Call Us Now

+91 9606900005 / 04

For Enquiry

16th February 2021 – Editorials/Opinions Analyses


  1. Death trap

Editorial: Death trap


  • Thousands of workers in Tamil Nadu’s famed fireworks industry remain trapped in unsafe conditions despite an unending series of accidents that keeps drawing attention to their plight. In the latest accident at a fireworks unit in Virudhunagar, at last count, 20 lives have perished, while 28 workers are in hospital.


  • GS Paper 3: Indian Economy (issues: planning, mobilisation of resources, growth, development, employment); Inclusive growth and issues therein.

Mains questions

  1. Labour reforms and technological advances within the fireworks industry are necessary. Discuss the statement, in context of labour code in India.
  2. The new code appears to be designed to deter collective action by workers’ unions, and make them fearful of getting trapped in the cross hairs of the new, supposedly “simplified” code. Comment. 15 marks

Dimensions of the Article

  • Overview of labour reforms in India
  • Objectives of labour reforms.
  • Consolidations of labour laws.
  • Issues related to new labour laws
  • Way forward

Overview of labour reforms in India

Labour falls under the Concurrent List of the Constitution.  Therefore, both Parliament and state legislatures can make laws regulating labour.  

  • The central government has stated that there are over 100 state and 40 central laws regulating various aspects of labour such as resolution of industrial disputes, working conditions, social security and wages.
  • The Second National Commission on Labour (2002) (NCL) found existing legislation to be complex, with archaic provisions and inconsistent definitions.
  • To improve ease of compliance and ensure uniformity in labour laws, the NCL recommended the consolidation of central labour laws into broader groups such as (i) industrial relations, (ii) wages, (iii) social security, (iv) safety, and (v) welfare and working conditions.

Objective of the Labour reforms

Labour is a concurrent list subject, thus there is multiplicity of laws at Centre and the State levels. Amidst this, the focus of labour reforms should be twin-fold: to promote creation of formal sector jobs, and to not stifle employers by over-protection of workers.

  • Consolidation and simplification of numerous States’ and Centre labour laws.
  • Streamlining of Minimum Wages in the country and ensuring they reach the beneficiaries.
  • Introduction of fixed term employment, to curb tendency for employing (socially insecure) contract labour.

Consolidations of the labour laws

The 2nd National Commission of labour had recommended simplification, amalgamation and rationalisation of Central Labour Laws. In 2019, the Ministry of Labour and Employment introduced four Bills on labour codes to consolidate 29 central laws.  These Codes regulate: (i) Wages, (ii) Industrial Relations, (iii) Social Security, and (iv) Occupational Safety, Health and Working Conditions.

Labour Code on Wages , 2019: Key Provisions

  • The Code will apply to any industry, trade, business, manufacturing or occupation including government establishments.
  • Wages include salary, allowance, or any other component expressed in monetary terms. This will not include bonus payable to employees or any travelling allowance, among others.
  • It differentiates the central and State Jurisdiction in determining the wage related decision for establishment such as Railways Mines and oil fields.
  • A concept of statutory National Minimum Wage for different geographical areas has been introduced. It will ensure that no State Government fixes the minimum wage below the National Minimum Wages for that particular area as notified by the Central Government.

Why Labour code on Wages is needed?

  • It arises in the absence of statutory National Minimum Wage for different regions, which impedes the economic prospect.
  • It seeks to consolidate laws relating to wages by replacing– Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976.

Labour Code on Industrial Relations: Key Provisions

  • It increases the employee limit from 100 to 300 above which, the government approval is needed for layoff/retrenchment/closure. This provision has been criticized sharply by the labour groups and trade unions.
  • It provides that 10% of workers shall apply (be applicant) for registering a trade union – this has also invited opposition from various worker groups and trade unions.
  • For employers employing < 50 employees, the requirement to provide a minimum of 1 months’ notice and retrenchment compensation (severance) is to be removed.
  • The threshold for negotiating council of trade unions have been reduced from 75% workers as members to 51% of workers.
  • Workers may apply to the Industrial Tribunal in case of dispute – 45 days after the application

Why Labour code on Industrial Relations is needed?

  • It aims to create greater labour market flexibility and discipline in labour – to improve upon ease of doing business and also to encourage entrepreneurs to engage in labour-intensive sectors. It would replace three laws i.e. Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947.

Labour Code on Social Security & Welfare: Key Provisions

  • Definition of employee and categorization of workers covers all kinds of employment including part-time workers, casual workers, fixed term workers, piece rate/ commission rated workers, informal workers, home-based workers, domestic workers and seasonal workers.
  • A proper percentage-based structure for contribution, vis-à-vis socio economic category and minimum notified wage, has been put in place under the Code.
  • It introduces new approaches to ensure a transparent and fair financial set up, such as,
    • Time bound preparation of Accounts within six months of the end of the financial year;
    • Provision for social audit of social security schemes by State Boards after every five years;
    • Accounts of Intermediate Agencies to be subject to CAG Audit on the same lines as that of Social Security Organizations.
  • Wage Ceiling and Income Threshold: The term ‘wage ceiling’ is for the purpose of determining a maximum limit on contribution payable; whereas the term ‘income threshold’ is for the purpose of enabling the government to provide for two different kind of schemes (for same purpose) for two different class of workers.
  • Contribution Augmentation Funds would be established through which governments could contribute to the social security in respect of workers who are unable to pay contribution.
  • National Stabilization Fund will be used for harmonizing the Scheme Funds across the country and will be managed by the Central Boards.

Why Labour code on Social Security and Welfare is needed?

  • Almost 90% of the current workers are not covered under any social security.
  • The current thresholds for wage and number of workers employed for a labour law to be applicable creates tenacious incentives for the employers to avoid joining the system which results in exclusions and distortions in the labour market.

Labour Code on Occupational Safety, Health & Working Conditions: Key Provisions

  • Centre has been empowered to prescribe standards on occupational safety and health
  • Annual health check to be made mandatory in factories and its charge will be borne by the employers
  • Appointment letters for all workers (including those employed before this code), underlying their rights to statutory benefits.
  • At least 50% of penalty levied on employers could go towards providing some relief to families of workers who die or are seriously injured while working.
  • National Occupational Safety and Health Advisory Board at national level and similar bodies at state level, have been proposed to recommend standards on related matters. · Appointment of facilitators with prescribed jurisdiction for inspection, survey, measurement, examination or inquiry has been proposed.
  • Mandatory license for every contractor who provides or intends to provide contract labour. Also, license is needed for industrial premises as well.

Why Labour Code on Occupational Safety, Health & Working Conditions, is needed?

  • The proposed code is the first single legislation prescribing standards for working conditions, health and safety of workers and it will apply on factories with at least 10 workers.
  • It will amalgamate 13 labour laws including the Factories Act, 1948; the Mines Act, 1952; the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996; the Contract Labour (Regulation and Abolition) Act, 1970 etc.

Issues related to New Labour Code:

  • According to Indiaspend’s analysis, the new codes may impact the number of permanent jobs in seasonal factories – which will result in a decline in wages, benefits and work conditions and reduced accountability for companies.
  • The report points out that as per the Bills’ fixed-term contracts clause, there will be a reduction in the number of permanent jobs and that the ambiguity on the definition of ‘trade unions’, may lead to diluting working rights.
  • With unclear terms for short-term workers, Indiaspend’s report argues that states will have more authority on lay-offs. As per the International Labour Organisation, at least 41 lakh people in the country have lost their jobs while the Centre for Monitoring the Indian Economy (CMIE) estimated 2.1 crore salaried jobs were lost following the lockdown.
  • Under the new Industrial Relations Code, a trade union can be deregistered for contravention of unspecified provisions of the code. It simply says that deregistration would follow in case of “contravention by the Trade Union of the provisions of this Code”. The possibility of deregistering a trade union in this unspecified manner shifts the balance completely in favour of employers, who continue to enjoy protection under the Companies Act. This violates the principles of equality before the law and of natural justice.

Way forward

The New Labour Codes try to bring balance between facilitating employment growth and protecting workers rights. The government should address the apprehensions of trade unions give more voice to workers so they can live their life with dignity.

December 2023