Why is this in news?
- 21 November: Union Labour Ministry announced the implementation of all four labour codes — Wages (2019), Industrial Relations (2020), Social Security (2020), OSHWC (2020).
- Trade unions across the spectrum (CTUs, sectoral federations) have opposed the notification, demanding withdrawal.
- The opposition centres on hire-and-fire, dilution of collective bargaining, weakening of social security, and higher thresholds that exclude workers.
Relevance
GS2 – Governance
• Major governance reform: consolidation of 29+ labour laws into 4 unified Codes.
• Centre–State friction: centralisation of powers (floor wage, licensing thresholds).
• Weak tripartism: minimal consultation with trade unions; no Indian Labour Conference since 2015.
• Regulatory overhaul: single registration, digital compliance, inspector-cum-facilitator model.
• Collective bargaining diluted: restrictive strike provisions, unclear union recognition.
GS2 – Social Justice
• Impact on 93% informal workforce due to raised thresholds in OSHWC.
• Limited social security expansion; current coverage only ~7%.
• First statutory recognition of gig/platform workers but thin protections.
• Precarity from fixed-term employment; women’s night-shift permissions with safety concerns.
What are the Four Labour Codes?
- Code on Wages, 2019: Merges 4 laws (Minimum Wages Act, Payment of Wages Act, Bonus Act, Equal Remuneration Act).
- Industrial Relations Code, 2020: Combines Industrial Disputes Act, Trade Unions Act, Industrial Employment (SO) Act.
- Code on Social Security, 2020: Merges 9 social security laws (EPF, ESI, Maternity Benefit Act etc.).
- OSHWC Code, 2020: Combines 13 safety & working condition laws.
Why did the Government Propose Codification?
Argument by R. Mukundan (industry perspective)
- Fragmentation of 40+ central laws, 100+ State laws → compliance burden, duplication.
- Outdated legislation dating to 1940s–50s; workforce structure transformed (gig/platform, logistics, e-commerce).
- Need for uniformity: definitions, thresholds, inspection systems.
- Objective: Job creation, ease of doing business, attracting global supply chains (comparison with Vietnam, S. Korea).
- Simplification + digitisation of compliance = predictability and reduction in disputes.
- Formalisation push: extending minimum wages + social security to new categories (gig/platform workers).
- Labour market flexibility (fixed-term employment, higher retrenchment threshold, women in all shifts) aligned with global trends.
Why Are Trade Unions Opposed?
Labour Union perspective
- Loss of historical rights gained through workers’ struggles (hours, wages, safety, collective bargaining).
- Centralisation of powers: States lose authority; Centre can fix floor wages and override minimum wage structure.
- Fixed-term employment → legalised hire & fire; weakens job security and unionisation.
- Higher thresholds in OSHWC Code:
- Factory license threshold increased from 10→20 workers with power, 20→40 without power → excludes many MSME workers.
- Social security dilution:
- Only ~7% of workforce currently covered (EPFO/ESIC).
- Codes won’t realistically cover 93% informal workforce, only selectively gig/platform.
- Lack of consultation:
- PM assured in 2015 Indian Labour Conference that no labour law would be amended without unions.
- Codes passed in Parliament without full debate or union participation.
- Collective bargaining diluted:
- Stricter strike notice, recognition of unions unresolved, and bargaining councils absent.
- Fear of industrial unrest due to unilateral reforms.
Core Contestations
A. Minimum Wages and Floor Wage
Industry view :
- Principle agreed; issue is methodology and implementation, not the idea.
- Wages must reflect regional cost of living, sectoral differences, inflation adjustment, productivity link.
Union view :
- Floor wage fixed by Centre may become ceiling for States → dilution of States’ power.
- Codes weaken the concept of living wage (ILO upheld).
- By increasing thresholds, millions fall outside minimum wage protection.
B. Social Security Expansion
Industry view :
- Codes aim to cover 40 crore workers, including informal, gig/platform, fixed-term employees.
- Organised sector prepared; MSMEs need handholding.
Union view :
- Ambitious but unrealistic:
- Current coverage ≈ 7%; infrastructure cannot handle a dramatic jump.
- Gig/platform workers are only a small subset of informal workers.
- Existing EPF/ESI/Maternity Benefit frameworks being dumped into new structure without clarity.
- No universal social protection architecture; budgetary support absent.
C. Industrial Relations, Strikes, and Hiring/Firing
Industry view :
- Reforms necessary for competitiveness; industries undergoing tech disruption (AI, automation).
- Enhancements in:
- Notice period
- Retrenchment compensation
- Reskilling fund for displaced workers.
Union view :
- Hire & fire legitimised:
- Retrenchment threshold raised from 100 → 300 workers (State can even increase further).
- Right to strike restricted:
- 60-day notice, 14-day pre-strike period; wider essential services interpretation.
- Recognition of trade unions unclear → weak collective bargaining.
D. Occupational Safety and Working Conditions
Industry view:
- Harmonised standards + modernised safety norms + women in all shifts = modern workforce policies.
Union view:
- Higher thresholds → millions excluded from OSH, health checks, crèche facilities.
- Informal workers remain unprotected.
E. Investment Attraction
Industry view:
- Predictability + uniformity → positive signal to investors.
- Global competition demands flexible labour systems.
- Labour reforms only one part of larger investment ecosystem (infrastructure, taxation).
Union view:
- Unrest + weakened worker protections diminish productivity and stability.
- FDI did not significantly rise even after liberalisation of insurance, defence, etc.
- Risk of neo-colonial dependency via investment-driven negotiations (India–US bilateral treaty concerns).
Structural Assessment: Are the Labour Codes Labour-Friendly?
Strengths
- Simplification of 40+ laws → improved clarity.
- Digital compliance, fewer inspections → reduces harassment.
- Formalisation intent: inclusion of gig/platform workers for first time.
- Women’s labour force participation may benefit (night shift permissions with safeguards).
- Potential ease of doing business → job creation argument (contested).
Weaknesses
- Exclusion of large workforce through raised thresholds.
- Weak collective bargaining → industrial harmony claim questionable.
- Fixed-term employment → precarious work; high turnover; unionisation decline.
- Floor wage may become de facto maximum.
- Universal social security goal remains largely aspirational without fiscal commitment.
- Democratic deficit in drafting: no Indian Labour Conference since 2015.
Evaluation
Labour-friendly elements
- Extends formal recognition to gig/platform workers.
- Aims to reduce compliance burden → possible employment growth.
- Harmonisation across States → clarity for firms + workers.
- Safety code modernises standards (though coverage limited).
Not labour-friendly elements
- Threshold increases exclude millions from protection.
- Hire & fire flexibility without strong social security backup = risk of insecurity.
- Dilution of right to strike and collective bargaining.
- Limited coverage expansion, despite claims of 40 crore; administrative machinery inadequate.
- Minimal consultation undermines tripartism (key ILO principle).
Final Verdict
- The codes are employer-friendly in structure but worker-friendly in stated intention.
- They aim for flexibility-first, protection-second, whereas global best models (Nordic, EU) rely on protection-first, flexibility-with-security.
- Without:
- universal minimum wage enforcement
- budget-backed social security
- strong unions/collective bargaining
the reforms risk creating a dual labour market — formal sector flexibility without adequate safety nets.
