Empowering 50 + Crore Workers – What the 4 New Labour Codes mean for India

Introduction

There is immense necessity of empowering workers for a prosperous and self-reliant (Aatmanirbhar) India. This is acknowledged in a report published by Ministry of Information and Broadcasting, Government of India. Despite 73 years of independence, about 90% of workers operate in the unorganized sector without access to social security. The total workforce, including organized and unorganized sectors, exceeds 50 crore. Previously, workers were entangled in a complex web of multiple labor legislations. The government has taken a historic step by consolidating 29 labor laws into four labor codes, ensuring workers’ security, dignity, and welfare.

For the first time, all workers—both in the organized and unorganized sectors—have been granted the right to minimum wages.

The Code on Wages, 2019 implementation is expected to deliver following key benefits

• Universal minimum wages for 50 crore workers.

• Regular revision of wages every five years.
• Timely payment of wages to all workers.
• Equal pay for male and female workers.
• Introduction of a “floor wage” to address regional disparities.
• Simplified wage determination based on skill level and geographical area.
• Wage ceiling increased from ₹18,000 to ₹24,000.

The Code on Social Security, 2020 consolidates nine labor laws to create a robust framework for insurance, pension, gratuity, and maternity. Benefits include:

• ESIC (Employees’ State Insurance Corporation) benefits extended to all sectors, including unorganized and gig workers.
• Expansion of ESIC hospitals and dispensaries across all 740 districts.
• Free medical treatment under ESIC hospitals.
• Pension scheme (EPFO) extended to all workers.
• Creation of a Social Security Fund for unorganized workers.
• Fixed-term employees entitled to gratuity without a minimum service requirement.
• Aadhaar-based Universal Account Number (UAN) for seamless portability.

The Occupational Safety, Health, and Working Conditions Code (OSH), 2020 ensures better and safer workplaces by consolidating 13 existing labor laws. Key provisions include:

• Protection for workers in factories, mines, plantations, motor transport, bidi/cigar industries, and construction.
• Interstate migrant workers can now self-register on a national portal, ensuring access to social security benefits.
• Mandatory employer-funded travel allowance for migrant workers.
• Annual free health check-ups for workers.
• Ensuring appointment letters for all workers.
• “One Nation, One Ration Card” for migrant workers to receive food rations in any state.
• Women workers can work in all establishments and at night with adequate safety provisions.

The Industrial Relations (IR) Code, 2020 merges three labor laws to create a fair dispute resolution system. Key features include:

• Atal Bimit Vyakti Kalyan Yojana for unemployment financial aid.
• Reskilling fund providing 15 days’ wages for retrenched workers.
• Faster justice through Industrial Tribunals, resolving disputes within a year.
• Recognition of Trade Unions: A union with 51% votes will be the sole negotiating body; otherwise, a negotiation council will be formed.
• Balance between industry and labor: The laws allow state governments flexibility in modifications.
• Right to strike remains intact, with additional statutory recognition for trade unions.
• Systematic employer-employee relations with mandatory notice periods for grievance resolution.

Proposed reforms to improve Compliance

National Institution for Transforming India (NITI Aayog) in its report New India @75 also acknowledges the requirement of simplified yet effective Labour Laws.

Extract from the report.

Protection and social security – A large number of workers that are engaged in the unorganized sector are not covered by labour regulations and social security. This dualistic nature of the labour market in India may be a result of the complex and large number of labour laws that make compliance very costly. In 2016, there were 44 labour laws under the statute of the central government. More than 100 laws fall under the jurisdiction of state governments. The multiplicity and complexity of laws makes compliance and enforcement difficult.

Labor law and Wages reforms mentioned in the NITI Aayog report include.

• Complete the codification of labor laws at the earliest.
• Simplify and modify labor laws applicable to the formal sector to introduce an optimum combination of flexibility and security.
• Make the compliance of working conditions regulations more effective and transparent.
• The National Policy for Domestic Workers needs to be brought in at the earliest to recognize their rights and promote better working conditions.

Make compliance with the national floor level minimum wage mandatory.

• Expand the Minimum Wages Act, 1948, to cover all jobs.

• Enforce the payment of wages through cheque or Aadhaar-enabled payments for all.

Conclusion

The codification of labor laws simplifies the compliance process for industries while ensuring significant benefits for workers. The reforms include:

• Universal social security.
• Reduced bureaucratic red tape through online processes.
• Lower compliance costs and minimal disputes.
• Recognition of gig and platform workers in social security schemes.

Streamlined registration, licensing, and reporting mechanisms. The overarching aim is to create a balanced system where both employers and workers benefit. By introducing a structured and modern labor framework, the government seeks to boost employment, enhance working conditions, and contribute to the nation’s economic progress. These reforms represent a landmark transformation of India’s labor laws, providing long-overdue security, fairness, and efficiency to workers across the country. For more details, refer to: https://labour.gov.in/sites/default/files/labour_code_eng.pdf