The introduction of four New Labour Codes introduced by the Government of India represents a significant step towards reforming and strengthening labour laws in India. The Code on Wages was enacted by the Parliament in August 2019, followed by the Industrial Relations Code in September 2020. Similarly, the Code on Social Security and the Occupational Safety, Health, and Working Conditions Code were also enacted by the Parliament in September 2020. These legislative actions signify a comprehensive effort to reform and streamline labor laws, addressing various aspects related to wages, industrial relations, social security, and occupational safety and health. The synchronized enactment of these codes demonstrates a holistic approach toward creating a more coherent and contemporary framework for labor regulations in the country.
The landmark decision to consolidate 29 laws into four codes is a historic step toward providing women with not only job security but also respect, health, and various welfare measures. Through these labor reforms, there is a clear commitment to creating an environment that prioritizes the well-being of women in the workforce. Additionally, these changes are expected to significantly enhance the ease of doing business in the country, streamlining regulations and fostering a more conducive environment for both employers and employees. This forward-looking approach not only supports gender equality but also contributes to the overall economic development and business efficiency in the nation.
In this comprehensive reform, the government seeks to ensure that all workers have a statutory right to receive minimum wages and timely wage payments, fostering a more equitable and prosperous labour environment. To reduce ambiguity and legal disputes, these codes introduce uniform and straightforward definitions of ‘wages’ across all four labour-related regulations. Furthermore, the introduction of annual health check-ups and medical facilities aims to improve the overall well-being of workers, enhancing productivity and extending life expectancy.
These reforms also formalize the employment relationship by requiring the issuance of appointment letters to every employee, ultimately providing job security and enabling workers to claim statutory benefits such as minimum wages and social security. Additionally, the creation of a Re-skilling Fund demonstrates the government’s commitment to the skill development of workers, aligning with the changing demands of the job market.
Furthermore, the codes recognize the importance of addressing the needs of gig workers and platform workers by defining them and paving the way for the formulation of social security schemes funded by aggregators and government sources. This inclusive approach extends the benefits of the Employees’ State Insurance Corporation and the Employees’ Provident Fund Organization to unorganized workers, gig workers, and platform workers, along with their families.
The reforms also ensure that fixed-term employment (FTE) workers are entitled to the same benefits as permanent employees, promoting fairness and job security. Workers’ rights are further enhanced with provisions for annual leave with wages and the option to encash leave on demand, offering flexibility and financial security.
Moreover, the expansion of the Employees’ Provident Fund to all industries, irrespective of their scheduling, underscores the government’s commitment to improving social security and labour welfare across various sectors. In sum, these labour codes represent a transformative and forward-looking effort to foster a more inclusive, secure, and prosperous work environment for all workers in India.
The four Labour Codes aim to enhance worker protection, including those in the unorganized sector, by ensuring statutory minimum wages, social security, and healthcare. Some significant provisions of these Codes include:
- Establishing a statutory right for all workers to receive minimum wages and timely wage payments to support sustainable development and inclusivity.
- Introducing a consistent and easily enforceable definition of ‘wages’ across all four Labour Codes to prevent multiple interpretations and legal disputes.
- Providing annual health check-ups and medical facilities to enhance worker productivity and increase life expectancy.
- Requiring the issuance of appointment letters to every employee, formalizing employment contracts, increasing job security, and enabling workers to claim statutory benefits such as minimum wages and social security.
- Establishing a Re-skilling Fund for worker skill development.
- Defining gig workers and platform workers to create social security schemes, funded by aggregators and other sources, with contributions from both the Central and State Governments.
- Allowing the Central Government to extend benefits to unorganized workers, gig workers, platform workers, and their families through the Employees’ State Insurance Corporation and the Employees’ Provident Fund Organization.
- Granting fixed-term employment (FTE) workers entitlement to the same benefits available to permanent employees, including gratuity after one year of service.
- Ensuring that every worker is entitled to annual leave with wages after working for 180 days, compared to the current requirement of 240 days. Additionally, there is a provision for leave encashment on the worker’s request while in service at the end of the calendar year.
- Expanding the applicability of the Employees’ Provident Fund to all industries, as opposed to only scheduled industries as it stands presently.
Major Achievements of New Labour Codes are as follows –
- As of December 2023, the Shram Suvidha Portal has successfully generated 4,268,334 Labour Identification Numbers (LIN). Furthermore, inspection reports for 821,283 cases have been uploaded onto the portal, reflecting the ongoing efforts to monitor and manage labor-related activities.
- The eSHRAM portal has been established with the aim of building a National Database of Unorganized Workers, incorporating Aadhaar details to facilitate the provision of social security benefits. Eligibility for registration on the eSHRAM portal is open to any worker operating in the unorganized sector with an age ranging from 16 to 59. This database encompasses a diverse range of workers, including migrant workers, construction workers, gig workers, platform workers, and more. As of December 2023, a noteworthy achievement has been reached, with a total of 29,23,93,908 e-cards issued through the portal, marking a significant step in the coverage and support for unorganized workers across the nation.
- As of October 2023, the All India Consumer Price Index Number for Industrial Workers (CPI-IW) has experienced a rise of 0.9 points, reaching a value of 138.4 (one hundred thirty-eight point four). In terms of the one-month percentage change, there has been a 0.65% increase compared to the previous month. This is in contrast to the 0.91% increase recorded during the corresponding months of the previous year. These figures provide insights into the fluctuations in the cost of living and inflationary trends affecting industrial workers in India.
- As part of the Nidhi Aapke Nikat 2.0 initiative, the Employees’ Provident Fund Organization (EPFO) extended its outreach to stakeholders across all districts of the country. The monthly ‘Nidhi Aapke Nikat’ program held on April 27th, 2023, covered 666 districts with 27,592 participants. The focus was on addressing grievances, resulting in 12,437 reported issues, of which 9,816 were successfully resolved. This effort underscores EPFO’s commitment to increasing accessibility, visibility, and resolving concerns for its stakeholders nationwide.
- As part of the celebration of Azadi Ka Amrit Mahotsav (AKAM), the Employees’ Provident Fund Organization (EPFO) has initiated a special drive to promote the filing of e-nominations by its members. In the month of September 2023, a notable achievement was reached with the filing of 3.40 lakh e-nominations. Cumulatively, as of September 30, 2023, a total of 2.07 crore e-nominations have been successfully filed, reflecting the widespread participation of members in utilizing the digital nomination process facilitated by EPFO. This effort aligns with the organization’s commitment to modernize processes and enhance member convenience.
- The provisional payroll data released by EPFO in November 2023 reveals a positive trend, indicating the addition of 891,583 net subscribers during the month of September 2023. This data underscores the ongoing growth and engagement within the Employees’ Provident Fund Organization, with a substantial number of individuals being added to the workforce during the specified period.
- As part of the ‘Prayaas’ initiative, the field offices of EPFO have been actively distributing Pension Payment Orders (PPOs) to members of the Employees’ Pension Scheme 1995 on the day of their superannuation. Until September 30, 2023, the field offices conducted a total of 6,751 webinars to promote and educate stakeholders about the Prayaas initiative. Furthermore, during the month of September 2023 alone, 403 PPOs were successfully handed over to subscribers, highlighting the commitment of EPFO to streamline processes and enhance member services through proactive initiatives like Prayaas.
- As part of the efforts to boost employment generation and mitigate the socio-economic impact of the Covid-19 pandemic, the Ministry of Labour & Employment introduced the EPFO-linked Aatmanirbhar Bharat Rojgar Yojana (ABRY) scheme on December 30, 2020. As of September 23, 2023, a total of 1,52,452 establishments have likely participated in the scheme, contributing to the broader objective of fostering economic recovery and job creation in the wake of the pandemic.
In this article, we will delve into some of the vital provisions and implications of these groundbreaking New Labour Codes, shedding light on their potential to improve the lives of countless workers across India.
4 New Labour Codes – a revolutionary approach to protecting the interests of workers
Labour laws in India had their origins in the British Raj, but over time, many of these laws had become obsolete and ineffective. Instead of safeguarding workers’ interests, some of these outdated labour codes had hindered their progress.
In response to this, the then-current government recognized the need to eliminate redundant or irrelevant labour laws. Consequently, the 29 existing labour laws were streamlined and consolidated into 4 new labour codes, a move that was expected to bring significant benefits to all stakeholders.
Benefits of New Labour Code
- Right to Minimum Wages for Everyone
4 labour laws are amalgamated into the Minimum Wage Code which has provided the “right to minimum wages” for the first time.
Labour Code (Wage Code) – 2019
- For the first time since India’s independence, the government is actively working towards providing wage security, social security, and health security to workers in both organized and unorganized sectors.
- The assurance of minimum wages extends to workers in both organized and unorganized sectors.
- Review of minimum wage rates every five years.
- Workers will get timely payment of their wages as a guaranteed right.
- Male and female workers will receive equal remuneration for their work.
- Approximately 400 million unorganized workers now have the right to a minimum wage, a significant development.
- The introduction of a floor wage aims to eliminate regional disparities in minimum wage levels.
- Determining minimum wages has been simplified by basing it on criteria like skill level and geographical locUnder National Data Governance Policy, GoI to set up 1 hundred labs in order to develop applications using 5G services in engineering institutions to realize a new range of opportunities, business models, and employment potential.
- Increased wage ceiling from Rs 18,000 to Rs 24,000 in FY 28-08-2017.
- Social Security for Everyone
In order to guarantee security for all workers, the Central Government consolidated nine Labour Laws into the Social Security Code. This step was taken to safeguard workers’ rights to insurance, pensions, gratuity, maternity benefits, and more.
Through this Code, a comprehensive legal framework for Social Security was established, ensuring that workers could fully access social security benefits.
Under this initiative, a systematic approach was put in place for contributions from both employers and workers. Additionally, the government had the capacity to subsidize contributions from workers in disadvantaged sections.
Social Security Code, 2020
- By making a nominal contribution, individuals can access the privilege of receiving free medical treatment at ESIC hospitals and dispensaries.
- The accessibility of ESIC will now be extended to workers across all sectors, including those in the unorganized sector.
- The expansion of ESIC hospitals, dispensaries, and branches will now reach the district level, extending this service from the existing 566 districts to cover all 740 districts in the country.
- ESIC benefits are extended to any worker involved in hazardous work, even if it’s just a single worker.
- Platform and gig workers in emerging technology fields have the opportunity to join ESIC.
- Plantation workers to get benefit of ESIC.
- Institutions operating in hazardous areas are required to undergo mandatory registration with ESIC.
Expansion of Social Security
- The pension scheme (EPFO) benefits will be extended to workers in both organized and unorganized sectors, including those who are self-employed.
- A social security fund is being established to deliver all-encompassing social security support to the unorganized sector.
- The necessity for a minimum service requirement to receive gratuity has been eliminated for fixed-term employees.
- Fixed-term employees are entitled to receive the same social security benefits as permanent employees.
- The establishment of a national worker database for the unorganized sector will be achieved through registration on a dedicated portal.
- Employers with a workforce of over 20 employees are required to submit job vacancies online.
- A Universal Account Number (UAN) will be introduced to cover ESIC, EPFO, and workers in the unorganized sector.
- A Universal Account Number (UAN) based on Aadhaar to ensure effortless portability.
- Right of Security to Workers in All Situations
To enhance workplace safety and occupational health for workers, the Occupational Safety, Health, and Working Conditions Code, 2020 has consolidated 13 existing labour laws. This Code prioritizes safeguarding the interests of workers in various sectors, including factories, mines, plantations, the motor transport industry, bidi and cigar workers, as well as contract and migrant workers.
OSH Code (Occupational, Safety, Health, Working Condition) – 2020
- Numerous provisions within the OSH Code will improve the living conditions and well-being of Inter-State Migrant Workers.
- The OSH Code has effectively resolved the discrepancies present in the Inter-State Migrant Workers Act, 1979. In the past, only workers hired by a contractor were acknowledged as Inter-State Migrant Workers. However, the updated provisions in the Code empower workers to become self-reliant by allowing them to self-register as Inter-State Migrant Workers on the national portal. This registration grants them a legal identity, enabling access to the benefits of various social security schemes.
- An arrangement has been put in place for employers to offer an annual travel allowance to Inter-State Migrant Workers for their round-trip journey to their hometown.
- Mandatory issuance of appointment letters to workers has been implemented.
- Employers are required to provide workers with a mandatory and cost-free annual health check-up.
- Workers engaged in construction and related activities, working in one state and relocating to another state, will receive benefits from the Building and other Construction Workers’ Cess fund.
- The “One Nation – One Ration Card” initiative ensures that an Inter-State Migrant Worker can access ration benefits in the state where they are employed, while the rest of their family can avail these benefits in the state where they reside.
- A national database will be established for Inter-State Migrant Workers.
- Now, if a worker has worked for 180 days, they will be entitled to one day of leave for every 20 days of work completed, instead of the previous requirement of 240 days.
Women Empowerment Through New Labour Codes in India
- Women workers have the right to work in all categories of establishments.
- Women now possess the right to work during nighttime with their consent, and employers must ensure adequate safety and facilities for women workers during night shifts.
- In 2017, amendments were made to the Maternity Benefit Act to extend paid maternity leave for female workers from 12 weeks to 26 weeks and mandate the availability of crèche facilities in all establishments employing 50 or more workers.
- Industrial Relations (IR) Code
Through the amalgamation of three Labour Laws into the Industrial Relations Code, the Central Government has taken measures to protect the interests of both Trade Unions and workers. This Code encompasses various provisions aimed at ensuring the harmony and minimizing potential disputes between industrial units and workers in the future.
Towards the end of disputes (Industrial Relations Code) –
- In the event of job loss, workers will be eligible for benefits under the Atal Bimit Vyakti Kalyan Yojna.
- The Atal Bimit Vyakti Kalyan Yojna offers financial assistance to organized sector workers who lose their jobs, serving as a form of unemployment allowance. This benefit is available to workers enrolled in the ESI Scheme.
- During the retrenchment process, workers will receive 15 days’ worth of wages dedicated to re-skilling. These wages will be directly deposited into the worker’s bank account, facilitating their ability to acquire new skills.
- Accelerated delivery of justice to workers via the Tribunal.
- Resolution of workers’ disputes in the Tribunal within one year.
- Industrial Tribunals will consist of two members to expedite the resolution of cases.
- In industrial establishments, a Trade Union that secures 51 percent of the votes will be acknowledged as the exclusive negotiating union with the authority to engage in agreements with employers.
- In industrial establishments where no trade union garners 51 percent of the votes, a negotiating council of trade unions will be formed to facilitate agreements with the employer.
Welfare of Inter-State Migrant Workers
The government has devoted considerable effort to enhance the welfare of Inter-State Migrant Workers. Measures have been implemented to fortify the legal framework concerning these workers.
For the benefit of Inter-State Migrant Workers and those in need, the Central Government has expedited various schemes, such as Garib Kalyan and the delivery of free food grains to households.
Benefits of Codification
- Single Registration; Single License; Single Statement; Minimum Forms
- Common definitions
- Reduction of Committees
- Web-based surprise inspection
- Use of technology – Electronic registration and licensing
- Reduction of compliance cost and disputes
Impact of New Labour code
The impact of the new Labour Codes in India is multifaceted and has several implications for the labour landscape, the economy, and society as a whole:
- Enhanced Worker Protection: The introduction of statutory rights to minimum wages and timely wage payments provides workers with financial security, reducing the risk of exploitation and poverty among the labour force. This can lead to improved living standards for a significant portion of the population.
- Formalization of Employment: Requiring employers to issue appointment letters formalizes employment relationships, increasing job security and ensuring that workers can claim their rightful benefits. This formalization can lead to more stable employment conditions for workers.
- Skill Development: The creation of a Re-skilling Fund emphasizes the importance of keeping the workforce up to date with evolving job market demands. This can lead to a more skilled and adaptable labour force, contributing to economic growth.
- Inclusion of Gig Workers: Recognizing and providing social security benefits to gig and platform workers acknowledges the changing nature of work. This can improve the working conditions and welfare of a significant segment of the workforce.
- Equal Treatment for Fixed-Term Employees: Ensuring that fixed-term employees receive the same benefits as permanent employees promotes fairness in employment practices and job security for a wider range of workers.
- Improved Health and Well-being: The provision for annual health check-ups and medical facilities enhances workers’ overall health and productivity. Healthier workers tend to be more efficient and have a longer work life, contributing to economic growth.
- Streamlined Definitions and Regulations: The introduction of uniform definitions of ‘wages’ simplifies compliance for employers and reduces legal disputes. This can lead to more efficient labour market operations and less administrative burden for businesses.
- Social Security Expansion: Extending social security benefits to unorganized workers, gig workers, platform workers, and their families provides a safety net for a larger portion of the workforce. This can reduce economic vulnerabilities and improve social welfare.
- Promotion of Gender Equality: Provisions promoting gender equality can empower women to participate more actively in the labour force, potentially leading to increased economic output and improved social inclusivity.
- Economic Growth and Productivity: Overall, the Labour Codes can contribute to economic growth by ensuring a more efficient and inclusive labour market. With a protected and skilled workforce, businesses can operate more effectively, leading to increased productivity and, in turn, economic growth.
- Reduced Administrative Burden: Simplifying regulations and compliance can reduce the administrative burden on businesses, making it easier for them to focus on growth and expansion.
- Legal Clarity: The Labour Codes bring about legal clarity with standardized definitions and regulations. This can reduce legal disputes and lead to a more predictable and stable labour environment.
- Improved Working Conditions: The codes have provisions for better working conditions and safety, ensuring that workers are healthier and more motivated, which can lead to improved productivity.
The introduction of the Labour Codes in India represents a significant step toward reforming labour laws and has far-reaching implications for workers, employers, and the broader economy. The impact is expected to be positive, promoting better labour conditions, inclusivity, and economic growth. However, the successful implementation and enforcement of these codes will be critical to realizing these potential benefits fully.
In conclusion, the introduction of the four Labour Codes in India represents a transformative step towards reforming and strengthening labour laws in the country. These codes, which include the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health, and Working Conditions Code, 2020, are not only significant in their scale but also in their potential to create a more equitable, secure, and prosperous work environment for all.
These codes address various aspects of labour rights and welfare, with a primary goal of safeguarding the interests of workers, especially those in the unorganized sector. Some of the notable provisions include the establishment of a statutory right to minimum wages and timely wage payments, simplified definitions of ‘wages’ to reduce ambiguity, annual health check-ups and medical facilities to enhance worker well-being, and the mandatory issuance of appointment letters to formalize employment relationships.
Additionally, these codes recognize the changing nature of work and the emergence of gig workers and platform workers in new technology sectors. They lay the groundwork for social security schemes for these workers, funded through contributions from aggregators and government sources. This inclusivity extends the benefits of social security to unorganized workers, gig workers, and platform workers, along with their families.
Moreover, the codes promote fairness and job security by ensuring that fixed-term employment (FTE) workers are entitled to the same benefits as permanent employees. Workers are also granted enhanced rights, such as annual leave with wages and the option to encash leave. The extension of the Employees’ Provident Fund to all industries, irrespective of their scheduling, further underscores the government’s commitment to improving social security and labour welfare.
These labour codes are not just an exercise in legal reform; they signify a comprehensive shift towards better protection, security, and welfare for all workers in India. They aim to reduce disputes, ensure faster resolution of labour issues, and provide social security for workers across various sectors and backgrounds. By streamlining and consolidating labour laws, they reduce the compliance burden and contribute to economic and social development.
Furthermore, the specific focus on Inter-State Migrant Workers and women workers adds an essential dimension to these reforms. Provisions for Inter-State Migrant Workers enable them to gain legal identity and social security benefits, while women workers are granted rights to work at night with safety measures in place. The extension of maternity leave and mandatory crèche facilities underlines the commitment to women’s empowerment.
In essence, the four Labour Codes represent a holistic and forward-looking approach to labour reform. They aim to protect the interests of workers, reduce disputes, and promote social security and well-being. As India continues to evolve and diversify its labour force, these codes offer a promising foundation for a more inclusive, equitable, and secure work environment for all its workers. They signify a significant stride towards progress and prosperity in the labour sector, aligning with the nation’s aspirations for sustainable growth and inclusivity.
Written & Compiled by CA Sunil Kumar Gupta
Founder Chairman, SARC Associates