LABOUR LAW REFORMS IN INDIA

Reasons for Labour Law Reforms

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1. Presence of multiple labour laws in the country: 144 laws for labour protection leading to more
confusion in arbitration. There were many contradictory elements in labour laws that were
leading to delays in judgments and decision making.
2. Laws were becoming outdated, unable to cater to changing labour market with changing

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technology and economy. A new law was needed to assure better returns without hampering
the employment generation. Eg: No provisions for gig workers, weak rules for migrant labour
(Migrant Labour Act 1979).
3. Industrial Dispute settlement was too time consuming and therefore discouraged employment
of labours. This also encouraged substituting labour with capital, further aggravating
employment generation.
4. Poor Contract Labour Act promoted informal employment through oral contracts which
discriminated against the workers. It was designed in a manner that it did not allow for
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contractual labour beyond certain industries and it also restricted employment of contractual
labour to not more than 10% of total labour force. Hence, the seasonal employers tend to
employ workers on oral contracts which were accepted by labourers due to their weak
bargaining power. The process lead to exploitation of workers and informal employment.
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5. Arbitrary powers with labour inspectors and their less number lead to more corruption than
safety. The rules were ill- defined which gave a lot of discretion in the hands of labour inspectors
resulting in harassment of employers.
6. It discouraged growth of industries and employment generation beyond a limit by a firm for fear
of being covered under Industrial Disputes Act (IDA- Employing more than 100 workers would
bring employers under the Act). Laws like IDA encouraged informalisation and dwarfism.

To avoid these problems, 4 Labour Codes were introduced by the Government of India. The codes were
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passed as follows, ie converted into Acts:

2019  Wage Code

2020  Industrial Relations Code; Social Security Code; Occupational Safety, health and working
conditions at workplace Code

Steps Taken to improve Labour Conditions under these Acts:

Wage Code

1. It combines provisions of multiple laws like Equal Remuneration Act, Minimum Wages Act,
Payment of Wages Act etc into a single rule. This gives clarity to employers and employees.
2. It also gives proper definition to wages and makes a rule that other payments cannot be more
than 50% of wages. The purpose of doing this is to easily identify the inequality in wages.
3. Wage payment has to be equal for equal work in all categories
4. Separate definition for worker and employee. Employee is taken as a larger set. Eg: Now
Consultancy providers will also be taken as a part of employee group.)

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5. There will be a floor wage or a minimum wage which will be common to entire economy.
Central govt will declare a national minimum wage. State govt can declare their minimum wage
equal to above the national minimum wage. This floor wage will be applicable to even
unorganized sector workers. This gives protection to workers.
6. There will be no wage limit for application of labour laws. Earlier laws restricted to Rs 10,000.

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Thus now, every employee will get recognition and get security.
7. Defines Contractual work and contract labour

Industrial Relations Act

1. Covers all industrial disputes, except charitable institutions and Non Profit Institutions
2. Disputes to be resolved in specially appointed industrial tribunals
3. Covers all labour, including domestic labour, non formal workforce, contractual labour.
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4. Provisions FIXED TERM EMPLOYMENT, which is permanent time bound contract to workers who
will receive all social security like normal workers. The purpose is to facilitate contract labour in
India. The worker will qualify to get social security net irrespective of term of contract. (Earlier
the minimum term limit for social security was 6 months. The companies were thus incentivized
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to deliberately keep the contract term to less than 6 months or oral contract.
5. The retrenchment laws are well specified. Eg: Workers can be retrenched if they are destructing
property in campus, without any remuneration.
6. It specifies increased ceiling on wage payment. The purpose is to attract good talents
7. Rules on strikes are well specified like conditions of strike, 14 days advance notice period to
management (no strike allowed during negotiations), negotiations etc. It assures that firms
would not face sudden strikes.

Social Security Code

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1. It defines aggregators (covers all types of employers), defines employees (includes gig workers,
platform workers, unorganized sector workers)
2. Onus on the firms/ employers to recognize all the workers and all workers above 16 years of age
should register on government portal to get recognition. If a firm hires a worker who is not
registered on the portal, it will be held guilty.
3. All benefits like Employees Provident Fund (10% of wage), Employees Insurance, Social Safety,
Gratuity to be paid to all workers.
Occupational Safety, health and working conditions at workplace Code (OSH Code)

1. For legal purposes, it defines contract labour, employee, employer, establishment etc. It also
defines hazardous process, health threat, threat to mental stability etc
2. It puts responsibility on employer to provision health safety in contention with worker’s
requirement.
3. It gives right to workers to demand safety standards and health benefits and report to Inspector
cum Facilitator in case of violation

Benefits from Law

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1. Reduces multiple laws
2. Defines each point which will improve interpretation
3. Specifies Rules of retrenchment which will make industrial relations better

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4. Promotes formal contract and long term contracts, which will also encourage employee’s
training
5. Identifies gig workers and platform workers and unorganized workers, which will add to their
social security.
6. Defines health hazards , safety hazards and sets protocol to assure worker’s safety
7. Provisions for Facilitator and Inspector to improve industrial relation
8. Increases scope of Industrial Disputes Act by only including firms employing more than 300
workers, promoting growth of employment in medium scale enterprises
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Challenges inspite of Labour Codes
1. Oral Contracts wherever done will remain exploitative
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2. Portal to recognize unorganized workers has not been established, which should have been
done with formation of law
3. Employers can violate labour’s rights by continuous negotiations to prevent strikes
4. Ensuring the implementation of law in spirit is a big challenge
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Way Forward
1. Educate the worker about their rights and the employers should also be informed about the
labour codes to ensure its implementation in spirit
2. Uplift the position of workers in informational sector
3. Create Tribunals for industries in a faster manner
4. Sensitising the Facilitator cum Inspector about the significance of implementation of the laws in
spirit
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