New labour codes: The reordering of Indian labour relations

India’s sweeping consolidation of labour laws into four Labour Codes marks one of the most consequential shifts in the country’s economic governance. The reforms promise streamlined compliance and modernised regulation. But is not the state moving away from its role as protector of labour toward a business facilitator in a market still dominated by informality, stagnant wages, and weak bargaining power

Code on Social Security extends social security benefits like insurance and pensions to gig and platform workers

Few legislative transformations in recent Indian history have been as consequential or as surreptitiously executed as the consolidation of 44 central labour laws into four Labour Codes. The Codes on Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions were passed with limited deliberation. Their architects described them as a long-overdue rationalisation, a simplification of an unwieldy regulatory thicket, and an instrument for ease of doing business.

Their critics described them as the most fundamental redrawing of the relationship between labour, capital, and the state since Independence. Carefully assessed, beneath the technical language of harmonisation lies a historic shift: the state that positioned itself as a guarantor of workers' rights now appears increasingly to function as a facilitator of employer prerogatives.

The Indian labour market into which these Codes have entered is one of unusual structural distress. According to the Periodic Labour Force Survey for 2024, the all-India labour force participation rate stood at roughly 56 per cent, with female participation in urban areas at a striking 25.8 per cent. The India Employment Report 2024, published by the International Labour Organisation, found that nearly 82 per cent of the workforce remains in the informal sector and almost 90 per cent in informal employment, a proportion that has scarcely moved in the past decade. Real wages for regular workers have stagnated or declined since 2019, and a majority of casual workers in agriculture and construction did not receive the prescribed daily minimum wage. Against this backdrop, the question is not whether the Codes contain commendable provisions, but whether their architecture can meaningfully reach the workforce that most needs them.

Consider the most-discussed innovation: a four-day workweek with 12-hour shifts. In a knowledge economy or a well-regulated factory, this offers welcome flexibility. In an industrial milieu where compliance with the eight-hour standard is itself uneven, the formalisation of a twelve-hour day risks becoming the new norm rather than a voluntary alternative. The recent wildcat workers' action in Noida, where workers protested twelve-hour, seven-day workweeks and monthly wages of eleven to twelve thousand rupees, is a sobering reminder of what flexibility can look like when bargaining power is absent.

The redefinition of wages, intended to ensure a fairer base, will produce mixed effects. By including basic pay, dearness allowance, and retaining allowance, while excluding house rent and conveyance, the Codes seek to prevent the suppression of provident fund and gratuity contributions through allowance-heavy structures. For many salaried workers, this will mean higher long-term retirement benefits and a meaningfully larger statutory cushion. For employers, it will mean higher immediate liabilities, likely passed on through restructured cost-to-company packages, modestly reduced take-home pay, and slower hiring at the margin. The transition will be uncomfortable but defensible. The deeper concern lies elsewhere in the economy, where the formal salaried workforce is a minority. The architecture of wage protection still leaves the majority of Indian workers, such as daily wagers, agricultural labourers, domestic workers, and the truly informal, so to speak, beyond its operative reach.

The treatment of gig and platform workers illustrates both the ambition and the limits of the new framework. Their formal recognition under the Code on Social Security, with provisions for contributory schemes funded partly by aggregator platforms, is a genuinely path-breaking development. Few major economies have legislated explicitly for this category. Yet the entitlements remain framed in the conditional voice. The government "may" notify schemes; aggregators "shall" contribute at rates yet to be finalised. As scholars analysing the Codes have observed, the gap between statutory recognition and justiciable entitlement remains wide, and the absence of a clear definition of the employer-employee relationship leaves platform workers vulnerable to algorithmic management without the bargaining tools that traditional employment confers.

On industrial relations, the Codes raise the threshold for prior governmental approval of lay-offs and retrenchments from 100 to 300 workers, and require a 14-day notice for strikes alongside automatic conciliation. The intent is to enable smoother corporate decision-making and to discourage disruptive industrial action.

The effect, as critics across the political spectrum have noted, is a meaningful tilt in bargaining leverage towards employers in an environment where union density is already below two per cent of the enterprise workforce. A genuine reform agenda might have paired flexibility with strengthened collective bargaining, perhaps through sectoral wage boards or stronger recognition mechanisms. The Codes have chosen flexibility without any counterweight.

Common definitions, fewer registrations, unified returns, and the reconstitution of inspectors as facilitators reduce regulatory friction in ways that small and medium enterprises have long demanded. Whether this translates into greater employment generation is less certain. The empirical evidence linking labour-law flexibility to job creation in India is mixed at best, and the binding constraints on Indian employment growth, such as weak demand, capital-intensive production, the absence of sufficient mid-skilled jobs, and the rural-urban divide in opportunity, lie largely beyond the labour code framework.

The Indian Constitution, in its directive principles, envisions the state as an active agent in securing humane working conditions, a living wage, and workers’ participation in the management of industry. These commitments do not bind the legislature in a strict legal sense, but they articulate a moral horizon. To move steadily away from that horizon, in the name of efficiency or competitiveness, is to alter the implicit compact between citizen and state. Labour, in the Indian constitutional imagination, was a domain of dignity, of social belonging, and of democratic participation, not just a market input. The Codes, whatever their administrative virtues, mark a retreat from that vision. Whether the Indian republic chooses to recover it or to ratify its erosion will shape not only its labour relations but also its larger understanding of what economic citizenship is meant to mean. India requires a sustained politics of labour: Investment in skilling, demand-side stimulation of formal job creation, mechanisms for genuine collective bargaining, and an extension of social protection that does not stop at statutory recognition but reaches the worker on the construction site, in the field, and at the delivery doorstep.

New Labour Codes

These codes   were made effective on November 21, 2025, with an aim to balance the welfare of the workforce with industrial growth.  These codes replace numerous fragmented acts like the Minimum Wages Act (1948), Factories Act (1948), and Industrial Disputes Act (1947). 

Code on Wages (2019):

Establishes a universal minimum wage for all employees in both organised and unorganised sectors. It introduces a “floor wage” set by the central government, below which state-fixed minimum wages cannot fall.

Industrial Relations Code (2020)

Streamlines rules for trade unions, strikes, and dispute settlements. It raises the worker threshold for requiring government approval for layoffs and closures from 100 to 300 workers.

Code on Social Security (2020)

Extends social security benefits like insurance and pensions to gig and platform workers for the first time. It also makes fixed-term employees eligible for pro-rata gratuity after just one year of service, down from five.

Occupational Safety Code (2020)

Sets uniform safety standards and mandates free annual health check-ups for certain employees. It also legally allows women to work night shifts across all establishments with their consent and mandatory safety measures. 

Prof. Manoj Kumar Jha Member of Parliament (Rajya Sabha) Rashtriya Janata Dal; Views presented are personal.