by distinct socio-economic priorities. This study’s objectives are manifold: primarily, to analyse the stated and implied policy objectives guiding the reforms in India and the EU; secondly, to critically evaluate and compare the specific legal mechanisms implemented in each jurisdiction concerning industrial relations and social security for non-standard workers and finally, to assess the implications of these distinct reform trajectories for the future of labour standards in a globalized economy. The scope is limited to the four Indian Labour Codes as in the Code on Wages, 2019; Industrial Relations Code, 2020; Social Security Code, 2020; and Occupational Safety, Health and Working Conditions Code, 2020 and key EU Directives adopted since 2019, including the Pay Transparency Directive and the Work-Life Balance Directive. The primary constraint is the varying degree of implementation, as India's Codes are yet to be fully enforced and EU Directives are subject to domestic transposition. This paper is structured to provide a detailed comparative analysis before synthesizing the findings and offering policy-relevant recommendations. 

A substantial body of international labour law scholarship has addressed the perennial challenge of reconciling labour protection with market flexibility. Academic discourse concerning India’s labour law regime has historically centred on the rigidity hypothesis of the argument that complex, rigid, and overlapping laws, such as the Industrial Disputes Act, 1947 and the Factories Act, 1948, have deterred large-scale manufacturing investment and fostered informal employment, thereby inhibiting job creation in the formal sector .Scholars like Besley and Burgess provided empirical evidence linking strict labour regulations to lower industrial output and investment in certain Indian states. The recent codification effort is widely viewed in the literature as a legislative response to these critiques explicitly prioritizing 'Ease of Doing Business' as a central reform goal. In contrast, scholarship on the European Union's employment law has focused on the evolution and resilience of the European Social Model (ESM). This literature emphasizes the acquis communautaire-the body of common rights and obligations which promotes upward convergence in social standards, driven by principles of social solidarity and social dialogue. Recent scholarly attention has turned to the European Pillar of Social Rights (EPSR), proclaimed in 2017, which serves as the political and legal compass for new legislation. Studies on the EU Directives, such as the ‘Transparent and Predictable Working Conditions Directive (2019)’, typically analyses their role in countering precarious work and ensuring core employment standards extend to atypical workers. While significant research exists on the internal reforms of both regions, a critical lacuna persists in the comparative analysis of their philosophical reform agendas. Previous comparative studies have often focused on high-level legal structure for e.g., common law vs. civil law systems or single-issue comparisons for e.g., minimum wage laws. The present study offers originality by bridging this gap, systematically comparing India’s market-centric, liberalization-driven codes with the EU’s rights-centric, standardization-driven directives. This comparison is vital, as it assesses not just the legal tools, but the distinct political economies and regulatory intentions underpinning the modernization of labour standards in two major global players. 

The research presented here is guided by a set of specific, comparative objectives, firstly to delineate the core regulatory philosophy that is market flexibility versus social standardization, governing labour law reform in India and the European Union; secondly to comparatively analyse the specific legal provisions relating to the Industrial Relations Code, 2020(India) and the Directives on Predictable Working Conditions and Pay Transparency (EU); and thirdly to evaluate the respective approaches of the Code on Social Security, 2020(India) and the Platform Work Directive(EU) in extending protections to workers in the emerging gig economy. The methodological approach adopted is doctrinal and analytical, drawing primarily on a systematic analysis of primary legal instruments. For India, this includes the full text of the four Labour Codes and their accompanying rules, alongside government white papers and parliamentary committee reports that articulate the intent and policy goals, particularly those related to easing compliance and promoting investment. For the European Union, the analysis involves a detailed examination of the relevant Directives, Regulations, and the preparatory documents stemming from the European Commission, the European Parliament, and the European Council, with the European Pillar of Social Rights serving as the normative framework. Secondary sources, including peer-reviewed law journals, international labour organization (ILO) reports, and comparative law commentaries, are utilized to interpret legislative intent and contextualize the reforms within broader global trends of deregulation and re-regulation. The comparative method is employed to systematically identify points of similarity and, more importantly, points of divergence between the two systems, allowing for a rigorous, evidence-based assessment of their success in achieving their stated policy goals. 

This comparative study is conceptually grounded in the Developmental State vs. Social Market Economy framework, with a specific theoretical focus on the concept of Regulatory Philosophy. This approach frames the divergence in labour law reforms not merely as technical differences in legal text, but as manifestations of fundamentally distinct national and supra-national ideologies concerning the proper role of the state, the market and social protection in a globalized economy. The Indian reforms are interpreted through the lens of a Developmental State transitioning toward a liberalized economy, where labour law acts as a mechanism to facilitate capital accumulation and enhance international competitiveness. In this philosophy, as articulated by the government, simplification and flexibility such as raising the threshold for government permission for retrenchment from 100 to 300 workers under the Industrial Relations Code, 2020 are seen as prerequisites for stimulating formal job creation and promoting foreign investment. The regulatory objective is, therefore, to reduce transaction costs for employers. Conversely, the EU’s reforms are anchored in the principle of the Social Market Economy, where the market is tempered by a strong, legally mandated social dimension. The regulatory objective, codified in the EPSR, is upward social convergence ensuring that economic integration does not lead to a 'race to the bottom' in labour standards. Directives like the Pay Transparency Directive are not aimed at enhancing business flexibility but at correcting systemic market failures through robust regulatory standardization and enforcement. By using this framework, the analysis can effectively highlight the philosophical chasm: one system primarily seeks to de-regulate to encourage growth, while the other seeks to re-regulate to mandate social cohesion. 

The core of this research rests on the analytical comparison of specific reform pillars in India and the EU, revealing how their distinct regulatory philosophies translate into concrete legal mandates. The reform of industrial relations presents the starkest contrast between the two jurisdictions. In India, the primary reform under the Industrial Relations Code, 2020, is the substantial increase in the employee threshold for requiring government approval for lay-offs, retrenchment, or closure of industrial establishments from 100 to 300 workers. This provision is the legislative embodiment of the flexibility agenda, enabling employers in larger establishments to adjust their workforce size without bureaucratic hindrance. Furthermore, the IR Code introduces a statutory framework for Fixed-Term Employment (FTE), granting such workers parity in social security and benefits with permanent employees, but crucially offering employers an exit strategy without complex retrenchment procedures. The focus is unequivocally on reducing the rigidities criticized by business lobbies and economic analysts. In direct opposition, the EU’s focus has been on strengthening and standardizing the existing rights of workers, particularly in atypical employment. The Transparent and Predictable Working Conditions Directive (2019) mandates that all workers receive comprehensive and timely information about their employment conditions and imposes limitations on the length and renewal of probationary periods, explicitly aiming to prevent arbitrary contract termination. Instead of easing dismissals, the EU reinforces the right to predictable work patterns. Similarly, the EU has consistently sought to strengthen collective bargaining and social dialogue, for instance through the revision of the European Works Council Directive and the proposal for a pact for European Social Dialogue, which promotes negotiation between social partners at national and supra-national levels. Where India seeks to de-bureaucratize and decentralize industrial decision-making toward management, the EU seeks to standardize and formalize it through collective action and regulation, reflecting a deeper commitment to the countervailing power of organized labour. Both India and the EU have pursued the standardization of wages, yet the scale and policy intention differ significantly. India’s Code on Wages, 2019, introduces the critical concept of a National Floor Wage, which the Central Government must set after considering the minimum living standards of workers, and which no State Government can undercut. This reform is transformative for India’s historically fragmented wage structure, ensuring universal coverage of minimum wages and explicitly tackling gender discrimination in pay. The aim is to formalize the unorganized sector and provide a basic safety net, linking economic efficiency with social inclusion. The EU’s parallel action, the Directive on Adequate Minimum Wages (2022), while also promoting minimum wages, is functionally distinct because many EU Member States already have robust minimum wage laws or rely on collective bargaining. The Directive's true innovation lies in its requirement for Member States to promote collective bargaining coverage where it is low (below 80% coverage) and to establish clear criteria for minimum wage adequacy, such as reference baskets of goods and services. Furthermore, the Pay Transparency Directive (2023) goes far beyond simple equal pay provisions by mandating that large companies report on their gender pay gap and requiring workers to be provided with information about pay levels for their categories. The EU’s approach, therefore, is not merely to set a minimum floor but to leverage regulatory tools to ensure pay equity and transparency, using collective mechanisms and public disclosure as compliance tools. The EU is focused on the substance of social equity, while India is focused on the structure and simplification of the basic wage floor. The rise of the platform economy necessitated legislative action in both jurisdictions, yet their respective responses reveal a defining philosophical split over the fundamental issue of worker status. India’s Code on Social Security, 2020, represents a pioneering effort by defining 'gig worker' and 'platform worker' for the first time in Indian law. However, the Code notably does not classify them as traditional 'employees.' Instead, it recognizes them as a separate category of workers and mandates the Central Government to formulate welfare schemes for them, financed through a combination of contributions from the worker, the aggregator, and the Central Government. This approach grants gig workers access to certain social security benefits like insurance, maternity benefits without imposing the full set of rights and obligations associated with a formal employment relationship, such as the right to retrenchment compensation or the protection of the IR Code. This is a deliberate policy choice to ensure that regulatory burdens do not stifle the growth of the digital economy. In contrast, the EU’s (proposed/adopted) Platform Work Directive directly addresses the issue of misclassification. Its core provision establishes a rebuttable presumption of employment for platform workers if certain criteria indicating control and direction by the platform are met. The aim of the Directive is to force platforms that exert control over their workforce to recognize these individuals as employees, thereby granting them access to the full suite of rights under existing EU and national labour law, including minimum wage, working time, and collective bargaining rights. The EU is prioritizing the correction of an alleged market distortion to uphold the principle of social rights consistency, even if it means potentially raising costs for platform businesses. The Indian model accepts the workers’ non-employee status and provides welfare, while the EU model challenges the workers’ non-employee status to grant rights.

The comparative analysis demonstrates that the labour law reforms in India and the European Union, though chronologically proximate and sharing the goal of modernization, exhibit a clear philosophical and functional divergence. The most important finding is that India’s reforms are driven primarily by a market-liberalizing philosophy, seeking to enhance labour market flexibility and compliance simplicity. This is evidenced by the consolidation of laws, the introduction of Fixed-Term Employment, and the increase in the retrenchment threshold to 300 workers. The reforms are aimed at attracting and consolidating capital investment by reducing the administrative and legal risk associated with hiring and firing. Conversely, the European Union’s reforms are fundamentally rights-reinforcing and standardizing, driven by the normative power of the European Pillar of Social Rights. This approach is manifest in Directives that mandate pay transparency, ensure predictable working conditions and crucially seek to reclassify platform workers as employees to grant them full protective rights. The EU's reforms demonstrate a commitment to social protection that prioritizes the worker as the weaker party, often irrespective of the immediate administrative cost to businesses. In sum, the research confirms the divergence identified in the theoretical framework: India's regulatory philosophy prioritizes economic growth through flexibility, while the EU's prioritizes social cohesion through standardization. This divergence signals that a globally coherent standard for modern labour governance is yet to materialize, with major players charting distinct paths rooted in their political economies.

The conclusion confirms the central hypothesis that the labour law reforms in India and the European Union, while both representing landmark legislative undertakings, reflect fundamentally opposed regulatory philosophies. India's codification of labour law is an essential exercise in simplification and market liberalization, intended to remove archaic complexities and signal the nation’s commitment to industrial ease of doing business. The core objective is economic growth, with social protection extended largely as a welfare measure for new categories of workers. The EU, by contrast, is engaging in an act of deepening social integration through legislative standardization, ensuring that new economic realities, such as algorithmic management and gig work, do not undermine the rights historically secured for conventional employees. The key insights drawn from this analysis underscore the differing approaches to the capital-labour nexus: India is primarily facilitating the demand side, whereas the EU is primarily strengthening the supply side. This study provides a critical foundation for legal scholarship seeking to understand the global fragmentation of labour standards and the persistent challenge of harmonizing the pursuit of economic competitiveness with the imperative of social justice. Future research should monitor the impact of the retrenchment threshold increase in India and the success of the reclassification presumption in the EU’s Platform Work Directive. 

Based on the comparative analysis and findings, the following realistic recommendations are briefly outlined to enhance the efficacy and balance of the respective legal regimes:

 • Enforcement in India: The Indian government must prioritize the effective, uniform enforcement of the National Floor Wage and the Social Security Code. Without a robust Inspector-cum-Facilitator mechanism, the benefits intended for the unorganized sector workers will remain merely aspirational.

 • Harmonization of Flexibility and Protection: To mitigate the perceived "hire-and-fire" implications of the higher retrenchment threshold in India, the government should simultaneously strengthen a universal unemployment insurance and reskilling mechanism, funded by the proposed Reskilling Fund in the IR Code, to provide a substantial safety net.

 • EU Transposition and Dialogue: EU Member States must hasten the effective transposition of critical social directives, such as Pay Transparency and Work-Life Balance, to ensure the legal benefits rapidly reach the workforce. Furthermore, the EU should continue its emphasis on strengthening cross-border social dialogue to facilitate the effective implementation of the Directives at the national level. 

• The Code on Wages, 2019, No. 40, Acts of Parliament, 2019 (India). 

• The Industrial Relations Code, 2020, No. 35, Acts of Parliament, 2020 (India). 

• The Code on Social Security, 2020, No. 36, Acts of Parliament, 2020 (India). 

• Directive (EU) 2023/970 on strengthening the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms, 2023 O.J. (L 132/21) (Pay Transparency Directive).

 • Directive (EU) 2019/1152 on transparent and predictable working conditions in the European Union, 2019 O.J. (L 186/105) (Predictable Working Conditions Directive). 

• Council of the European Union, Interinstitutional Proclamation on the European Pillar of Social Rights (2017/C 428/01), 2017 O.J. (C 428/1).

 • Kaushik Sunder Rajan, Bio capital: The Constitution of Life in a Market Economy 115 (Duke University Press 2006). 

• Arpita Khan, India’s Labour Codes: A Regulatory Balancing Act, 55 Econ. & Pol. Wkly. 15 (2020). 

• Simon Deakin & J. W. Mair, The European Social Model: An Economic and Legal Analysis 42 (Edward Elgar Publ’g 2017). 

• Timothy Besley & Robin Burgess, Can Labor Regulation Hinder Economic Performance Evidence from India, 119 Q. J. Econ. 91 (2004). 

• European Commission, Proposal for a Directive on improving working conditions in platform work, COM(2021) 762 final (Dec. 9, 2021) (Platform Work Directive Proposal). 

• Timothy Besley & Robin Burgess, Can Labour Regulation Hinder Economic Performance? Evidence from India, 119 Q.J. Econ. 91 (2004).