An in-depth analysis of India's Labour Codes 2020—do they empower workers or weaken protections? Explore the real impact on workers' rights.

In 2020, India ushered in a new era in labour regulation by consolidating 29 central labour laws into four comprehensive codes: the Code on Wages, the Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code, and the Social Security Code. Promoted as a necessary step toward simplification, modernization, and improving ease of doing business, the Labour Codes have been portrayed as historic reforms. However, amidst this narrative, concerns have been raised about the erosion of hard-earned workers' rights, the weakening of collective bargaining, and increased precarity in the labour market.

As India seeks to position itself as a global economic power, the tension between the need for labour market flexibility and the obligation to protect workers' welfare has never been more pronounced. This blog explores whether the Labour Codes represent a progressive reform or a regression for India's workforce.

The Rationale Behind Labour Law Reforms

The existing labour law framework prior to 2020 was widely considered outdated, rigid, and heavily fragmented. Several statutes dated back to the colonial era, and amendments over the decades had only made the system more cumbersome. For instance, definitions of "worker" and "wages" varied across different laws, creating compliance challenges and frequent litigation. India's labour market is characterized by a high degree of informality, with about 90% of the workforce employed in the informal sector, according to the Periodic Labour Force Survey (PLFS) 2019-20. Formal sector employment, too, was struggling under the weight of complex regulations that often discouraged scaling up and formalization.

The government's rationale behind codification included:

• Reducing the regulatory burden on businesses
• Attracting foreign investment
• Facilitating formalization of the workforce
• Expanding social security coverage to the unorganized sector

However, questions have been raised whether the new Codes adequately address the deep structural inequalities entrenched in India's labour market.
 

The Four Labour Codes: An Overview

1. Code on Wages, 2019

   The Code on Wages consolidates four laws: the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and the Equal Remuneration Act. It universalizes minimum wage coverage across all sectors and introduces a concept of a national floor wage to minimize regional disparities.
    

2. Industrial Relations Code, 2020

   This Code merges three statutes related to trade unions, conditions of employment, and industrial disputes. It seeks to streamline procedures for layoffs, retrenchments, strikes, and the resolution of industrial disputes. 

3. Occupational Safety, Health and Working Conditions Code, 2020

   This Code amalgamates laws relating to workplace safety, health, and welfare across factories, mines, plantations, and other sectors. It emphasizes providing a safer working environment and extends welfare provisions to more categories of workers, including inter-state migrant workers.
    

4. Social Security Code, 2020

   The Social Security Code integrates laws related to provident funds, insurance, gratuity, and maternity benefits. It extends coverage to gig workers, platform workers, and the unorganized sector, envisioning a universal social security architecture.

Promised Gains for Workers: The Reform Narrative

Universalization of Minimum Wages

Previously, the Minimum Wages Act applied only to scheduled employments. With the Code on Wages, minimum wage protection is available to all workers. This is significant for India's vast unorganized workforce, particularly in sectors like domestic work, agriculture, and construction, where exploitation was rampant due to the absence of formal wage floors. The Code also empowers the central government to fix a national floor wage. States cannot set minimum wages lower than this floor, ensuring a basic income security nationally. According to estimates, nearly 40 million workers in the unorganized sector stand to benefit from the floor wage provision once fully implemented.
 

Recognition of New Forms of Work

The inclusion of gig and platform workers under the Social Security Code acknowledges the changing nature of work. With the rise of app-based services such as ride-sharing, food delivery, and e-commerce logistics, a significant segment of the workforce operates outside traditional employer-employee relationships. Recognizing them in legislation is a crucial step toward providing them rights and entitlements. As per NITI Aayog, India had approximately 7.7 million gig workers in 2021, projected to grow to 23.5 million by 2030. Without proper legal recognition, these workers risk exploitation, insecurity, and exclusion from benefits.
 

Enhanced Worker Safety Provisions

The Occupational Safety Code expands safety regulations to cover establishments with 10 or more employees. The Code mandates the maintenance of health and safety standards, periodic health check-ups, and welfare measures such as crèches, canteens, and first aid for workers. Furthermore, for women workers, particularly in sectors such as night shifts in factories or BPOs, the Code requires employers to ensure their safety, transportation, and welfare measures—a progressive provision aimed at enhancing women's workforce participation.
 

Areas of Concern: Signs of Regression

Erosion of Right to Strike

The Industrial Relations Code has significantly restricted the right to strike. Workers in all sectors are now required to give a 60-day notice before going on strike, even outside public utility services. Moreover, strikes are prohibited during conciliation proceedings and for seven days after their conclusion. Legal scholars argue that these provisions make organizing effective industrial action almost impossible. The ability to strike has historically been a vital tool for workers to negotiate better wages, safety conditions, and other rights. Undermining this tool tips the balance of power heavily in favour of employers. According to a report by the Indian Labour Organization (ILO), countries that excessively restrict strike actions experience increased labour unrest in the long term, often leading to informal strikes and protests.

Increased Thresholds for Retrenchment Permissions

The increase of the threshold for mandatory government approval for layoffs and retrenchments from 100 workers to 300 workers is perhaps the most contentious reform. Critics argue that it emboldens employers to terminate workers without sufficient safeguards, leading to heightened job insecurity. A study by the Centre for Sustainable Employment (CSE) at Azim Premji University suggests that around 65% of manufacturing establishments in India employ less than 300 workers. Thus, the majority of firms would now be exempt from seeking government approval, making job security for millions of workers more precarious.

Contractualization and Fixed-Term Employment

The Codes legitimize fixed-term employment, allowing employers to hire workers for a specific period with benefits similar to permanent employees. However, this also opens the door to widespread contractualization, undermining the notion of stable, long-term employment relationships. With growing evidence from countries like the United States and Brazil, where gigification and contractualization have led to an erosion of job security, India's move towards embracing similar models raises concerns about the quality of future employment.

Statistical Snapshot: Impact Indicators

International Comparisons: A Different Approach

Countries such as Denmark, the Netherlands, and Germany have successfully implemented models combining labour market flexibility with strong social security nets—a system known as flexicurity. These nations permit easy hiring and firing, but guarantee unemployment benefits, retraining programs, and healthcare coverage, ensuring that workers are not left vulnerable. In contrast, India's Labour Codes prioritize flexibility without establishing a strong safety net. For instance, while the Social Security Code envisions schemes for gig workers, their actual implementation remains discretionary, with contributions by employers capped at minimal percentages. A report by the ILO in 2022 emphasized that merely recognizing workers without ensuring enforceable rights and benefits amounts to "tokenism without transformation." Without mandatory entitlements, India's gig and unorganized workers remain at risk.
 

State Governments And The Implementation Gap

Labour is a concurrent subject under the Indian Constitution. This means that both the central and state governments have the authority to legislate on labour issues. As a result, the implementation of the Labour Codes largely depends on states framing their respective rules. As of early 2024, several major states like Maharashtra, Tamil Nadu, and West Bengal have yet to notify final rules under the Codes. Others like Uttar Pradesh and Gujarat have moved swiftly, often diluting protections even further. This uneven implementation risks creating a fragmented labour market, undermining the very objective of simplification and uniformity.
 

Labour Unions' And Workers' Organizations' Response

The 2020 Labour Codes have faced strong opposition from several workers' organizations, labour unions, and civil society groups. Major national trade unions such as INTUC, AITUC, CITU, and HMS have consistently criticized the Codes as being pro-employer and anti-worker. Their key concerns include:

• Dilution of Collective Bargaining: By imposing onerous conditions on forming unions and initiating strikes, the Codes weaken workers' ability to organize and negotiate.
• Increased Precarity: By promoting fixed-term employment and raising retrenchment thresholds, job security is eroded, pushing workers into vulnerable and unstable employment.
• Social Security Ambiguity: Although gig and platform workers are acknowledged, their rights are not enforceable unless schemes are voluntarily notified by the government, leaving vast sections unprotected.
• Centralization of Powers: The Labour Codes shift many discretionary powers to the executive branch, reducing judicial oversight and transparency.
   

Protests And Strikes

In November 2020, trade unions organized a nationwide strike involving more than 250 million workers - one of the largest in history - demanding the repeal of the Labour Codes alongside other economic grievances. This strong response highlights the disconnect between the government's vision of labour reform and workers' lived realities.
 

Criticism From International Bodies

The International Trade Union Confederation (ITUC) and Human Rights Watch (HRW) have both flagged concerns over India's Labour Codes. They point to:

• Potential violations of ILO Conventions, particularly regarding freedom of association and collective bargaining.
• Reduced protections for contract workers and weaker occupational health and safety standards.
• Insufficient mechanisms to ensure non-discrimination and equal pay.
• In its 2023 report, ITUC downgraded India's rating to Category 5 ("No guarantee of rights"), citing the restrictive environment for trade unions under the new laws.

This international scrutiny could impact India's reputation at forums like the ILO, WTO, and in future trade negotiations.
 

Future Outlook: The Road Ahead

As India stands at a crossroads, the future of workers' rights under the Labour Codes will depend on several factors:

• Judicial Scrutiny: Multiple challenges have been filed in courts arguing that the Codes violate fundamental rights under Articles 19(1)(c) (right to form associations) and 21 (right to livelihood) of the Constitution. Judicial interpretation will significantly shape how the Codes are enforced.
• State-Level Innovation: Some progressive states could use the Codes creatively to build better protections. For instance, Kerala has indicated it will draft rules to strengthen gig workers' social security rights.
• Workers' Movements: Continued activism and public pressure can push for amendments to the Codes, ensuring they better reflect the needs of India's working class.
• Global Trade Dynamics: With sustainability, ESG (Environmental, Social, and Governance), and labour standards becoming key criteria in global supply chains, India will have to ensure it balances labour flexibility with minimum labour standards to remain competitive.

In the long run, the real success of labour law reform will be measured not by how quickly businesses can hire and fire, but by whether India's workers achieve greater dignity, fairness, and economic security.
 

Conclusion: Reform, But At What Cost?

The Labour Codes 2020 undoubtedly represent a monumental change in India's labour regulatory framework. They promise simplification, formalization, and recognition of new forms of work. However, their implementation and the substantive impact on workers' rights reveal a more complex picture.

While businesses might enjoy greater ease of operations, workers risk facing increased precarity, weakened bargaining power, and uncertain access to social security. Unless accompanied by strong enforcement mechanisms, transparent governance, and genuine worker participation, the Labour Codes may end up serving employers more than employees. Labour reform must not come at the cost of labour rights. For India to achieve sustainable and equitable growth, it is imperative to ensure that economic liberalization goes hand-in-hand with social protection, dignity of work, and workers' empowerment.

Labour law is not just an economic tool; it is a fundamental pillar of social justice. The Labour Codes 2020 have the potential to shape India's workforce for decades. Whether they usher in empowerment or exploitation will depend on vigilant implementation, continuous dialogue with stakeholders, and above all, a commitment to the Constitutional ideals of equality, justice, and dignity.

As India marches towards becoming a $5 trillion economy, it must remember that economic growth without human rights is hollow. True reform lies in harmonizing productivity with protection, competitiveness with compassion.

In conclusion, whether the Labour Codes will usher in an era of genuine reform or a period of regression depends not merely on the written law, but on the political will to enforce it in a manner that safeguards the interests of all stakeholders, especially the millions whose livelihoods depend on fair and just labour practices.