By Vickram Kilpady
Five years after Parliament passed them with much fanfare, India’s four labour codes have finally been notified, taking effect on November 21. Together, these codes replace nearly 30 existing labour laws. The government has packaged this moment as a historic leap—modernising labour relations, protecting workers, and streamlining compliance for a “Viksit Bharat” poised for 2047.
The four codes—the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and the Occupational Safety, Health and Working Conditions (OSH) Code (2020)—attempt to rewrite the architecture of labour regulation. The argument is that India’s economy has shifted dramatically since Independence and that colonial-era legislation cannot address the needs of a modern, mobile, digital workforce.
Yet, beneath the rhetoric of reform lies a deep ideological shift—one that has drawn strong applause from industry and equally strong warnings from trade unions.
A MIXED BAG OF PROTECTIONS AND PERMISSIONS
The government points to several worker-friendly provisions:
Mandatory appointment letters for all workers, filling a long-standing gap.
Universal social security eligibility, including PF, ESIC, and gratuity.
Coverage of gig and platform workers, an overdue recognition of a growing informal workforce.
Mandatory free annual health check-ups for workers over 40.
Gender parity measures, including allowing women to work night shifts with consent and safety protocols.
The OSH Code also extends ESIC coverage nationwide, making it voluntary for small firms (fewer than 10 workers), but mandatory even for a single worker engaged in hazardous processes. The Code on Wages finally guarantees minimum wages across all sectors, not only scheduled industries.
But the reform comes with a controversial trade-off: the 12-hour workday, already implemented in most states except Kerala, which has refused to adopt the codes.
WHY THE UNIONS ARE UP IN ARMS
Trade unions have opposed the codes since their passage in Parliament, arguing that the new framework sidelines the state’s oversight role and increases employers’ discretion.
1. Self-Certification Replaces Inspections
Under earlier laws, state labour inspectors could routinely verify compliance. The new system encourages employer self-certification, which unions fear will weaken protections against exploitation.
2. Minimum Wage Mechanism Undermined
Unions warn that the Code on Wages is silent on how minimum wages will be calculated. The centre’s current floor wage of Rs 168/day is lower than many state rates. They fear states will be forced to lower their own wages over time.
3. Social Security Still Vague for Gig Workers
The Social Security Code speaks of future schemes, but provides no deadlines. Contributions from aggregators remain too small to offer meaningful protection. Earlier sector-specific levies that funded worker welfare vanished with the GST regime.
4. “Hire and Fire” Gets Easier
The Industrial Relations Code (IRC) is the flashpoint. By placing fixed-term employees on par with permanent staff in benefits, the Code arguably incentivizes employers to prefer temporary contracts—with easy termination, reduced bargaining power, and no long-term protection.
Centre of Indian Trade Unions’ President K Hemalatha summarised the fear: “The new code legalizes permanent temporariness in core jobs… It is meant to destroy stable employment and prevent unionization.” Most controversially, the IRC raises the threshold for government permission for layoffs and retrenchment from 100 to 300 workers, a long-standing demand of industry.
STRIKES BECOME RISKIER
The new framework demands prior notice for strikes and imposes fines—and even imprisonment—if workers protest without meeting procedural requirements. Unions say this effectively criminalises collective action in workplaces already tilted towards employers. Protests have already begun and are expected to intensify.
A SHORT-TERM HR AND ACCOUNTING NIGHTMARE
Amid the ideological battle, HR departments and accountants are confronting more immediate chaos. The Code on Wages dramatically alters the salary structure by defining “wages” as 50 percent of total remuneration (basic pay + DA + retaining allowance). This has knock-on effects:
Employees with low basic pay and high allowances may see reduced take-home salary.
Employers may shift allowances into basic pay to comply—impacting income-tax deductions, insurance premiums, and investments.
Payroll teams face increased documentation, while PF inspectors must still enforce the unrepealed EPF Act, creating parallel compliance tracks.
In short, the codes promise simplicity, but may deliver complexity—at least in the transition period.
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