Labour laws: The future of labour codes depends on the rules we write today

It is good to see the Government of India gather the required political will to notify the labour codes on November 21, 2025 that were passed in 2019 and 2020. India thus stands on the threshold of a major shift in labour governance. The four new labour codes now duly notified promise to simplify compliance, widen social security coverage, reduce the compliance burden and modernise labour relations.

However, these promises will only be realised if the rules to be framed by the Union and state governments are clear, practical and geared towards effective implementation of these codes. Without thoughtfully designed rules, even the most well-intentioned legislation can falter. The 'first best' solution would, of course, be if the same set of rules were to be applicable across all the states. That alone will ensure a seamless national labour market, which will greatly facilitate labour mobility and skill availability wherever these are needed. However, the first best is not always possible in our federal democracy, in which states have to respond to their own particular political circumstances. The second best can be efficiently designed if the finalisation of the rules by the Central Government, expected by March 2026, is preceded by a sustained and cohesive round of consultations between the Central and state governments. This may ensure that subsequent notification of rules by the states is designed within a common framework.

The new codes replace 29 existing labour laws. Once they come into force, the real work begins: drafting and finalising rules that translate the broad provisions of the codes into actionable procedures for employers and benefits for workers.

Rules are where policy meets daily practice. They determine how returns are to be filed, how inspections will be carried out, what records employers must maintain and how disputes will be resolved. They shape whether workers can access social security benefits without bureaucratic hurdles and whether small enterprises can comply without being overwhelmed. In short, the success or failure of the labour codes depends not merely on the legislation but on the administrative architecture built through the rules.

The challenge is substantial. India has more than 63 million enterprises, most of which are micro or small units that lack administrative capacity for complex compliance. For them, compliance must be simple, digital and predictable. If rules introduce ambiguity or complex layers of reporting, they will impose costs that could drive firms back into informality. Clear thresholds, simple procedures and user-friendly digital systems are crucial if the codes are to reduce the compliance burden rather than add to it.

At the same time, India has a vast informal workforce that remains outside the ambit of formal social protection. The Code on Social Security has the potential to change this, but only if rules enable seamless registration, portable benefits and low-friction access. If workers are required to navigate complicated paperwork, travel to offices or depend on intermediaries, the promise of universal social security will remain unfulfilled. The rules must, therefore, be designed around the lived experiences of workers, not the convenience of administration.

Another key area where rules will be decisive is dispute resolution. The Industrial Relations Code introduces new mechanisms, including negotiations with unions, and redefines thresholds for layoffs and retrenchment. However, unless the rules set clear timelines, transparent procedures and fair mechanisms for both parties, industrial disputes may only become more drawn out. Predictability is essential for both workers and employers: workers must have confidence that their grievances will be heard, and employers must know that compliance will protect them from arbitrary proceedings.

For safety and working conditions too, the rules must recognise the realities of India's diverse sectors. The needs of a construction site, a textile factory and a technology start-up are very different. One-size-fits-all compliance requirements will either dilute safety or over-regulate. The Occupational Safety, Health and Working Conditions Code provides a broad framework, but it is the rules that will decide whether workplaces become genuinely safer or whether compliance becomes a mere procedural formality.

Digital implementation is another area where rules must provide clarity. The vision of a unified labour compliance system can only be realised if the rules mandate interoperability, shared databases and minimisation of duplicate filings. Workers' data must be portable across states and employers. Employers must not be required to upload the same information multiple times for different departments. The rules should explicitly mandate integration rather than leaving it to future administrative orders.

Equally important is ensuring that the rules are framed through a transparent and consultative process. When the draft rules for the codes were released, stakeholders raised concerns about ambiguities, impractical requirements and incomplete procedures. These inputs must not be treated as mere formalities. The government must hold inclusive consultations with trade unions, industry bodies, labour experts and civil society organisations. A rule book drafted without ground-level understanding risks creating more problems than it solves.

Ultimately, labour reform is not an event but a process. Legislation sets direction, but rules determine impact. If the rules strike the right balance between flexibility and protection, India can create a labour market that is more formal, more productive and more equitable. If the rules are rushed, unclear or overly complex, implementation will falter and trust in the reforms will erode.

The new labour codes present an opportunity to reshape the world of work for the next generation. India's workforce is young, energetic and aspirational. They deserve a light-touch regulatory framework that effectively protects their rights, supports their growth and encourages investment and innovation. The rules we write today will determine whether this opportunity is realised or lost.

As the government moves towards final notification, it must remember: good laws matter, but good rules matter even more. Effective implementation will be the real test of India's labour reforms, and that test will be won or lost in the fine print.

Rajiv is the Chairman of Pahlé India Foundation and Former Vice-Chairman, NITI Aayog while Ankeetaa Mahesshwari is a Fellow at Pahlé India Foundation, a Delhi based think-tank; views are personal