Mains Practice Questions

Introduction :

India’s labour regulatory framework historically consisted of 29 central laws that were complex, overlapping, and inadequate for a rapidly transforming economy. To modernise labour governance and promote both worker welfare and industrial productivity, the Government consolidated these laws into four Labour Codes—the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and the Occupational Safety, Health and Working Conditions (OSHWC) Code (2020).

Body

The significance of India’s recent labour reforms under the four new Labour Codes

• Code on Wages, 2019: The Code merges four wage-related laws to create a single, uniform wage system for all workers, including those in the unorganised sector.
  • It guarantees a statutory minimum wage, backed by a national floor wage below which states cannot fix wages.
  • The Code promotes gender-neutral employment, mandates timely wage payments, and ensures overtime at twice the normal rate.
  • Compliance becomes simpler through a uniform wage definition, a friendly Inspector-cum-Facilitator system, and monetary penalties instead of criminal prosecution for minor offences.
• Industrial Relations Code, 2020: This Code streamlines the laws on trade unions, industrial disputes, and standing orders, aiming for industrial harmony, predictability, and labour flexibility.
  • It formalises Fixed Term Employment, granting contract workers full wage parity and gratuity after one year.
  • The threshold for layoffs, retrenchment, and standing orders rises from 100 to 300 workers, making scaling easier for industries.
• Code on Social Security, 2020: This Code consolidates nine social security laws and extends social protection to unorganised workers, gig workers, and platform workers, marking a major expansion in India’s welfare net.
  • It widens ESIC coverage nationwide, mandates it for hazardous occupations, and simplifies EPF procedures with time-bound inquiries and lower appeal deposits.
• Occupational Safety, Health and Working Conditions (OSH) Code, 2020: The OSH Code merges 13 laws to create a unified, modern framework for workplace safety, health, and welfare.
  • It introduces one registration, one licence, and one return for establishments, significantly reducing paperwork and compliance burden.
  • The Code promotes women’s employment by allowing night work with safety measures and mandates annual health check-ups and formal appointment letters for all workers.
  • Working hours are fixed at 8 hours/day and 48 hours/week, backed by a shift from imprisonment to monetary penalties for violations.

The Major Challenges Faced in Governing Labour Issues in India

• Fragmented and Complex Regulatory Environment: Prior to consolidation, India had 29 central labour laws, many overlapping and contradictory.
  • The large number of rules was a major compliance burden; studies estimate firms faced over 69,000 compliances annually under 1,536 legal provisions.
• Gaps in Social Security Design for Gig Workers: The Social Security Code, 2020 formally defines gig and platform workers, but the funding architecture for their benefits remains unclear.
  • The law indicates contributions from aggregators but does not spell out how much the government will shoulder or how benefits will be sustainably financed.
• OSH Code and Women’s Employment: The OSH Code allows night shifts for women but requires employers to ensure extensive safety measures. While intended to expand opportunities, the added compliance burden may discourage smaller firms from hiring women.
• Industrial Relations Code and the “Missing Middle”: The Industrial Relations Code raises the threshold for government permission on layoffs from 100 to 300 workers.
  • Critics argue this widens the scope for “hire and fire” practices and may raise job insecurity instead of job creation.
• Youth Unemployment and Skill Mismatch: Despite India’s demographic dividend, youth unemployment remains a critical challenge, with the youth unemployment rate (ages 15–29) hovering around 14.6%, nearly three times the national average.
• Resistance from Trade Unions and Political Opposition: Labour reforms face resistance from trade unions fearing erosion of worker protections, citing concerns over layoff thresholds and fixed-term contracts viewed as precarious.
  • Ten large trade unions have strongly opposed the four new labour codes implemented in November 2025, calling them “anti-worker” and a “deceptive fraud,” alleging a significant erosion of worker protections.
• Data Poverty and Policy Blindspots: India’s labour governance suffers from severe data poverty, with outdated, fragmented, and incomplete labour statistics.
  • The absence of a unified Labour Market Information System (LMIS) limits real-time, evidence-based policymaking.

Measures India Can Adopt to Strengthen Labour Governance in India

• Simplify and Digitize Compliance Procedures: India must accelerate the implementation of unified digital platforms, single registration, licensing, and consolidated returns to reduce the overwhelming compliance burden.
  • Drawing lessons from countries like Singapore and South Korea, where integrated digital labour portals ease employer compliance, India can reduce paperwork and promote formalisation.
• Promote Formalisation with Incentives for Micro and Informal Enterprises: To bring over 90% informal workers into the formal sector, financial and regulatory incentives like tax relief, access to credit, and simplified procedures should be offered to bridge the “missing middle” in India’s industrial structure.
• Enhance Women’s Labour Participation through Infrastructure and Social Support: Beyond legal provisions in labour codes, India must invest in safe and affordable transport, gender-segregated workplace amenities, and quality childcare facilities as prioritized in the National Gender Resource Centre framework..
• Innovate Social Security Frameworks for Gig and Platform Workers: The gig economy’s dynamism requires designing portable, technology-driven social security schemes with minimal administrative friction.
• Strengthen Enforcement Capacity with Training and Technology: Investing in capacity building of state labour departments is vital to close enforcement gaps.
• Engage and Build Consensus with Trade Unions and Employers: Sustained dialogue platforms involving labour unions, employers, and government at state and national levels can balance worker protections with business flexibility.

Conclusion:

India’s new labour codes mark a transformative step in modernising labour governance, promoting formalisation, social security, and inclusion. As ILO Director-General Gilbert F. Houngbo states, “Social dialogue among government, employers, and workers is essential to ensure reforms benefit both workers and businesses.” Moving forward, India must prioritize cooperative federalism, digital compliance, and inclusive skilling to bridge gaps between policy and practice, enabling a resilient workforce that drives equitable economic growth.