The Central Government consolidated 29 existing central labour laws into four codes to simplify the legal framework, improve ease of doing business.
4 Labour codes-
Code on Wages
Industrial Relations Code
Code on Social Security
Occupational Safety, Health and Working Conditions Code
Merits
Merging and Simplification of laws reduces complexity and overlaps.
Uniform definitions & wage protections: Eg- code on Wages introduces a floor wage
Flexibility in hiring/retention: IR Code raises the threshold for requiring government approval for layoffs/closures from 100 to 300 workers.
Broader social security coverage: SS Code covers gig workers, platform workers, unorganised sector. (presently only 25%)
Improved safety and working conditions: OSHWC mandates working hours, safety standards, migrant worker welfare.
Promoting formalisation through clearer rules and digital compliance systems.
Minimise exploitative practices – Eg: provision for overtime wages twice normal wages
Easier resolution of industrial disputes – Eg: 14 days’ notice period before strikes & lockdowns
Demerits
Transition and Adaptation Challenges as India’s labour market is 90% informal, contributing nearly 50% of GDP
Weakened collective bargaining: IR Code imposes stricter conditions on strikes (60 days’ notice).
Job-security concerns: Increased flexibility may lead to precarious employment. Eg- fixed-term employment, easier layoffs
Increased burden on SMEs: Eg- requirements such as documentation of wages, benefits, safety norms, etc..
Inconsistent Application Across Sectors – agriculture (60% of informal workforce) and construction (~50 million workers) face seasonal work, casual labour, and absence of contracts
Rising Costs for Businesses
Gratuity obligations
PF contributions
Maternity benefits (26 weeks paid leave + crèche facilities)
Progress So Far
All four codes are legally enacted between 2019-20.
34 States and UTs have notified draft rules but full implementation is pending.
The Centre has initiated digital portals (e-Shram, unified labour compliance) to support implementation.
Resistance from trade unions and worker groups continues. Eg- strikes by AITUC and CPI
Labour is a concurrent subject – state-level variation persists.
Enforcing labour codes can bring in transparency, simplification & digitization in compliance. This can help India to become a manufacturing hub as companies adopt the “China+1” strategy.