The Government of India has undertaken a landmark step in labour reforms by consolidating 29 central labour laws into 4 comprehensive Labour Codes. These reforms are designed to simplify compliance, ensure transparency, and create a more business-friendly environment while safeguarding employee rights.
The new 4 Labour Codes are yet to be fully implemented, but once in force, they will significantly transform the way companies in India manage their workforce, statutory compliance, and employee benefits.
The 4 New Labour Codes at a Glance
1. Code on Wages, 2019
- Consolidates: Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act.
- Key Highlights:
- Uniform definition of wages across laws.
- Minimum wages applicable for all employees across industries.
- Gender-neutral provisions for equal pay.
- Timely payment of wages to employees (including contract workers).
2. Industrial Relations Code, 2020
- Consolidates: Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act.
- Key Highlights:
- Introduction of a Fixed Term Employment system.
- Streamlined process for dispute resolution.
- Stricter conditions for strikes and lockouts (14-day prior notice mandatory).
- Companies with up to 300 workers can retrench or close without government approval (earlier limit was 100).
3. Occupational Safety, Health and Working Conditions Code (OSH Code), 2020
- Consolidates: 13 Acts related to health, safety, and working conditions (Factories Act, Contract Labour Act, Inter-State Migrant Workers Act, etc.).
- Key Highlights:
- Applicable to all establishments with 10+ workers.
- Mandatory health, safety, and working condition standards.
- Free annual health check-ups for employees.
- Mandatory registration of all establishments under one code.
4. Code on Social Security, 2020
- Consolidates: 9 social security laws including EPF Act, ESI Act, Maternity Benefit Act, Gratuity Act, etc.
- Key Highlights:
- Universal social security coverage for all workers, including gig and platform workers.
- EPF, ESI, gratuity, and maternity benefits extended to more employees.
- Aggregators (like cab services, e-commerce platforms) to contribute towards gig workers’ welfare.
- Uniformity in social security compliance.
Key Compliance Requirements under the Labour Codes
Once implemented, businesses will need to focus on:
- Wage Restructuring
- Companies must restructure salaries to align with the new wage definition (50% of total salary should be basic pay + DA).
- Digitized Compliance
- All records, returns, and registrations to be filed online.
- Social Security Contributions
- Mandatory EPF/ESI for eligible employees.
- Contributions for gig and platform workers by aggregators.
- Health & Safety Obligations
- Free annual health check-ups.
- Safe and hygienic working conditions.
- Industrial Relations Compliance
- Standing orders required for establishments with 300+ workers.
- Proper notice and procedure before strikes, retrenchments, or closures.
Impact on Employers and Employees
For Employers:
- Simplified compliance framework.
- Fewer registrations and returns due to consolidation.
- Higher wage costs due to restructured salary components.
- Digital compliance to ensure transparency and ease of operations.
For Employees:
- Universal access to minimum wages and timely payment.
- Increased social security benefits (EPF, ESIC, gratuity).
- Safer workplaces and better working conditions.
- Job security through fixed-term employment and dispute resolution mechanisms.
Preparing for the New Labour Codes
Businesses should proactively:
- Restructure employee salary as per the new definition of wages.
- Update HR and payroll systems to ensure compliance.
- Review employment contracts and standing orders.
- Train HR and compliance teams on the new rules.
- Engage compliance experts for smooth transition.
The New 4 Labour Codes mark a significant shift in India’s labour law regime. While they promise a simplified compliance structure and greater protection for employees, they also require businesses to adapt quickly to new rules on wages, social security, and workplace safety.
Organizations that prepare early will find the transition smooth and position themselves as compliant, employee-friendly, and future-ready
