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September 28, 2020

Some salient features of the four labour codes passed by Parliament

by CA Shivam Jaiswal in Corporate Law

Some salient features of the four labour codes passed by Parliament

There existed 44 central labour laws. 12 of them had been previously repealed.

Now 29 acts comprising 1232 sections subsumed into hugely simplified just 4 acts with 479 sections.

1) Code on Wages: Subsumes 4 acts into 1.


  • Statutory right for minimum & timely wages for ALL workers – organised and unorganized
  • 542 different classifications of minimum wages standardized to just 12
  • Skill to be a determinant in fixing wage.

2) Industrial Relations Code: Subsumes 3 acts into 1


  • No prior permission needed for upto 300 workers for retrenchment (earlier limit 100)
  • Fixed term employment. Workers can now be directly hired with all benefits without middlemen contractors.
  • payment of 15 days wages per completed year of service if retrenched
  • Re-skilling fund for all retrenched workers
  • 14 days mandatory notice period before strike (thus avoiding flash strikes)

3) Occupational Safety & Health Code: Subsumes 13 acts into 1


  • 1 registration instead of 6
  • 1 license instead of 4
  • 1 return instead of 21
  • Single, all India 5 years valid license for hiring contract workers (now license needed per work order)
  • Applicability threshold of law increased from 10 (power) and 20 (non-power) to 20 and 40
  • New establishments may be exempt from the law by specific local orders
  • Welfare provisions applicability maze simplified

4) Social Security Code: Subsumes 9 acts into 1


  • Applicability of ESIC extended to all districts of India
  • Social security extended to gig, platform and all such other workers
  • Social security and welfare fund for unorganized sector workers

So What do Labour Reforms means for the Employers?

  • Just 1 registration, 1 inspection and 1 return.
  • Perverse incentive for MSMEs to not expand beyond 100 workers capacity ended
  • Reduced compliance costs, reduced litigation
  • Faceless inspections, End of ‘inspector raj’

So What do Labour Reforms means for the Workers?

  • Nigh shifts for women allowed (with safety measures)
  • Fixed term employment, weeding out contractor route
  • Migrant workers definition made comprehensive; portability of benefits
  • Dignity of labour; assured wages and benefits

The Labour Reforms finally make Indian labour laws modern and futuristic. They protect worker rights and yet give freedom to wealth creators to operate with flexibility without fear of ‘raid raj’. These laws are by far the greatest reforms yet for ‘Ease of Doing Business’

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