India's Labour Codes 2020: A Transformative Reform

Introduction

On 21st November 2025, India witnessed one of the most significant labour reforms in its post-independence history with the implementation of four unified Labour Codes that consolidated and rationalized 29 existing labour laws.

The Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 represent a comprehensive overhaul of India's labour regulatory framework. This transformational change aims to create a protected, future-ready workforce while promoting ease of doing business, thus balancing the interests of workers, employers, and the broader economy¹. The journey towards these consolidated codes began with recommendations from the Second National Commission on Labour, which advocated for grouping labour laws into four to five codes. Following extensive consultations from 2015 to 2019, the Ministry of Labour and Employment pursued this modernization agenda to simplify compliance, reduce bureaucratic complexity, and extend protection to hitherto excluded categories of workers, including those in the gig economy, platform-based work, and unorganized sectors².

Explore More: Indian Labour Laws and Changing Work Nature

Context and Rationale for Codification:

The pre-2019 labour law framework in India was characterized by fragmentation and redundancy. Multiple Central and State -level enactments created overlapping jurisdictions, compliance burdens for employers, and gaps in worker protection. Workers in the informal economy, including the estimated 400 million unorganized sector workers, gig workers, and platform workers, remained largely outside the formal social security net. Similarly, existing laws were not designed to accommodate the evolving nature of work arrangements, such as fixed-term employment and platform-based work³.

The codification process was guided by several key principles. Firstly, the codes has adopted a pro-labour, pro-employment, and pro-growth approach that fosters industrial harmony while promoting inclusive participation. Secondly, they emphasize ease of doing business through simplified registration, licensing, and compliance mechanisms. Thirdly, they extend coverage to previously excluded workers and ensure universal social security protection. Fourthly, the codes modernize benefit schemes like the Employee Provident Fund and Employee State Insurance Corporation through digitization and portability of benefits across State boundaries.

The implementation of these codes marks the culmination of a systematic reform that seeks to establish a more rational, coherent, and inclusive labour governance framework applicable across all sectors of the economy. It introduces several systemic reforms designed to ease compliance and reduce administrative burden.

The "Single Registration, License, and Return" mechanism consolidates multiple registration and licensing requirements under existing laws into unified processes, significantly reducing compliance burden for employers.

The introduction of gender-neutral pay standards and protections ensures equal treatment of workers regardless of gender, including specific protections for transgender persons. The codes establish mechanisms for workers to access information, raise grievances, and seek redressal through various forums, from workplace-level grievance committees to Industrial Tribunals for formal disputes. The digitization of compliance and benefit administration through portals and databases enhances transparency, reduces corruption, and ensures portability of benefits. Workers in the unorganized and gig economy sectors can register themselves through self-declaration and Aadhaar-based verification, simplifying access to social security benefits.

Code on Wages, 2019: Ensuring Minimum Living Standards

This Code establishes a uniform definition of wages. The most significant aspect of the Code is Section 2(zq), which provides a unified definition of "wages" with transformative implications for salary structuring. The definition comprises an inclusive part in regards to basic pay, dearness allowance, retaining allowance), an exclusion part I regards to HRA, conveyance, overtime, commission, bonuses, and critically, a proviso that imposes a 50% ceiling on exclusions.

The first proviso to Section 2(zq) establishes that if the aggregate of excluded components exceeds 50% (or such other percentage as may be notified by the Central Government) of total remuneration, the excess amount shall be "deemed as remuneration and accordingly added in wages." For the first time, Indian labour law caps the non-wage component, forcing employers to maintain wages at a minimum of 50% of total remuneration. The second proviso to the definition permits remuneration in kind, but only if it does not exceed 15% of total wages.

A cornerstone of the Code on Wages is the establishment of a national floor wage mechanism. The Central Government is mandated to fix a floor wage taking into account the minimum living standards of workers, with provisions for different floor wages in different geographical areas. This floor wage serves as the baseline below which no State Government can fix minimum wages⁴. The Code specifies that minimum wages fixed by the appropriate Government must not be less than the floor wage.

Importantly, if the minimum wages already fixed by a State or Central Government are higher than the floor wage, the Government cannot reduce those wages, thereby protecting gains already achieved.

Unlike the Minimum Wages Act, 1948, which applied only to "scheduled employments" (predetermined occupations), the Code on Wages applies universally to all workers across all establishments engaged in any economic activity. This represents a paradigmatic shift from selective to universal coverage, ensuring that workers in previously unscheduled sectors, from small retail establishments to logistics companies, are now entitled to statutory minimum wages.

The Code mandates timely and full payment of wages to workers. Deductions from wages are permitted only in specified circumstances and in accordance with prescribed limits. The Code establishes a process for reviewing and revising minimum wages at intervals not exceeding five years.

When fixing minimum wages, both Central and State Government may consider factors such as the skill levels of workers and the difficulty associated with specific types of work.

Coverage under this Code extends to all workers in all establishments engaged in any economic activity, with minimal exemptions. This includes workers in factories, plantations, mines, transport, and service sectors, as well as MSME workers.

Youth workers, beedi and cigar workers, and plantation workers all receive guaranteed minimum wages and mandatory wage payment during leave periods. For instance, beedi and cigar workers have their working hours capped at 8 to 12 hours per day or 48 hours per week, with overtime permitted only with consent at double wage rates.

Industrial Relations Code, 2020: Streamlining Labour Dispute Resolution

This Code replaces the Trade Unions Act, 1926, the Industrial Disputes Act, 1947, and the Industrial Employment (Standing Orders) Act, 1946. A defining feature of the new regulatory regime is Section 62 of the IR Code, which substantially restricts strike activity across all industrial establishments. The provision mandates that no person employed in an industrial establishment shall go on strike without compliance with multiple procedural requirements:

• The 60-Day Notice Requirement: A notice of strike must be provided to the employer within 60 days before striking, escalating from the earlier 6-week requirement in the Industrial Disputes Act. Critically, the strike cannot commence within 14 days of providing the notice, creating a 14-day minimum conciliation window.
• The Conciliation Bar: Strikes are prohibited during the pendency of conciliation proceedings before a conciliation officer and for seven days after the conclusion of such proceedings. Conciliation proceedings are deemed to commence on the first meeting held by the conciliation officer after receipt of the strike notice and conclude upon the officer's written State ment of failure or agreement.
• The Tribunal Cooling-Off Period: No strike is permissible during proceedings before a Tribunal or National Industrial Tribunal and for 60 days after the conclusion of such proceedings. Similarly, strikes are prohibited during arbitration proceedings and for 60 days thereafter.
• Practical Impact: These provisions effectively eliminate spontaneous or solidarity strikes, as even a hastily-called strike requires a 14-day notice plus mandatory conciliation, creating a minimum 3-week window before industrial action can commence. For employers, this provides predictability and time to prepare contingency arrangements. For workers and unions, this substantially curtails the tactical utility of strikes, converting them from an immediate expression of grievance into a protracted strategic exercise requiring extensive planning.
• Reporting Obligations: Significantly, Section 62(6) mandates that upon receiving or issuing a strike or lockout notice on any day, the employer must report the same to the appropriate Government authority and the conciliation officer within 5 days, specifying the number of notices received or issued. This creates a formal Government record of all strike activity, enhancing surveillance and enforcement capacity.

According to Section 70 of the Code, no worker employed in any industry who has been in continuous service for not less than one year can be retrenched until several conditions are satisfied. The employer must provide one month's written notice indicating the reasons for retrenchment, and after the notice period expires, compensation must be paid to the retrenched worker equivalent to 15 days' average pay for every completed year of continuous service, or any part thereof exceeding six months. Additionally, the appropriate Government or specified authority must be notified in the prescribed manner before retrenchment occurs.

The Code introduces the principle of "Last come, first go" in retrenchment procedures. Where a worker is retrenched from a particular category in an industrial establishment, the employer ordinarily retrenches the worker who was the last person employed in that category, unless the employer records specific reasons for deviating from this principle. Furthermore, when an employer proposes to hire workers within one year following a retrenchment, the employer must provide an opportunity to retrenched workers (who are Indian citizens) to offer themselves for re-employment, and such workers shall have preference over other applicants.

The Code introduces fixed-term employment as a formal category of work arrangement, recognizing the realities of modern labour markets. It raises the threshold for applicability of certain provisions from 20 workers to 50 workers in establishments, thereby reducing regulatory burdens on smaller enterprises while maintaining worker protections in larger establishments. The Code establishes Industrial Tribunals as forums for faster dispute resolution, moving away from lengthy litigation processes that characterized earlier frameworks. For trade union registration, the Code implements uniform definitions and procedures, simplifying the process of recognizing trade unions and extending representational rights to workers engaged in collective bargaining and dispute resolution.

Code on Social Security, 2020: Universal Protection for All Workers

The Code on Social Security, 2020 represents perhaps the most transformative reform in India's labour framework by extending universal social security coverage to all categories of workers, including those in the unorganized sector, gig workers, and platform workers. This Code consolidates nine Central labour enactments relating to social security, including provisions formerly contained in the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the Employees' State Insurance Act, 1948.

Previously, social security benefits like provident funds and health insurance were limited to organized sector workers in establishments above certain size thresholds. The new Code mandates that the Central Government may, by notification, apply social security coverage to any establishment regardless of size thresholds. For gig workers, platform workers, and unorganized sector workers, the Code establishes dedicated social security funds managed at both Central and State levels.

The most novel aspect of the Code on Social Security is its explicit recognition and regulation of "gig workers" and "platform workers," categories previously existing in legal obscurity. Section 113 mandates that every unorganized worker, gig worker, or platform worker shall be registered for the purposes of Chapter IX, subject to fulfillment of eligibility criteria: completion of 16 years of age (or such age as prescribed), and submission of a self-declaration containing information in the prescribed form.

• The Aggregator Contribution Mechanism (Section 114(4)): It introduces a novel funding model wherein aggregators like digital intermediaries such as ride-sharing platforms, food delivery services, and online marketplaces, must contribute 1% to 2% of their annual turnover to a dedicated social security fund for gig and platform workers. This contribution is, however, capped at 5% of the total amount paid or payable by the aggregator to gig and platform workers. This mechanism embeds social security funding within the operational structure of digital platforms, ensuring that worker welfare costs are not externalized to the Government or absorbed by workers themselves. The aggregator's contribution obligation is statutory and non-negotiable, regardless of whether workers or platforms voluntarily opt in.
• Employer Obligations: Aggregators and employers engaging gig or platform workers must maintain accurate databases of all active workers, submit employment terms to the appropriate authority, facilitate worker registration on Government portals (such as e-Shram), and ensure timely contribution to the social security fund. Non-compliance attracts penalties, and labour authorities possess power to initiate suo moto action upon discovery of data gaps or non-reporting.
• Benefits and Registration: Once registered, gig and platform workers become eligible for multiple protections i.e., life and disability insurance, health and maternity benefits, provident insurance, pension schemes, and skill upgradation programmes. The creation of an Aadhaar-verified national database enables portability of benefits across State boundaries and facilitates access to targeted welfare schemes.

Under the Code on Social Security, all workers are entitled to multiple forms of protection. These include life insurance, disability insurance, health and maternity benefits, provident insurance, pension schemes, and skill upgradation programmes. The Code establishes National and State Social Security Boards to administer schemes for unorganized workers, complementing the existing Central Board of Trustees for EPF administration and the Employees State Insurance Corporation for ESI scheme administration.

A critical innovation is the creation of an Aadhaar-verified national database of unorganized workers, gig workers, migrant workers, and platform workers. This database serves multiple purposes as it maps worker skills, enables portability of benefits across State boundaries, and facilitates access to targeted welfare schemes.

An inter-State migrant worker can register on the designated portal on the basis of self-declaration and Aadhaar, ensuring that benefits follow workers across geographical locations.

The Code mandates the establishment of dedicated Social Security Funds for unorganized workers, to which funds from penalties imposed under the Code (including amounts collected through compounding) are credited. The Central and State Governments may also transfer other resources to these funds to finance social security schemes.

Along with this, Section 53 of this Code prescribes that gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—

1. on his superannuation; or
2. on his retirement or resignation; or
3. on his death or disablement due to accident or disease; or
4. on termination of his contract period under fixed term employment.

Gratuity is to be calculated at the rate of 15 days' wages for every completed year of service, or part thereof in excess of six months. Fixed-Term Employees are entitled to gratuity on a pro-rata basis even if their service period is less than 5 years.

Occupational Safety, Health and Working Conditions Code, 2020: Comprehensive Worker Protection

The Occupational Safety, Health and Working Conditions Code, 2020 unifies 13 labour laws into a comprehensive framework governing workplace safety, health, and welfare standards. This Code establishes uniform standards across factories, mines, plantations, transport, and service sectors, eliminating previously fragmented regulatory approaches.

A fundamental provision of this Code is the establishment of an 8-hour working day and 48-hour working week as the baseline standard for all workers. The Code mandates that appointment letters be provided to all workers, ensuring clarity regarding terms and conditions of employment. Workers are entitled to paid leave, and overtime is permissible only in specified circumstances with workers receiving double wage rates for overtime work.

The Code introduces a risk-based compliance framework designed to reduce regulatory complexity while maintaining substantive protections. It establishes the National Occupational Safety, Health Board to set harmonized safety standards across sectors and ensure consistent implementation.

Importantly, the Code implements an "Inspector cum Facilitator" system that shifts the regulatory approach from punitive enforcement to promotional compliance assistance. This system aims to improve workplace compliance by supporting employers in understanding and meeting safety standards⁵.

The Code defines core and non-core activities within establishments and regulates contract labour by permitting contract labour only in specified core activities subject to prescribed conditions. The threshold for applicability of certain provisions has been raised from 20 workers to 50 workers, providing relief to smaller establishments while ensuring that larger enterprises maintain comprehensive safety standards.

Principal employers are assigned responsibility for welfare facilities and ensuring the payment of unpaid wages to all workers, including contract workers. Workers are entitled to facilities such as canteens, drinking water, rest areas, and medical check-ups. The Code also protects workers' rights to raise concerns regarding safety. Workers have the right to obtain from employers information relating to health and safety at work and to communicate concerns regarding inadequate safety provisions to the employer and, if unsatisfied, to the Inspector-cum-Facilitator.

Conclusion

India's Labour Codes, 2020 represent a fundamental restructuring of the nation's labour governance framework, consolidating 29 fragmented enactments into four coherent codes. By establishing minimum living wage standards, streamlining dispute resolution, extending universal social security coverage, and ensuring comprehensive workplace safety, these codes attempt to balance the competing interests of workers' protection, employer compliance ease, and economic growth. The codes acknowledge the transformation of work in the 21st century by explicitly including gig workers and platform workers within protective frameworks, a significant departure from earlier legislation designed for traditional organized sector employment. The successful implementation of these codes depends on effective execution through facilitatory inspection mechanisms, timely rule-making by State Governments, and capacity-building among stakeholders. As India's workforce navigates the transition from 29 laws to four codes, the labour framework now offers expanded protections for previously excluded workers while maintaining reasonable compliance pathways for employers. This reform positions India's labour law framework to align with modern global practices whilst addressing long-standing challenges of informal sector protection and employment flexibility.

Footnotes

1. Ministry of Labour & Employment, Government of India. (2025, November 21). Four Labour Codes Herald Transformational Change: Better Wages, Safety, Social Security & Enhanced Welfare for India's Workforce. Press Release, Press Information Bureau. https://labour.gov.in/

2. SCC Online. (2025, November 28). Four Labour Codes Explained: Reforms, Compliance Requirements, and Their Impact on Workers, Employers, and the Broader Economy. https://www.scconline.com/blog/post/2025/11/29/india-four-labour-codes-overview-explained-scctimes/

3. The Legal Quotient. (2024, July 13). Retrenchment Under the Industrial Relations Code, 2020. https://thelegalquotient.com/labour-laws/industrial-relations-code/retrenchment/2922/

4. PRS India. (2025, December 8). The Code on Wages, 2019. Bill Track. https://prsindia.org/billtrack/the-code-on-wages-2019

5. Ministry of Labo

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