Emergence of New Labour Codes

Author: Supriya Dayal, Banasthali Vidyapith, Rajasthan

Abstract

This Article evaluates the legislative codification that resulted in four labour codes in India: the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Condition Code, 2020. Using a legal perspective, the article examines statutory provisions, government reports, and judicial decisions that interpret key concepts such as “workman” and “gig worker”. As codification clarifies the legal framework regarding labour laws, certain issues continue to arise in areas such as definition, rule-making, enforcement, and the protection of collective rights. It is concluded by suggesting some legal recommendations that aim to improve implementation and ensure stronger protection for workers within the new regulatory framework.

Keywords

Labour codes, Code on Wages, Industrial Relations Code, Social Security, Gig Workers, Workman, Employer, Central Government, Legal Reforms

Introduction

India’s new labour codes signify a major change in the nation’s approach to labour laws. Till now, employers and employees were struggling to understand and comply with the numerous, sometimes outdated laws that varied from one state to another. Due to the complexity of the laws, it was difficult for businesses to comply with them, and many workers, particularly in the unorganised sector, were left without social security or basic protections. After realising the issue, the government undertook a historic reform by merging 29 central labour laws into four labour codes. The authorities aimed to make compliance simpler and ensure that every worker, irrespective of their work position or salary, obtains essential rights. The new codes also included gig workers and individuals in modern employment arrangements, illustrating the realities of the current job market.

New codes cover labour laws as follows:

The Code on Wages, 2019: Consolidate and amend the laws relating to wages and bonus

The Industrial Relation Codes, 2020: Consolidate and amend the laws relating to Trade Unions, conditions of employment in industrial establishment or undertaking, investigation and settlement of industrial disputes

The Code on Social Security, 2020: Consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors

The Occupational Safety, Health, and Working Condition Code, 2020: Consolidate and amend the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment.

Evolution of labour laws

In the 18th century India was a major agricultural and manufacturing country, supplying goods to Asian and European markets, especially textiles. But the British government in India pursued policies to discourage Indian manufacturers in order to encourage the rising manufacturers of England. British industrial policies imposed heavy duties on Indian exports and nullified duties on import of British products, which led to decline of local handicrafts. With the growth of industry and exploitation of cheap labour, the plantation industry in Assam was the first to attract legislative control as workers are not allowed to leave the tea gardens. A number of Acts were passed from 1850 onwards; these legislations protected more the interest of employers than safeguarding the interest of the workers. Acts like Apprentices Act, 1850, the Factories Act, 1881, and Mines Act 1901 were passed, but the most important of such Acts were passed to protect the interest of the workers was the Workmen’s Compensation Act,1923.

Post independence, a series of labour laws were enacted to balance and regulate the labour management relations. Some of them are the Employees State Insurance Act, 1948, the Employee's Provident Funds Act, 1952 and the Maternity Benefit Act, 1961, the Industrial Disputes Act, 1947, and the Industrial Employment (Standing Orders) Act, 1946. Labour legislations ensuring labour welfare and minimum standards were also enacted. Some of them are the Factories Act, 1948, the Minimum Wages Act, 1948, the Payment of Wages Act, 1936 and the Payment of Bonus Act, 1965.

Need for Consolidation and Reform

By the early 21^st century, it was found that India’s labour legislation is outdated and complex across more than 20 Central and over 100 state laws. As there were numerous legislatures to regulate the relation of worker and management which make it complicated for employers and workers to comply with the rules and regulation, to simplify it was recommended to codify the laws. The Second National Commission on Labour submitted its report in 2002 in which it recommended to consolidate laws into simplified codes.

On that recommendation, the Government of India introduced the Code on Wages Bill in Lok Sabha on July 23, 2019, passed by Lok Sabha on July 30,2019 and by Rajya Sabha on August 2, 2019. Other three Bills were introduced in the Parliament in September 2020 and passed by both Houses of Parliament in the same month.

Major Reforms Under the Code

The Code on Wages, 2019 consolidates the Minimum Wages Act, 1948, Payment of Wages Act, 1936, Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976.
It provides uniformity in provisions for minimum wages across India, the Central Government fixed national minimum wage limit below which no state can set their minimum wages.
Unlike previous laws which applied only to scheduled employment and certain wage thresholds, this Code applies uniformly to all employees, irrespective of wage limits, or industry.
It also simplifies the bonus calculation by consolidation provisions from the Payment of Bonus Act.
The Industrial Relations Code, 2020 consolidates and amends Trade Union Act, the Industrial Employment (Standing Orders) Act, and the Industrial Dispute Act.
It made notable changes such as redefining “workers”, recognizing “Negotiation Union” or “Negotiation Council”,
It also provided time limit to conclude proceedings, a 14 days prior notice for strikes or lockouts
Also standardize procedure for dispute resolution and standing orders, aiming to provide speedy resolution for disputes.
It maintains a balance between the needs and rights of employers and employees.
The Occupational Safety, Health and Working Condition Code, 2020 consolidates more than 10 previous labour laws related to occupational safety, health and working conditions of workers employed in an establishment.
The OSH code standardizes regulations such as maximum working hours per day, welfare amenities and,
Mandate to provide a safer working environment by constituting safety committees in larger establishments.
Additionally, it expanded the definition of factory and prescribed new penalties and mechanisms for enforcement of the provisions.
Advisory Board and inspector-cum-facilitators are to be established to monitor compliances, create a more transparent and efficient health and safety system at the workplace.
The Social Security Code, 2020 consolidates India’s fragmented social welfare laws such as Employees’ Provident Fund Act, Employees’ State Insurance Act, Maternity Benefit Act, Payment of Gratuity Act etc. into a unified code.
It broadened the definition of employees covering both organized and unorganized sectors, including gig, platform and self- employed workers as well as inter-state migrants which was lacking behind in Indian labour laws.
The code increased the number of members, 42 members in National and 34 members in State Social Security Board.
It unifies digital registration, reporting and record keeping to replace multiple overlapping fillings and ensure procedural transparency.

Impacts on New Labour Codes

The new labour codes in India bring major changes that affect both workers and employers

For Workers:

Guarantees minimum wages uniformly across all sectors and industries.
Extends social security benefits to gig, platform, and unorganized workers for the first time.
Improves workplace safety and health standards with clearer rules.
Includes new definitions of "worker" to cover more categories of employees.
Ensures timely payment of wages and bonuses.
Protects rights for fixed-term and contract workers, providing them benefits similar to permanent workers.
Includes provisions to prevent gender-based wage discrimination.
Provides better dispute resolution mechanisms improving workers’ voice and collective bargaining.

For Employers:

Simplifies compliance by merging 29 laws into four easy-to-follow labour codes.
Introduces digital record-keeping for better transparency and easier reporting.
Raises the threshold for government approval before layoffs from 100 to 300 employees, giving greater flexibility.
Changes in wage definition may increase costs related to provident fund and gratuity contributions.
Employers will face stricter penalties for non-compliance, encouraging better adherence.
Mandatory grievance mechanisms for organizations employing more than 20 migrant workers.
Implementation challenges due to the need for states to notify rules may cause uncertainty initially.

Overall:

Labour laws are more streamlined, making India more attractive for business and investment.
Benefit workers with clearer protections and expanded welfare.
Encourage formalization of the workforce, especially in informal sectors.
Balance between protecting workers’ rights and providing flexibility to employers.
Potential short-term adjustment challenges but long-term benefits for economy and workforce welfare.

Challenges in Implementation

All four codes have been passed by both Houses of Parliament and received the President’s assent by the end of 2020 but they are not fully implemented yet. The Government of India intended to implement the code from 1 July 2022 but the following issues are still persistent:

That labour is a subject of concurrent list as Entries 22, 23, 24, 36, 47 of concurrent list of the Constitution of India are related to labour, due to which it requires both state and central governments to frame and notify their respective rules.
The central government has published draft rules for all the codes but several state governments have not submitted their draft rules which leads to delay in implementation of the codes. The center- state tension within Indian federalism may cause hindrance in the successful implementation of the Codes and Government Schemes for the implementation such as e-SHRAM portal, the Pradhan Mantri Shram Yogi Maan-Dhan Yojana, Rashtriya Swasthya Bima Yojana etc.
The new labour codes did not clarify the jurisdiction of the appropriate government, which vary from Code to Code. The Supreme Court in the case Steel Authority of India Ltd. vs. National Union Water Front Workers and Hindustan Aeronautics Ltd. vs. Workmen were two ruling in response to litigation raised to decide who is the appropriate government.

Conclusion

In conclusion, the emergence of the new labour code is a significant change in the regulatory framework governing industrial relations and social securities etc., the consolidation of various laws into four codes which simplified the compliances and promised flexibility and clarity by providing clear wage structure, enhancing social security and safety and welfare measures. The codes not only focus on workers in employment but it also emphasizes skill development and training programs which is helpful for the employees, the employers as well as the nation as it will help in GDP growth and upliftment of living standard of the nation.

References

Statutes

Code on Wages, No. 29 of 2019 (India).
Industrial Relations Code, No. 35 of 2020 (India).
Code on Social Security, No. 36 of 2020 (India).
Occupational Safety, Health and Working Conditions Code, No. 37 of 2020 (India).

Government Report

Ministry of Labour & Employment, Gov’t of India, Report of the Second National Commission on Labour (2002).
Ministry of Labour & Employment, Gov’t of India, e-SHRAM Portal and Labour Reforms Updates (2022).