India's Labor Reforms (English Text)

Labor, the Cornerstone of India's Development
Empowering labor is the foundation of a strong, prosperous, and self-reliant India. Reflecting this vision, employment in India has shown remarkable growth – from 475 million in 2017-18 to 643.3 million in 2023-24, a net increase of 168.3 million jobs in just six years. During the same period, the unemployment rate has declined sharply from 6.0% to 3.2%, and 15.6 million women have joined the formal workforce.
Rationale behind codifying the existing 29 labor laws
Reforming labor laws is an ongoing process. The objective of codification is to enhance ease of doing business, promote employment generation, and ensure safety, health, social, and wage protection for every worker.

The main reasons behind this reform are the following:
Simplifying compliance: The multiplicity of laws makes compliance difficult.
Streamlining enforcement: The multiplicity of authorities in various labor laws led to complexity and difficulty in enforcement.
Modernizing outdated laws: Most labor laws were enacted during the pre-independence era, necessitating their alignment with today's economic realities and technological advancements.

The Code on Wages 2019:
Key Highlights
Universal minimum wage: This Code establishes a statutory right to a minimum wage for all workers in both the organized and unorganized sectors. Previously, the Minimum Wage Act applied only to scheduled employments, which covered approximately 30% of workers.
Introduction of floor wage: A statutory floor wage will be set by the government based on the minimum standard of living, with scope for regional variation. No state can set a minimum wage below this level, ensuring uniformity and adequacy across the country.
Criteria for Wage Determination: Governments will set minimum wages based on workers' skill levels (unskilled, skilled, semi-skilled, and highly skilled), geographic regions, and job conditions such as temperature, humidity, or hazardous environments.
Gender Equality in Employment: Employers will not discriminate on the basis of gender (including transgender identity) in recruitment, wages, and employment conditions for the same work.
Universal Coverage for Wage Payment: Provisions ensuring timely payment and preventing unauthorized deductions will apply to all employees, regardless of their wage threshold (currently, this applies only to employees earning up to ₹24,000/month).
Overtime Compensation: Employers must pay all employees at least double the normal rate of overtime wages for any work performed beyond regular working hours.
Responsibility for Wage Payment: Employers, including companies, firms, or associations, will pay wages to their employees. Failure to do so will render the owner/unit liable for unpaid wages.
Inspector-cum-Facilitator: The traditional role of "Inspector" has been replaced with "Inspector-cum-Facilitator," which emphasizes guidance, awareness, and advisory roles, along with enforcement, to improve compliance.
Compounding of Offences: First-time non-imprisonable offenses can be compounded by paying a fine. However, offenses repeated within five years cannot be compounded.
Decriminalization of Offences: The Code replaces imprisonment with monetary fines (up to 50% of the maximum fine) for some first-time offenses, making the framework less punitive and more compliance-oriented.

Industrial Relations Code, 2020:
Key Highlights
Fixed-Term Employment (FTE): Allows for direct, time-bound contracts with full parity in wages and benefits; eligibility for gratuity after one year. This provision reduces excessive contractualization and provides cost efficiencies to employers.
Re-skilling Fund: To train retrenched employees, this fund has been established by contributing an amount equivalent to 15 days' wages for each retrenched worker by the industrial establishment. This is in addition to the retrenchment compensation. This amount will be credited to the worker's account within 45 days of retrenchment.
Trade Union Recognition: A union with 51% membership will be recognized as a negotiating union; otherwise, a negotiating council will be formed from unions with at least 20% membership of the trade union. Such an arrangement strengthens collective bargaining.
Expanded definition of worker: Includes sales promotion staff, journalists, and supervisory staff earning up to ₹18,000/month.
Broader definition of industry: Covers all organized employer-employee activities, regardless of profit or capital, thereby broadening access to labor protection.
Higher threshold for retrenchment/layoff/closure: The approval threshold has been raised from 100 to 300 workers; states can further increase this threshold. This provision will simplify compliance and contribute to formalization.
Women's representation: Ensures proportional representation of women in grievance committees for gender-sensitive redressal.
Standing order limit: Increased from 100 to 300 employees, easing compliance and enabling flexible workforce management.
Work from home provision: Allowed in service sectors by mutual consent, improving flexibility.
Industrial Tribunals: Two-member tribunals consisting of a judicial and administrative member for speedy resolution of disputes.
Direct Tribunal Access: Parties can approach tribunals directly after conciliation fails within 90 days.
Strike/Lockout Notice: Mandatory 14-day notice for all establishments to promote dialogue and minimize disruptions.
Expanded Definition of Strike: Includes "mass casual leave" within its scope to prevent sudden strikes and ensure lawful action.
Decriminalization and Compromise: Minor offenses have been made compoundable with monetary penalties, which promotes compliance rather than prosecution.
Digital Processes: Enables electronic record-keeping, registration, and communication for transparency and efficiency.

Code on Social Security, 2020
Key Highlights
Expanded ESIC (Employees' State Insurance) coverage: ESIC will now be applicable pan-India, eliminating the "notified areas" criteria. Establishments with fewer than 10 employees can voluntarily opt in with mutual consent between employers and employees. Coverage will be mandatory for hazardous occupations and extended to plantation workers.
Time-bound EPF (Employees' Provident Fund) investigations: A five-year deadline has been set for initiating EPF investigations and recovery proceedings, which must be completed within two years (extendable by one year). Suo motu reopening of cases has been eliminated, ensuring timely resolution.
Reduced EPF Appeal Deposit: Employers appealing against EPFO ​​orders will now have to deposit only 25% of the assessed amount (previously 40-70%), reducing the financial burden and improving ease of doing business and access to justice.
Self-Assessment for Construction Cess: Employers can now self-assess cess liabilities for building and other construction work, which was previously assessed by a notified government authority. This reduces procedural delays and official interference.
Inclusion of Gig and Platform Workers: New definitions have been included to enable social security coverage – “aggregator,” “gig worker,” and “platform worker.” Aggregators will be required to contribute 1-2% of annual turnover (limited to 5% of payments made to such workers).
Social Security Fund: A dedicated fund has been proposed to finance schemes covering life, disability, health, and old-age benefits for unorganized, gig, and platform workers. Amounts collected through compounding of crimes will be deposited into this fund and utilized by the government.
Expanded Definition of Dependents: Coverage has been extended to maternal grandparents and, in the case of female employees, to include dependent parents-in-law, thereby broadening access to family benefits.
Uniform definition of wages: "Wages" now includes basic pay, dearness allowance, and retaining allowance; 50% (or such percentage as may be notified) of total remuneration will be added to the calculation of wages, ensuring consistency in the calculation of gratuity, pension, and social security benefits.
Inclusion of travel accidents: Accidents occurring while traveling between home and workplace are now considered employment-related, making them eligible for compensation.
Gratuity for fixed-term employees: Fixed-term employees become eligible for gratuity after one year of continuous service (previously five years).
Inspector-cum-Facilitator System: Random web-based, algorithm-driven inspections have been introduced to ensure transparency and comprehensive compliance. Inspectors now act as facilitators to support compliance and reduce harassment.
Decriminalization and Monetary Penalties: The Code replaces imprisonment with monetary fines for certain offenses. Employers will be given a mandatory 30-day notice for compliance before any legal action is taken.
Compounding of Offenses: First-time offenses punishable by fines can be compounded—for offenses punishable only with fines: 50% of the maximum penalty, and for cases involving fine/imprisonment: 75% of the maximum penalty—thereby reducing litigation and improving ease of doing business.
Digitization of Compliance: Mandates electronic maintenance of records, registers, and returns, thereby reducing costs and improving efficiency.
Reporting of Vacancies: Employers will report vacancies to designated career centers before recruiting, thereby promoting transparency in employment opportunities.

Occupational Safety, Health and Service Conditions Code 2020:
Key Highlights
Unified Registration: A uniform threshold of 10 employees has been set for electronic registration. A single registration for an establishment is now envisaged, replacing the six registrations previously envisaged in the Acts. This will create a centralized database and promote ease of doing business.
Extension to Hazardous Work: The government can extend the provisions of the Code to any establishment with even a single employee, provided the establishment is engaged in hazardous or life-threatening occupations.
Simplified Compliance: A one-license, one-registration, and one-return framework has been introduced for establishments, reducing redundancies and compliance burden.
Expanded Definition of Migrant Workers: The definition of inter-state migrant workers (ISMWs) now includes workers who are employed directly, through contractors, or migrate on their own. Establishments will be required to declare the number of ISMWs. Benefits include: a one-time annual travel allowance for travel to the place of origin once in 12 months and portability of public distribution system and social security benefits across states, as well as access to a toll-free helpline.
Health and formalization: Free annual health check-up for employees.
Formalization through appointment letters: Appointment letters specifying job description, wages, and social security will be issued to enhance transparency and accountability.
Employment of women: Women can work in all types of establishments and during night hours (before 6 a.m., after 7 p.m.) with consent and safeguards, promoting equality and inclusion.
Expanded media worker definition: "Working journalists" and "cine workers" now include employees employed in all forms of electronic media and audio-visual production.
National Database for Unorganized Workers: A national database for unorganized workers, including migrant workers, will be developed to help with job placement, mapping their skills, and providing other social security benefits.
Victim Compensation: In cases of injury or death, courts may direct at least 50% of the fine imposed to be paid as compensation to the victims or their legal heirs.
Contract Labor Reforms: The applicability limit has been increased from 20 to 50 contract workers. Contractors will be granted an all-India license valid for 5 years, instead of a work-order-based license. For contract labor, beedi and cigar manufacturing, and factories: a common license is envisaged, and a provision for an honorary license after the expiry of a specified period has been introduced. Furthermore, licenses will be automatically generated. The provision for a Contract Labor Board has been abolished, and a provision for the appointment of a designated authority to advise on core and non-core activities has been introduced.
Safety Committees: Establishments with 500 or more workers will form safety committees with employer-worker representation, enhancing workplace safety and shared accountability.
National Occupational Safety and Health Advisory Board: A single tripartite advisory board will replace the six previous boards to set national safety and health standards across sectors, ensuring uniformity and quality.
Decriminalization and Compounding of Offenses: Offenses punishable only by fines will be compounded by paying 50% of the maximum fine; offenses involving imprisonment or fines, or both, will be compounded by paying 75%. Criminal penalties (imprisonment) have been replaced with civil penalties such as monetary fines, which promote compliance rather than punishment.
Revised Factory Limits: Applicability has been increased from 10 to 20 workers (with electricity) and from 20 to 40 workers (without electricity), reducing the compliance burden for smaller units.
Social Security Fund: A fund has been established for the welfare and benefit distribution of unorganized workers, which will be funded through penalties and settlement fees.
Contract Labor - Welfare and Wages: Principal employers must provide welfare facilities, such as health and safety measures, to contract workers. If the contractor fails to pay wages, the principal employer must pay the unpaid wages to contract labor.
Working Hours and Overtime: Normal working hours are limited to 8 hours per day and 48 hours per week. Overtime will be permitted only with the worker's consent and will be paid at double the regular rate.
Inspector-cum-Facilitator System: Inspectors will now act as facilitators, helping employers comply with laws, rules, and regulations, rather than solely policing.