India’s New Labour Codes: A Transformational Shift for Workers and Employers

 

India’s New Labour Codes: A Transformational Shift for Workers and Employers

India has consolidated 29 outdated labour laws into four modern, simplified labour codes. These codes aim to strengthen worker protections, reduce compliance burdens on businesses, and create a more dynamic labour market that supports investment, including foreign direct investment (FDI), and job creation.

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Key Benefits for Workers

1. Mandatory Appointment Letter

Every worker must now receive a formal appointment letter, ensuring:

1. Clear terms of employment

2. Transparency regarding wages, duties, and work conditions

2. Universal Minimum Wages

Earlier, minimum wages applied only to certain scheduled sectors.
Under the new framework:

1. A national floor wage is introduced

2. States must set their minimum wages above this national benchmark

3. All workers, across all sectors, are covered

3. Timely Wage Payment

Clear timelines for salary disbursement ensure worker protection:

1. Daily wage workers: end of the working day

2. Monthly wage workers: within 7 days of the next month

3. No gender discrimination, including for transgender persons

4. Universal Social Security

Social security benefits now extend to:

1. Unorganised workers

2. Migrant workers

3. Gig and platform workers

4. Contract and fixed-term workers

Benefits include:

1. Pension

2. Life and disability insurance

3. Health coverage

4. Maternity benefits

5. Accident insurance

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Reforms for Gig, Platform, and Unorganised Workers

1. First-Ever Legal Recognition

Gig and platform workers (including those at Ola, Uber, Swiggy, Zomato etc.) are legally defined for the first time.

2. Social Security Fund Based on Aggregator Contributions

Digital platforms/aggregators must contribute:

1. 1–2% of annual turnover, capped at 5% of payments made to workers

3. Delivery of Benefits

Social security benefits will be enabled through:

1. Aadhaar-linked bank accounts

2. The nationwide e-Shram portal

3. A national helpline

4. Dedicated social security boards for unorganised workers

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Simplified Compliance for Employers

1. Unified Registration and Licensing

Multiple registrations are merged into:

1. A single registration

2. A single return filing system

3. Licenses valid across the country

2. Decriminalisation of Several Offences

Many offences now carry monetary penalties instead of criminal charges.

3. Introduction of the “Facilitator”

The traditional inspector role is reformed into:

1. Inspector-cum-Facilitator, encouraging guidance rather than penal action

4. Full Digitalisation of Processes

All approvals, inspections, registrations, and filings shift to:

1. Online portals

2. Web-based inspection systems

This is especially beneficial for MSMEs.

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Labour Market Flexibility with Job Security

1. Legalisation of Fixed-Term Employment (FTE)

Companies can directly hire workers for:

1. Seasonal work

2. Project-based roles

3. Time-bound tasks

Benefits for FTE workers include:

1. Leave

2. Maternity benefits

3. Gratuity if employed for one year, even if not permanent

2. Higher Threshold for Retrenchment/Closure Approval

The threshold for mandatory government approval is raised:

1. From 100 workers to 300 workers

This change aims to:

1. Reduce under-reporting of workforce size

2. Encourage formal hiring

3. Reduce dependency on contract labour

However, protections remain:

1. Notice period

2. Compensation for each completed year of service

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Measures to Boost Women’s Participation

1. Women Can Work in All Occupations

Restrictions on women working in specific sectors or at night are removed, provided:

1. They consent voluntarily

2. Employers ensure safety measures such as:

   1. Transport

   2. CCTV surveillance

   3. Security staff

2. Crèche Facilities

Mandatory crèche facilities for establishments with 50+ employees, regardless of gender.

3. Enhanced Representation

Women must comprise one-third of key boards and grievance-redressal committees, ensuring:

1. Better policy voice

2. Stronger support for workplace grievances

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Conclusion

India’s four labour codes represent one of the most comprehensive reforms in its labour regulatory framework. By combining stronger worker protections with simpler, digital, and more transparent compliance systems, the codes aim to create a labour market that is both fair and competitive.

The reforms are expected to:

1. Improve working conditions

2. Expand social security coverage

3. Encourage formalisation of jobs

4. Support business growth and investment

5. Increase workforce participation, especially among women

In essence, the new labour codes seek to balance economic growth with social protection, shaping a more inclusive future of work in India.