Labour Codes Fully Operationalised – Reform Push or Dilution of Workers’ Rights

Labour Codes Latest News

• The Union Government has fully operationalised the four Labour Codes by notifying over 30 final Rules after announcing their implementation from November 21, 2025. 
• These Codes consolidate 29 existing labour laws governing wages, industrial relations, social security, occupational safety, and working conditions.
• The move has triggered sharp reactions from trade unions and Opposition parties, which allege that the reforms weaken labour protections, centralise decision-making, and undermine collective bargaining rights. 
• The government, however, argues that the Codes simplify compliance, improve ease of doing business, and modernise India’s labour regime.

The Four Labour Codes

• The four Labour Codes enacted between 2019 and 2020 are –
  • Code on Wages, 2019
  • Industrial Relations Code, 2020
  • Code on Social Security, 2020
  • Occupational Safety, Health and Working Conditions (OSH) Code, 2020

Significance of the Labour Codes

• Ease of Doing Business: Simplified compliance framework, reduction in multiplicity of laws, and digitisation of labour administration.
• Formalisation of employment: Improved documentation, electronic wage payment systems, and universalised social security architecture.
• Expansion of social security: Inclusion of gig workers, platform workers, and unorganised labour marks a major policy shift.
• Together, they replace 29 existing labour laws. Below, we will discuss key provisions of the final Rules.

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Wage-Related Provisions

• National Floor Wage:
  • The Centre will determine a national floor wage in consultation with the Central Advisory Board, and State governments.
  • The floor wage will consider minimum living standards, food, clothing, housing, and other factors deemed appropriate.
• Working hours: 8-hour normal working day, weekly cap fixed at 48 hours, and daily wage calculations (hourly wage is equal to daily wage divided by 8, while monthly wage is equal to daily wage multiply by 26).
• Mandatory wage slips: Employers must issue wage slips electronically or physically.
• Timely wage payments:
  • The government has mandated strict timelines for wage payments – daily workers (by end of shift), weekly workers (before weekly holiday), fortnightly workers (within 2 days), and monthly workers (within 7 days of next month).
  • Payments must be made through the bank transfer electronic mode.
• Penalties for contractors: Contractors failing to pay workers on time may face debarment, blacklisting, and procurement restrictions.

Critical Change in Minimum Wage Formula

• Removal of scientific criteria:
  • One of the most controversial changes is the removal of the earlier formula for calculating minimum wages from the final Rules.
  • The draft rules had retained the established formula based on 2,700 calories per day, clothing requirement of 66 metres annually, housing expenditure, fuel and electricity costs, and education and medical expenses.
• This formula emerged from:
  • 15th Indian Labour Conference (1957).
  • Reptakos Brett Supreme Court Judgement (1991).
• The final Rules now state that wage criteria will be separately specified later through government orders.

Concerns Raised by Experts

• Possibility of lower minimum wages: Labour economists argue that removing the formula could –
  • Reduce wage transparency
  • Enable arbitrary wage determination
  • Result in lower wages
  • Increase interstate wage disparities
• Impact on collective bargaining: Minimum wages often act as the baseline for trade union negotiations, and collective bargaining agreements. Weakening this benchmark may reduce workers’ bargaining power.

Social Security Provisions

• Expanded coverage: The Code on Social Security modifies several existing rules, including the Employees’ State Insurance (ESI) Rules, and the Employees’ Provident Fund (EPF) framework.
• Social Security Fund: 
  • A dedicated social security fund will be created for the unorganised workers, gig workers, and the platform workers.
  • This is significant given the rapid expansion of gig economy employment, and informal labour markets.

Industrial Relations and Trade Union Recognition

• Sole negotiating union: The Industrial Relations Code provides that if only one registered trade union exists, and it has at least 30% membership of workers, then the employer must recognise it as the sole negotiating union.

Opposition from Trade Unions and Political Parties

• Trade union protests:
  • Ten central trade unions organised nationwide protests and burnt copies of the Rules.
  • Key demands included clarity on working hours, minimum wages, floor wages, social security protections, and trade union rights.
  • Trade unions alleged that their suggestions were largely ignored.
• Political opposition: 
  • Opposition parties described the Rules as anti-worker, corporate-friendly, and an attack on labour rights.
  • They accused the government of delaying notification until after Assembly election results to avoid political backlash.

Major Challenges Associated with the Labour Codes

• Federal concerns: As labour is in the Concurrent List, states framing their own rules, may create uneven labour standards due to variations across states.
• Informalisation of labour: India’s workforce remains predominantly informal, and challenges include weak enforcement, contractualisation, lack of unionisation, and gig worker vulnerability.
• Dilution of worker protections: Critics argue the Codes may ease hire-and-fire practices, reduce union bargaining power, and increase employer discretion.
• Implementation capacity: Effective implementation requires labour inspection reforms, digital infrastructure, worker awareness, and coordination between Centre and States.
• Wage inequality across states: Without a transparent minimum wage formula wage disparities may widen, workers in poorer states may face wage suppression.

Way Forward

• Restore scientific wage determination: The government should adopt transparent and objective criteria for minimum wages based on nutritional needs, inflation, and living wage standards.
• Strengthen tripartite consultation: Meaningful consultation among government, employers, and trade unions is essential for labour peace.
• Ensure uniform minimum standards: While states may adapt rules, a strong national floor wage should prevent exploitation and regional disparities.
• Strengthen social security delivery: Focus areas are gig worker registration, portability of benefits, universal coverage, and efficient grievance redressal.
• Improve labour inspection and enforcement: Technology-driven inspections should not weaken accountability. Worker protection mechanisms must remain robust.

Conclusion

• The operationalisation of the four Labour Codes marks one of the most significant labour reforms in independent India. 
• While the Codes aim to modernise labour governance, serious concerns remain regarding wage determination, dilution of labour protections, and weakening of collective bargaining mechanisms.
• The ultimate success of the Labour Codes will depend not merely on simplification of laws, but on achieving a balanced framework that promotes economic growth while safeguarding workers’ dignity.

Source: TH | IE