Introduction: Why New Labour Codes?
For decades, India's labour market was governed by a complex web of central and state laws, many of which were archaic and hindered economic growth. To simplify this framework, improve the ease of doing business, and enhance social security for workers, the Government of India has consolidated 29 central labour laws into four comprehensive codes. This move represents one of the most significant economic reforms in recent years and is a crucial topic for the UPSC Civil Services Examination, particularly for GS Paper-II (Governance) and GS Paper-III (Indian Economy).
The primary objectives of these labour codes are:
- To simplify and rationalise complex labour legislation.
- To facilitate easier compliance for industries, thereby promoting investment.
- To expand social security coverage to the unorganised sector.
- To ensure minimum wages for all workers and strengthen their rights.
A Breakdown of the Four Labour Codes
Let's delve into the key provisions of each of the four codes.
1. The Code on Wages, 2019
This code amalgamates four laws related to wages and bonuses. Its goal is to universalise the provisions for timely payment of wages and minimum wages for all workers, irrespective of the sector or wage ceiling.
- Universal Minimum Wage: Introduces a statutory floor wage to be set by the Central Government, which states cannot set their minimum wages below. This aims to reduce regional disparities.
- Definition of 'Wage': Provides a uniform definition of 'wage', which is expected to reduce litigation and compliance costs for employers.
- Timely Payment: Stipulates the timely payment of wages to all employees.
- Gender Neutrality: Prohibits gender discrimination in matters related to wages and recruitment.
2. The Industrial Relations Code, 2020
This code consolidates three major laws governing industrial disputes, trade unions, and conditions of employment. It aims to improve the business environment by providing greater flexibility to employers.
- Increased Threshold for Layoffs: Companies with up to 300 workers (previously 100) will not require government permission for layoffs, retrenchment, or closure. This is a major change aimed at improving flexibility.
- Fixed-Term Employment (FTE): Legalises fixed-term employment, allowing employers to hire workers directly for a fixed duration. Such workers will be eligible for statutory benefits like social security on a pro-rata basis.
- Trade Unions: A single trade union will be designated as the sole negotiating union if it has the support of 75% of workers, aiming to streamline negotiations.
- Strike Regulations: Workers must give a 14-day notice before a strike, making it more difficult to call sudden strikes.
3. The Code on Social Security, 2020
This code subsumes nine laws related to social security and aims to extend benefits to all employees and workers, including those in the unorganised sector.
- Universal Social Security: A key objective is to provide a social security net for gig and platform workers (e.g., drivers for ride-hailing apps, delivery personnel).
- Social Security Fund: Proposes the creation of a national social security fund for unorganised workers, gig workers, and platform workers.
- Registration: Mandates the registration of all workers, including gig and platform workers, on an online portal to access benefits.
- Definitional Clarity: For the first time, it defines terms like 'gig worker', 'platform worker', and 'unorganised worker'.
4. The Occupational Safety, Health and Working Conditions (OSH) Code, 2020
This code consolidates 13 laws regulating the health, safety, and working conditions of workers across various sectors, including factories, mines, and construction.
- Broader Coverage: Expands the definition of a 'factory' and covers establishments with 10 or more workers.
- Rights of Workers: Grants every worker the right to have a safe workplace and empowers them to remove themselves from a situation they believe poses an imminent danger to their life or health.
- Inter-State Migrant Workers: Provides a specific definition for inter-state migrant workers and includes provisions for their welfare, including a journey allowance and an option to avail benefits of the public distribution system.
- Safety Committees: Mandates the formation of safety committees in certain establishments to promote a culture of workplace safety.
Significance and Potential Benefits of the Reforms
- Ease of Doing Business: Simplification from over 29 laws to 4 codes will reduce the compliance burden on companies, potentially attracting more investment.
- Formalisation of Economy: By extending social security and defining gig/platform workers, the codes aim to bring more of the informal workforce into the formal economy.
- Boost to Employment: The flexibility in hiring and firing (especially the increased threshold in the IR Code) is intended to encourage companies to hire more workers.
- Protection for Workers: The universalisation of minimum wage and social security are landmark steps towards protecting the rights and welfare of all workers.
Criticisms and Concerns
Despite the potential benefits, the labour codes have faced significant criticism from trade unions and labour experts.
- Dilution of Worker Rights: Critics argue that the increased threshold for layoffs gives companies arbitrary power to 'hire and fire', undermining job security.
- Weakening of Trade Unions: The stringent conditions for calling a strike and the rules for recognising a single negotiating union are seen as measures to weaken the collective bargaining power of workers.
- Implementation Challenges: The success of the codes, especially the social security provisions for gig workers, depends heavily on the creation of robust databases and effective implementation by the state governments.
- Ambiguity: Certain definitions and clauses remain open to interpretation, which could lead to future disputes and litigation.
The Way Forward
The new labour codes represent a paradigm shift in India's labour law landscape. While they hold the promise of creating a more dynamic and formalised economy, their success hinges on a balanced and careful implementation. The government must engage in continuous dialogue with all stakeholders—industry, trade unions, and state governments—to address the genuine concerns raised. Creating a robust IT infrastructure for the registration and delivery of social security benefits to unorganised workers is paramount. Ultimately, the goal should be to strike a delicate balance between promoting economic growth and protecting the fundamental rights and welfare of India's vast workforce. For UPSC aspirants, understanding this balance is key to forming a nuanced and comprehensive perspective on this critical reform.