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How Will the New Labour Codes Impact Workers in India?

Sep 29, 2020 7:59 AM 4 min read

The Indian Parliament passed three “new” labour codes yesterday, amidst rising uproar that the reforms will ease firing practices and dilute operation of unions.

To be precise, the codes are an integration of the numerous labour-related legislations that existed before.

While it is an appreciable effort to integrate all existing labour laws in the country, bigger questions regarding the utility and workability of the erstwhile and newly-reformed laws loom large.

What’s the Issue?

‘Labour’ is listed under the Concurrent List of the Constitution, meaning that both Union and State Legislatures can make laws on it, and given the complex nature of the subject, there are n-number of rules in force all over the country -  often overlapping, sometimes contradictory. Numbers range from 200 State laws to 50 Central laws.

The sheer variance of these laws makes it impossible to rationalise their application. Hence, the Union Government decided to club them together under three broad umbrellas - i.e., the three labour codes - in a move that was frankly, long pending.


Why All the Fuss, Then?

This might have to do with the fact that in the process of simplifying labour laws, the Government has also incorporated some “radical” changes in the regime.

Let’s study these changes one by one.

What’s New: The Code also allows a new provision to address grievances of workmen who have been fired under dispute.

Pros: The first is a welcome change for employers because now they can employ up to 300 people without worrying about Government approvals for firing them. It’s a useful device to increase employment numbers.

Cons: The remaining changes, however, have called for criticism from trade unions who think their authority is being undermined by tightening the laws to strike and increasing threshold representations which will drown out the voices of small unions.

On the other hand, the Government says that the increased time period before granting permission to strike is to allow for dialogue and settlement of conflict.

What’s New:

  • For the first time, workers in the unorganised sector (migrant workers, gig workers and platform workers) are included under social security coverage.
  • The Central Government will set up a 'social security fund' for unorganised workers, which will require contributions from the employer companies (called ‘aggregators’). Contributions must be at least 1-2% of their annual turnover. 


This Code has introduced the greatest number of changes. Universalisation of social security is a prudent and long-awaited step in the right direction.

Through the inclusion of gig and platform workers, the Code has catered to the millions of self-employed workers and those working on a contract-basis for the service sector in companies like Uber, Swiggy, Amazon etc.


The changes don’t go far enough. A thriving social-security scheme requires a basic and mandatory employer-employee contribution to make use of its benefits. The Code still makes this requirement discretionary and not mandatory on unorganised establishments (fewer than 10 workers), leaving a large chunk of masses out of coverage.

What’s New:

  • Inter-state migrant workers are now entitled to avail Public Distribution System benefits in either their home state or employed state.

Pros: The reduction in maximum work hours is now in conformity with the ILO Convention. The number of ‘non-core’ activities where contract labour can be employed has also been reduced to 11, a laudable step in prohibition against hazard.

Cons: The state-wise database introduced for maintenance of migrant workers’ records is on the basis of self-declaration, still. The income cap of 18,000 per month that has been fixed to define inter-state migrants is not commensurate to the per-capita income figures.

The three new labour codes are undoubtedly a momentous reform in the labour law landscape of India. They simplify labour legalese to a great extent. But as is the case with many policies and laws, only time will tell how effective these  changes will be for employees, employers and the economy in general.


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