Labour Codes: What Changes for Workers and Employers?

1. Code on Wages

a) Consolidation & Coverage

• Merges 4 laws related to wages and bonus.
• Applies to all employees, irrespective of:
• sector (organised/unorganised)
• wage level
• type of industry or gender
• Earlier, minimum wage provisions were limited to scheduled employment and employees below a certain income (e.g., ₹24,000/month).

b) National Floor Wage

• Introduces a National Floor Wage as baseline – all States must fix minimum wages not below this.
• Aims to reduce inter-State disparity & wage exploitation.

c) Definition of “Wage”

• Wage = Basic Pay + Dearness Allowance + Retaining Allowance.
• This becomes the basis for social security contributions & other benefits.
• Deductions cannot exceed 50% of total pay.

d) Working Hours & Overtime

• Working hours: 8–12 hours/day, but total weekly hours cannot exceed 48 hours.
• Overtime: at least 2 times the normal wage for work beyond normal hours.

e) Timely Payment & Wage Slips

• Clear time limits for wage payment:
  • Daily – end of shift
  • Weekly – before weekly holiday
  • Fortnightly – within 2 days of end of fortnight
  • Monthly – within 7 days of next month
  • On resignation/termination – within 2 days
• Mandatory wage slips (physical or electronic) for all employees – documentary proof of:
  • wages, allowances, deductions, net pay

2. Code on Social Security

a) Consolidation & Coverage

• Merges 9 existing social security laws – EPF, ESI, gratuity, maternity benefit, etc.
• Extends coverage to both organised and unorganised sectors.

b) Gig & Platform Workers

• For the first time, defines gig workers and platform workers legally.
• Provides for:
  • National registration of such workers;
  • Creation of a Social Security Fund for them.

c) Funding Mechanism

• Social security schemes may be funded by:
  • Union & State Governments;
  • Corporate Social Responsibility (CSR) contributions;
  • Aggregators (for gig workers) contributing 1–2% of annual turnover, capped at 5% of the amount payable to gig workers.

d) Gratuity & Fixed-Term Workers

• Fixed-term employees (contractual for specific time) will:
  • Be treated at par with permanent workers in terms of wages & benefits;
  • Become eligible for gratuity after 1 year of continuous service
  • (Earlier: only permanent employees after 5 years).

e) EPFO & ESIC Expansion

• EPFO coverage: all establishments with 20+ employees, irrespective of type of industry.
• ESIC coverage:
  • Pan-India, not limited to notified areas;
  • Mandatory even if 1 worker is engaged in hazardous occupation (earlier minimum 10 workers);
  • Plantation owners can now opt in voluntarily;
  • Family definition for female employees can include parents-in-law (subject to income cap).

f) Inspector-cum-Facilitator

• Traditional “inspectors” replaced with inspector-cum-facilitators.
• Inspection scheme may include web-based inspections and electronic calling of information to reduce harassment & corruption.

3. Industrial Relations Code

a) Definition of Worker

• Defines “worker” as any person (except apprentice) employed in any industry for:
  • manual, unskilled, skilled, technical, operational, clerical, supervisory work,
  • includes sales promotion employees, working journalists
  • includes supervisory staff earning less than ₹18,000/month.

b) Fixed-Term Employment

• Introduces fixed-term employment formally:
  • Allows hiring for short, seasonal, or project-based durations.
  • Workers must receive pro-rata benefits equivalent to permanent workers.
  • Trade unions fear it may increase precarity & hire-and-fire culture.

c) Retrenchment, Layoff & Closure Threshold

• Earlier: factories, mines, plantations needed government permission for layoff/retrenchment/closure if 100+ workers.
• Now: threshold raised to 300 workers.
  • Industry’s view: gives flexibility & encourages investment.
  • Unions’ view: makes it easier to hire & fire, reduces job security.

d) Right to Strike – Stricter Conditions

• Earlier, strict notice rules applied mainly to public utility services (water, electricity, gas, etc.).
• Now, similar conditions apply to all industrial establishments:
  • Workers cannot strike without:
    • giving notice within 60 days before striking; and
    • not striking within 14 days of giving such notice.
• Mass casual leave by more than 50% workers on a given day = deemed a strike.
  • Government justifies this as preventing flash strikes.
  • Trade unions say it dilutes collective bargaining power.

e) Negotiating Union / Negotiating Council

• Establishes a sole negotiating union if one union has 51% membership.
• If multiple unions exist:
  • a negotiating council will have representatives of unions with at least 20% membership, with one seat per 20%.
• Aim: streamline bargaining; unions argue it weakens smaller unions.

4. OSH (Occupational Safety, Health & Working Conditions) Code

a) Consolidation & Scope

• Merges 13 Central laws relating to factories, mines, contract labour, building & construction, etc.
• Government promises:
  • Single registration,
  • Common licences,
  • Electronic filings,
  • Reduced duplication in compliance.

b) Factory Licence Threshold

• For manufacturing with power: raised from 10 to 20 workers.
• For manufacturing without power: raised from 20 to 40 workers.
  • Reduces regulatory burden on very small units, but may leave some workers outside stricter safety norms.

c) Contract Labour

• Contract labour provisions now apply only when the contractor employs 50 or more workers (earlier 20).
• Defines core and non-core activities (sanitation, catering, etc.).
• Allows even core activities to be outsourced to contract labour, subject to conditions – unions fear increased casualisation.

d) Women’s Night Work & Safety

• Permits women to work before 6 am and after 7 pm, subject to:
  • their consent, and
  • adequate safety measures.
• Seen as enhancing gender equality but also raises safety and implementation concerns.

e) Inter-State Migrant Workers

• Definition expanded to include workers employed directly by employer, not just through contractors.
• Aims to better protect migrant workers, especially after COVID-like crises highlighted their vulnerability.

f) Appointment Letters & Health Checks

• Mandatory appointment letters for every employee – crucial for casual/informal workers who lacked written contracts earlier.
• Employers must provide annual free health examinations.
• Establishments with:
  • ≥ 500 factory workers,
  • ≥ 250 construction workers,
  • ≥ 100 mine workers must set up Safety Committees with employer & worker representatives.