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[India] India's Labour Law Overhaul: A Look at the Incoming Labour Codes

In 2019, the Ministry of Labour and Employment of India introduced four bills which proposed to combine twenty-nine existing labour laws into four codes, aiming to modernize and simplify labour regulation in India. The four introduced codes were, the Code on Wages, 2019 (the “Code on Wages”); the Industrial Relations Code, 2020 (the “IRC”); the Code on Social Security, 2020 (the “Code on Social Security”); and the Occupational Safety, Health and Working Conditions Code 2020 (the “OSHWC”). 

These codes were quickly passed in both houses of India’s bicameral parliament and enacted. However, the notification for their enforcement is still pending. This delay was initially due to the ongoing overhaul of state rules and the need for stakeholder consultations. However, it is now also being influenced by the consideration of the political consequences ahead of the 2024 general elections.

The four codes are not simply a compilation of existing laws but, also a reform of the labour law framework in India. The broad consensus has been that the new laws are more employer friendly than employee friendly. This is a shift from the welfare-oriented labour laws of the past to creating a more holistic business friendly environment in India, some of the notable changes within the law include:

Employer Friendly Changes

  • Reduced scope of applicability: The new labour regime increases the employee threshold for applicability under OSHWC, approximately doubling to tripling the previous thresholds of the underlying laws.

  • Single registration for multiple laws: A single registration has replaced all other registrations that were present in the underlying laws of the OSHWC.

  • Decriminalization: An overall decriminalization of general offences in the labour regime, however, this has been accompanied by significantly higher monetary penalties.

  • Digital records: Labour-related records and registers can now be maintained digitally.

  • Bonus obligations: In the case of a dismissal of an employee due to conviction in a sexual harassment matter, bonus obligations previously due are no longer required to be paid.

Employee Friendly Changes

  • Further Inclusion of different workers: Widened the definition of contract labour, to include migrant workers and now provides for social security to gig workers.

  • Reduction in daily working hours: Daily non-overtime working hours have been reduced from nine to eight while maintaining the weekly working hours limit of forty-eight.

  • Allowing women to work night shifts: Women are allowed to work night shifts under the OSHWC, provided adequate safeguards are taken by the employer.

  • Favorable leave policy: The OSHWC now allows for leave encashment when the leave balance of a worker exceeds thirty days.

  • Wage payment: As per the Code on Wages, any employee who is removed, dismissed, retrenched, or resigns shall be paid wages within two working days.

While these changes introduce some ambiguities in the law, it is anticipated that these will be resolved through additional rules or judicial interpretations that come about. The new labour codes are an update to an age-old legislation that was operating in India, the move to simplify the complex labour law regime is a promising development that seeks to reduce the cost doing of business in India.

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