[Burning Issue] Labour Code on Industrial Relations


  • Labour and Employment Ministry has introduced the Labour Code on Industrial Relations bill in the Lok Sabha.
  • As part of labour reform initiatives, the labour ministry has decided to amalgamate 44 labour laws into four codes—on wages, industrial relations, social security and safety, health and working conditions.
  • The industrial relations code is the third of four labour codes that have got approval from the cabinet.

The Industrial Relations Code Bill, 2019

  • It proposes to amalgamate
  1. The Trade Unions Act, 1926,
  2. The Industrial Employment (Standing Orders) Act, 1946, and
  3. The Industrial Disputes Act, 1947.
  • This is the third Code in the government’s proposed codification of central labour laws into four Codes.

Aims and objectives

  • The bill aims to improve the business environment in the country largely by reducing the labour compliance burden of industries.
  • It proposes to make it easier for an employer to engage and disengage workers based on requirement.
  • This will make the process of hiring and firing smoother depending on elasticity of demand in the shop floor.

Key propositions of the Bill

I. Fixed-term employment

  • The most important aspect of the Bill is that it presents the legal framework for ushering in the concept of ‘fixed-term employment’ through contract workers on a pan-India basis.
  • Currently, companies hire contract workers through contractors.
  • With the introduction of fixed-term employment, they will be able to hire workers directly under a fixed-term contract, with the flexibility to tweak the length of the contract based on the seasonality of industry.
  • These workers will be treated on a par with regular workers during the tenure of the contract.
  • The move to include it in a central law will help in wider reach, and states are expected to follow similar applicability.

II. Recognition of Negotiating Union

  • To help employers check constant unionism, the bill introduces this feature under which a trade union will be recognized as sole ‘negotiating union’ if it has the support of 75% or more of the workers on the rolls of an establishment.
  • As several trade unions are active in companies, it will be tough for any one group to manage 75% support.
  • This, thus, takes away the negotiating rights of unions. In such a case, a negotiating council will be constituted for negotiation, according to the bill.

IV. Fixed Term Employment Workman

  • Earlier the government had included the category of ‘Fixed Term Employment Workman’ for all sectors in the Industrial Employment (Standing Orders) Act, 1946.
  • This was only applicable to ‘central sphere’ establishments, and the states did not follow suit.
  • Finance Minister saif that workers under a fixed-term contract would be taken up depending upon the seasonality of the industry, but would be treated on a par with regular workers.

Special offerings of the bill

  • The threshold required for government permission for retrenchment has been kept unchanged at 100 employees, as against the proposal for 300 employees in an earlier draft of the Bill, which was opposed by trade unions.
  • Instead, the government has now provided flexibility for changing the threshold through notification.
  • The rigidity of labour laws about laying off labour has often been cited by industry as the main reason limiting scalability and employment generation.
  • At present, any company having 100 workers or more has to seek government approval for retrenchment.
  • The provision of fixed-term employment, which helps in the flow of social security benefits to all workers along with making it easier for companies to hire and fire, in The Industrial Relations Code Bill.
  • Layoffs usually happen due to skill issues or company performance. The bill also has a provision to create a re-skilling fund for the benefit of workers.


  • Critics question the welfare context in this Code. The bill wants to contractualize the workforce, take their collective bargaining right, curtail their right to strike and even on mass leave.
  • Hiring and firing is what the government seeks to formalize through this, they argue.
  • Any discretion in law leads to uncertainty, lack of clarity, discriminatory implementation, and provides scope for unnecessary usage.
  • Provisions like fixed term employment will also instill fear of failure in startup founders and future entrepreneurs which isn’t encouraging for job creation.


  • The move aims to build positivity in business environment, but workers unions called it a systemic attack on employee welfare.
  • It showcases the government’s intention to create an eco-system for job creation.







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