Implementation of Labour Codes: Still a Long Way to Go for Workers
Despite the completion of the labour codes implementation, critical gaps leave workers vulnerable and concerns unaddressed.
4 mins read
“Labour reforms must balance flexibility for employers with security and dignity for workers.”
With the notification of rules under all four Labour Codes, India's labour law reform framework is now operational. While the Codes aim to simplify labour regulations, trade unions and labour scholars argue that the rules fail to address several concerns and may weaken worker protections.
The Four Labour Codes
| Labour Code | Focus Area |
|---|---|
| Code on Wages, 2019 | Wages and remuneration |
| Industrial Relations Code, 2020 | Employment relations and trade unions |
| Code on Social Security, 2020 | Social protection and welfare |
| Occupational Safety, Health and Working Conditions Code, 2020 | Workplace safety and welfare |
The implementation process has taken nearly six years since the enactment of the Codes during 2019–20.
Why Are the Rules Important?
Rules act as the Standard Operating Procedures (SoPs) for implementing legislation.
They:
- Clarify broad provisions.
- Define implementation mechanisms.
- Fill legislative gaps.
- Reduce ambiguity.
However, critics argue that several open-ended provisions remain unresolved.
Fixed-Term Employment (FTE): Flexibility Without Safeguards?
The Industrial Relations Code formally incorporates Fixed-Term Employment.
Concerns
The Rules do not specify:
- Minimum duration of employment.
- Maximum number of renewals.
- Conditions preventing misuse.
No Minimum Tenure
+
Unlimited Renewals
↓
Possibility of Replacing
Regular Jobs with FTEs
↓
Reduced Job Security
A minimum one-year tenure and limits on renewals could have reduced uncertainty for workers.
Wage Code: Ambiguity in Wage Determination
The Code on Wages Rules leave several questions unanswered.
Key Issues
| Issue | Concern |
|---|---|
| Floor Wage | Definition remains vague |
| State Consultation | No detailed framework provided |
| Minimum Wage Principles | Lack of clear criteria |
The Rules also continue the convention of treating a four-member family as three consumption units.
Gender Concern
- Adult male = 1.0 unit
- Adult female = 0.8 unit
Critics argue that this perpetuates gender bias in wage calculations.
Hourly Wage Calculation
The Rules calculate hourly wages by dividing daily wages by eight.
However, critics argue:
- Hourly work is often irregular.
- Workers may not obtain employment for the remaining hours.
- International practice often fixes hourly wages independently.
This issue is particularly relevant for:
- Domestic workers
- Part-time workers
- Gig workers
- Platform workers
Social Security Code and Gig Workers
India's gig economy continues to expand rapidly.
However, the Rules:
- Do not clarify employer-worker relationships.
- Continue to classify gig workers as self-employed.
- Leave them within the unorganised sector framework.
Gratuity Insurance Gap
The Code envisages mandatory gratuity insurance.
Yet the Rules fail to specify:
- Implementation mechanism.
- Coverage structure.
- Employer obligations.
This weakens protection against non-payment of gratuity.
Gig Worker
↓
No Clear Employment Status
↓
Limited Social Protection
↓
Higher Vulnerability
Trade Union Recognition Challenges
The Industrial Relations Rules require:
- At least 30% membership for recognition of a sole registered union.
Implications
- Registration alone is insufficient.
- Smaller unions may struggle to gain recognition.
- Collective bargaining capacity may weaken.
Notably, this 30% threshold is not explicitly mentioned in the parent Code itself.
Occupational Safety Code: Missing Welfare Measures
The Occupational Safety, Health and Working Conditions Rules contain safety provisions but omit several worker safeguards.
Missing Provisions
- Housing facilities for plantation workers.
- Medical facilities for plantation labour.
- Clear distinction between core and non-core activities.
- Conditions governing engagement of contract labour.
Why Is This Important?
Absence of Core Activity Definition
↓
Contract Labour in Core Operations
↓
Informalisation of Workforce
↓
Reduced Employment Security
The absence of clear definitions increases scope for ambiguity and misuse.
Major Concerns Across the Labour Codes
- Increased employment flexibility without adequate security.
- Weak protection for gig and platform workers.
- Ambiguity in wage determination.
- Reduced trade union bargaining power.
- Continued informalisation through contract labour.
- Missing occupation-specific welfare safeguards.
- Limited clarification of controversial provisions.
Way Forward
- Prescribe minimum tenure and renewal limits for FTE workers.
- Establish transparent principles for fixing floor and minimum wages.
- Remove gender bias from wage calculations.
- Define employment relationships in the gig economy.
- Operationalise gratuity insurance mechanisms.
- Strengthen trade union recognition and collective bargaining rights.
- Clearly define core and non-core activities.
- Enhance welfare provisions for vulnerable occupational groups.
Conclusion
The Labour Codes seek to modernise India's labour law framework and improve ease of doing business. However, the newly notified rules leave several critical worker protections undefined. Without adequate safeguards on wages, employment security, social protection, and collective bargaining, labour reforms risk increasing labour market flexibility at the cost of worker welfare and social justice.
Attribution
Original content sources and authors
Syllabus classification
How this article maps to GS papers
Main syllabus
GS3Jobs & Inclusive GrowthQuick Q&A
What are the four Labour Codes enacted during 2019-20 and what is their significance for labour market reforms in India?
India's four Labour Codes represent one of the most significant labour reforms undertaken since Independence. Enacted during 2019-20, they seek to consolidate 29 central labour laws into four broad codes: the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020. Their implementation framework became complete with the notification of rules in May 2025 after nearly six years of delay.
The primary objective of these reforms is to simplify labour regulations, improve ease of doing business, and create a uniform legal framework for workers and employers. The Code on Wages seeks to universalize wage protection and introduces the concept of a floor wage. The Industrial Relations Code deals with trade unions, dispute resolution, and fixed-term employment. The Social Security Code attempts to extend social protection to organized and unorganized workers, including gig workers. The Occupational Safety Code focuses on workplace safety and welfare standards.
Supporters argue that these codes will improve compliance, enhance labour flexibility, and promote investment and employment generation. However, trade unions and labour economists have criticized several provisions as being pro-employer and inadequate in protecting workers' rights.
The issue is highly relevant for UPSC GS-III under 'Jobs and Inclusive Growth' and GS-II under governance and welfare policies. It also connects with themes of informalization, labour productivity, industrial relations, and social justice. Questions on balancing economic growth with workers' welfare frequently appear in UPSC Mains and interviews.
Why have trade unions and labour economists expressed concerns regarding the implementation of the new Labour Codes and associated rules?
Trade unions, labour rights activists, and several academics have raised concerns that the rules framed under the four Labour Codes have failed to address many contentious issues present in the parent legislation. Rules are intended to provide detailed standard operating procedures and clarify broad provisions. However, critics argue that this opportunity has largely been missed.
One major concern relates to Fixed-Term Employment (FTE) under the Industrial Relations Code, 2020. The Code introduces FTE formally but does not prescribe a minimum tenure or place limits on contract renewals. This creates the possibility that permanent jobs may gradually be replaced by repeatedly renewed temporary positions.
Another issue concerns the definition of floor wage and the methodology for minimum wage determination. Critics argue that the absence of clear principles perpetuates outdated assumptions and gender biases. Similarly, gig workers continue to be classified as self-employed under the Social Security Code, leaving their employment relationship ambiguous and limiting access to social security protections.
Trade unions are also concerned about the requirement that a sole registered union must secure 30% membership to gain recognition. Smaller unions may find it difficult to satisfy this criterion, thereby weakening collective bargaining rights.
Furthermore, ambiguities regarding contract labour and the distinction between core and non-core activities may accelerate labour informalization.
For UPSC aspirants, these debates are important from the perspective of inclusive growth, labour welfare, industrial relations, and constitutional principles of social justice under DPSPs. The controversy highlights the challenge of balancing labour flexibility with workers' rights in a rapidly changing economy.
How does the concept of Fixed-Term Employment under the Industrial Relations Code affect labour flexibility and worker security?
Fixed-Term Employment (FTE) refers to employment contracts that are valid for a specified duration rather than being permanent in nature. Although such arrangements existed informally in India for decades, the Industrial Relations Code, 2020 formally incorporates them into the legal framework.
From the perspective of employers, FTE provides flexibility in hiring and workforce management. Industries facing seasonal demand or technological changes can adjust labour requirements more efficiently. Such flexibility is often considered essential for improving competitiveness, attracting investment, and enhancing ease of doing business.
However, critics argue that the absence of safeguards creates significant vulnerabilities for workers. The Code and its rules do not specify a minimum contract period or limit the number of renewals. Consequently, employers may repeatedly renew short-term contracts, effectively replacing permanent jobs with temporary ones. This could undermine job security, weaken collective bargaining, and reduce long-term social protection.
Internationally, many countries impose restrictions on repeated renewals and establish minimum tenures to prevent misuse. Experts have suggested introducing a minimum one-year duration and limiting the number of contract extensions.
The issue reflects a broader debate between labour market flexibility and employment security. Supporters emphasize efficiency and competitiveness, whereas critics stress dignity of labour and social protection.
For UPSC preparation, this topic is relevant to GS-III themes such as employment generation, labour reforms, and inclusive growth. It also touches upon GS-II issues related to welfare and governance. Candidates should present a balanced perspective by acknowledging both economic efficiency and the need for adequate safeguards against precarious employment.
Critically analyse the challenges associated with wage determination and gender concerns under the Code on Wages framework.
The Code on Wages, 2019 aims to universalize wage protection and establish a national floor wage framework. However, critics contend that the accompanying rules lack clarity regarding wage determination and perpetuate structural inequalities.
One major concern is the vague distinction between the floor wage and minimum wage. Although consultation with States is mandated, the rules do not specify a transparent framework for such consultations. This raises concerns regarding cooperative federalism and the possibility of symbolic rather than substantive participation.
Another criticism relates to the continued use of outdated consumption norms. Traditionally, a family of four is treated as equivalent to three consumption units, assigning a weight of 1.0 to an adult male and 0.8 to an adult female. Labour economists argue that this methodology reflects gender bias and fails to account for changing social realities.
The method of calculating hourly wages by dividing daily wages by eight hours has also been criticized. International practice often determines hourly wages independently, especially in sectors characterized by fragmented work schedules. This issue assumes greater significance with the growth of domestic work and the gig economy.
Supporters argue that the Code provides universal coverage and simplifies wage regulations, which were previously fragmented across multiple laws. Nevertheless, the lack of precise criteria may result in inconsistencies and inadequate wage protection.
For UPSC aspirants, this topic connects with GS-III themes of inclusive growth and labour economics and GS-I topics relating to women and social empowerment. It also raises ethical and constitutional questions concerning equality and social justice, making it highly relevant for interviews and essay papers.
What challenges do gig workers and platform workers face under the Social Security Code and why is this issue increasingly important?
The emergence of the gig economy represents one of the most important transformations in the world of work. Workers associated with platforms such as Uber, Ola, Swiggy, Zomato, and Urban Company constitute a rapidly expanding segment of India's workforce. Recognizing this trend, the Code on Social Security, 2020 seeks to bring gig and platform workers within the social security framework.
However, the rules notified under the Code have attracted criticism because they do not clearly define the employment relationship of gig workers. They continue to be treated as self-employed and part of the unorganized sector. As a result, questions regarding employer liability, insurance, provident fund, gratuity, and occupational benefits remain unresolved.
Another major concern relates to mandatory gratuity insurance envisaged under the Code. While the legislation mentions such protection, the rules do not specify mechanisms for implementation. Consequently, workers remain vulnerable to non-payment of benefits.
Globally, countries such as the United Kingdom and parts of the European Union have attempted to redefine the status of platform workers and extend social security coverage. Similar debates are taking place in India regarding the balance between flexibility and protection.
The issue has acquired greater importance because digital platforms are expected to generate millions of jobs in the coming decade. Without adequate safeguards, precarious employment and income insecurity may intensify.
For UPSC, this topic is highly relevant to GS-III under employment and inclusive growth, as well as GS-II under welfare policies. It also connects with contemporary debates on the future of work, technological disruption, and labour rights.
What does the issue of trade union recognition and contract labour reveal about the changing nature of industrial relations in India?
The provisions relating to trade unions and contract labour under the Labour Codes illustrate the broader transformation occurring in India's industrial relations framework. Traditionally, trade unions played a significant role in collective bargaining and protection of workers' interests. However, globalization, technological changes, and increasing informalization have altered this landscape.
Under the Industrial Relations Code Rules, a sole registered trade union must secure at least 30% membership to gain official recognition. Critics point out that this threshold is not explicitly mentioned in the parent Code. Smaller and newly formed unions may struggle to achieve this level of support, particularly in large enterprises. Consequently, workers' bargaining power may weaken further.
Similarly, the Occupational Safety, Health and Working Conditions Code Rules do not clearly specify the distinction between core and non-core activities or define the sectors where contract labour may be employed. This ambiguity may encourage the increasing use of contract workers in core operations, contributing to labour market informalization.
Trade unions perceive these developments as reducing job security and collective representation. Employers, on the other hand, argue that flexibility is essential for competitiveness and productivity.
The issue demonstrates the tension between efficiency and equity in labour market reforms. It also highlights the changing nature of employer-employee relations in the age of globalization.
For UPSC preparation, this case study is relevant to GS-III topics on industrial growth and labour reforms, as well as GS-II themes of governance and social justice. It exemplifies how institutional arrangements influence both economic development and workers' welfare.
Practice questions
2 questions for mains preparation