Labour codes
Indian Labour Policy - Nani A Palkhivala
June 2023
Recognizing compulsory woman worker
Labour participation rate
By: - Centre for Monitoring Indian Economy - March 2022
- Rural women - 9.92%,
- Rural men - 67.24%
November 2025
Labour code into force
The Centre has brought all four Labour Codes into force from November 21, rationalizing 29 old laws to improve worker welfare, and simplify rules for businesses and support a 'future ready workforce'.
4 Codes
- The Code on Wages (2019)
- Industrial Relations Code (2020)
- Code on Social Security (2020)
- Occupational Safety, Health and Working Conditions Code (2020)
Reason for the change
Most of India’s labour laws were created between the 1930s and 1950s, when economic structures and work patterns were very different.
Benefits of labour reforms across key sectors
Fixed Term employees (FTE)
- FTEs will receive the same benefits as permanent staff, including leave, medical and social security coverage.
- Gratuity eligibility after one year of service instead of five.
- Ensures equal wages
- Reduces excessive use of contract labour
Gig and platform workers
- Definition for 'gig work', 'platform work' and 'aggregators' introduced for the first time
- Aggregators will contribute 1-2% of annual turnover, capped at 5% of payments made to gig and platform workers.
- Aadhaar linked universal account number will enable full portability of benefits across states.
Contract workers
- FTE norms will improve employability and social security
- Gratuity available after one year of continuous service
- Principal employers must provide social security and health benefits
- Workers will receive a free annual health checkup
Women workers
- Gender discrimination prohibited under law
- Equal pay for equal work ensured
- Women allowed to work night shifts and in all sectors including under ground mining, with consent and safety measures
- Mandatory women's representation in grievance committees
- Family definition expanded to include parents - in - law
Youth and entry level workers
- Minimum wage guaranteed
- Workers must receive appointment letters
- Employers must pay wages during leave
- Central government will set the floor wage
MSME workers
- All eligible workers covered under Social Security code
- Minimum wage, basic facilities, standard working hours, and double overtime
- Timely payment of wages mandated
Beedi and Cigar workers
- Minimum wages ensured
- Work hours capped at 8-12 hours per day and 48 hours per week
- Over time must be voluntary and paid at double the normal rate
- Bonus eligibility after 30 days of work in a year
Additional reforms
- National floor wage to ensure a minimum living wage
- Gender neutral opportunities
- Protection against discrimination including for transgender persons
- Single license, single registration and single return for simplified compliance
- National OSH board to create a harmonised safety and health standards
- Mandatory safety committees in establishments with over 500 workers
- Higher applicability limits for factories to reduce small unit compliance burden Business Standard
Firms disincentivised for recruitment
Regulations which have to do with firm size, for instance, have tended to limit the emergence of large firms, especially in labour intensive manufacturing sectors. With firms disincentivised to expand and hire more workers, it has led to too few firms scaling up - as per a study by ICRIER, a majority of firms in the manufacturing sector have less than 10 workers. This had implications for manufacturing and formal job creation.
Workers have thus trapped in a low productivity jobs.
Capital intensive and labour saving
The growing capital intensity of production, - the India Employment Report, 2024 - "the production process increasingly become capital intensive and labour saving" - is at odds with a labour abundant economy. 1
1,536 - 69,233 - 6,618 - Compliance 3.0
A firm in India typically needs to comply with provisions under 1,536 acts, fulfill 69,233 compliances and complete 6,618 filings at various levels of government - Teamlease report, "Compliance 3.0" 1
Reforms undertaken at state levels
Complementing the centre's deregulation push, which includes revoking the quality control orders recently - 16 states have implemented 38 reforms. This includes land, labour, licensing reforms, and decriminalisation of offences.
Union Budget 2025-26
The Union Budget 2025 - 2026, had spoken about regulatory reforms, "especially in matters of inspection and compliances".
