Decoding the labour Codes

Reforms in India’s labour policies have been in demand for many years:

  • Till a few years ago, even a discussion on labour reforms was seen as difficult.
  • This, despite the fact that labour reforms were badly needed to put India to work.

Understanding the basis for labour reforms:

  • Three guiding principles primarily drove the journey towards laying a robust foundation for positive labour policies:
    • Creation of formal jobs needs formal employers, while most of India’s work force is stuck in informal jobs
    • India does not have a jobs problem but a wage problem – people looking for menial jobs in construction etc can easily find one
    • We need labour laws, but fewer laws, which are pro-labour and pro-employer

Four labour Codes passed by Parliament recently:

  • The Indian Parliament has recently passed the four labour, to set the momentum on labour reform. 
  • Before the four labour Codes got the final nod, India had 463 Acts, 32,542 compliances and 3,048 filings.
  • Post the Parliament assent, 463 Acts have been reduced to 434 Acts, as 29 of the 44 Central Labour Laws have been subsumed in the four Codes.
  • Once the rules get notified, there will be better idea on the reduction in compliances and filings.

Broad benefits of the four Codes for employers and candidates/employees

For Employers: 

  • Ease of business:
    • The codes reduce complexity in compliance due to a multiplicity of labour laws.
    • They facilitate ease of doing business.
      • India’s present ranking is 77, and the goal is to reach a position among the top 50 countries of the world.
    • The Codes are for simplification, and rationalisation.
  • Lower cost of compliance:
    • Provision of one licence/one registration and one return will save time, resources and efforts of the establishment.
    • It will result in reduction in cost of compliance, a single, decentralised authority for implementation.
    • Web-based electronic labour inspectors/facilitators shall, before initiation of prosecution proceedings, give an opportunity to the employer to comply with the provisions of the Codes. 
  • Employment generation:
    • The codes will result in employment generation without diluting basic aspects of securing employee rights, safety, security and health of workers etc.
  • Transparency:
    • The legitimisation of fixed-term employment enables transparency for employers while creating clear accountabilities.
    • Clear role definitions in contract labour, clear criteria of eligibility of contractors, national licensing of contractors help create a win-win situation for all stakeholders.

For Workers:

  • The Codes have much to offer, especially for incumbent formal job seekers.
  • Protections for informal workers also:
    • They attempt to encompass a large cross-section of workforce, beyond those in the organised sector.
    • It seeks to provide protection under the labour laws through outreach schemes, specifically for the informal and unorganised sectors.
  • Protection from exploitation:
    • There is also a statutory requirement to issue appointment letters to every employee to prevent exploitation and implementation of clear and transparent ways of employee engagement.
    • The cut-off date for salary disbursement has been advanced to the 7th of the subsequent month, facilitating prompt remittances of statutory contributions by the 15th of the subsequent month.
    • This impacts every employee/worker across all sections. 
  • Safeguards for gig workers:
    • The codes acknowledge gig work and gig platforms and makes provisions to safeguard those who pick up gig assignments.
    • This will encourage many workers and aspirants to consider it as an alternate option for livelihood given the uncertainty around us. 

Long way ahead on labour reforms:

  • The four labour codes bring in some much needed labour reforms.
  • However, this is only the beginning of India’s reform agenda on labour.
  • We have to shift our focus now towards:
    • Finetuning the existing Codes to ensure that they are effective
    • Pay attention to the rules notified under the new labour codes to ensure actual rationalisation of labour laws the Codes
    • Complete digitisation of compliances
    • Democratising employment and labour data
    • State-specific labour reforms


  • While we might have taken 60 years to get started on labour reforms, there is hope that further reforms will not take too long.

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