Steel production at a factory in Mandi Gobindgarh.
Credit: Reuters photo
The rollout of the four labour codes by the Union government marks an important turn in India’s labour landscape and will have significant economic implications. Described by the government as “historic”, the codes deal with wages, industrial relations, occupational safety, and social security. They subsume 29 laws, some of which date back to colonial times, and reduce 1,228 sections to 480, 1,436 rules to 351, four licences to one, and 85 registers to eight, apart from decriminalising 65 sections. These changes are long overdue – some of the earlier laws were restrictive and criticised for not responding to new realities of the labour and capital markets. In what is seen as the most comprehensive labour reforms in independent India, the codes are aimed at simplifying the existing framework, introducing formalisation in the employment of workers, and bringing in greater flexibility for the employers.
The new codes widen the social security net to gig and unorganised workers, remove unfair restrictions on women, and enable portability of benefits to inter-state workers. They mandate payment of timely minimum wages, appointment letters for new employees, equal pay for women, gratuity for fixed-term workers after nine years, free annual health check-ups for workers aged 40 years and above, and double wages for overtime work. Together, they mark a move towards formalisation and transparency. While recognition of gig and platform workers within the social security ambit is a major structural change, equality in employment conditions may increase women’s participation in the workforce, which remains low.
Labour unions and some of the Opposition parties have criticised the codes for their “anti-labour” provisions. One major point of contention is the raising of the threshold for government approval for layoffs and closures, from 100 to 300 workers. While the industry has welcomed it, unions have said it will weaken job security. There is criticism that the changes dilute the labourers’ collective bargaining power and tilt the balance in favour of the employer. Implementation will also depend on the states, and adoption could be uneven. Some states already have legislation relevant to areas covered by the codes. It may be noted that the codes were framed without detailed consultations with the unions or parties. Parliament passed three of them during Covid; the discussions were perfunctory. Now that the codes have been notified, the government should hold discussions with all stakeholders before finalising the implementation roadmap. That will present an opportunity to address some of the concerns, taking the codes closer to their intended objective of efficiency and workforce security.