India’s labour law landscape has undergone a major transformation with the introduction of the Industrial Relations Code, 2020 (IR Code). This reform consolidates and simplifies existing laws to improve ease of doing business while also aiming to protect workers’ rights. In this blog, we’ll break down the key changes in simple, practical language, so both employers and employees can clearly understand what has changed and what it means for them.
What is the Industrial Relations Code, 2020?
The Industrial Relations Code, 2020 is one of the four labour codes introduced by the Government of India. It replaces three earlier laws:
- Industrial Disputes Act, 1947
- Trade Unions Act, 1926
- Industrial Employment (Standing Orders) Act, 1946
The goal is to streamline dispute resolution, regulate trade unions, and simplify compliance.
Why Was This Code Introduced?
The previous labour laws were:
- Complex and overlapping
- Difficult for businesses to comply with
- Time-consuming during disputes
The new code aims to:
- Improve industrial harmony
- Encourage investment and job creation
- Provide clarity in employer-employee relationships
Key Changes Under the Industrial Relations Code, 2020
1. New Threshold for Standing Orders
Earlier, companies with 100 or more workers had to define formal employment rules (standing orders).
Now, the threshold has been increased to 300 workers.
Impact:
- Employers: Less compliance burden for smaller firms
- Employees: Fewer workers covered under formal service rules
2. Fixed Term Employment (FTE) Formalized
The code officially recognizes fixed-term employment across sectors.
What this means:
- Employers can hire workers for a specific duration
- Fixed-term employees get same benefits as permanent workers (like wages, allowances, etc.)
Impact:
- More flexibility for employers
- Better protection for contract-based workers
3. Stricter Rules for Strikes and Lockouts
Workers must now give 14 days’ notice before going on strike, even in non-public utility services.
Similarly, employers must follow rules before lockouts.
Impact:
- Reduces sudden disruptions
- Encourages dialogue before conflict
4. Reskilling Fund for Retrenched Workers
A new Reskilling Fund has been introduced.
- Employers must contribute 15 days’ wages for each retrenched worker
- This fund is used to support skill development
Impact:
- Helps workers transition to new jobs
- Adds responsibility for employers
5. Higher Threshold for Layoffs, Retrenchment, and Closure
Earlier, companies with 100+ employees needed government approval for layoffs or closure.
Now, this applies only to companies with 300+ employees.
Impact:
- Employers: More flexibility in managing workforce
- Employees: Reduced job security in mid-sized companies
6. Recognition of Negotiating Union/Council
The code introduces the concept of a negotiating union:
- If a union has 51% or more workers, it becomes the sole negotiating body
- Otherwise, a negotiating council is formed
Impact:
- Streamlines communication
- Reduces inter-union conflicts
7. Faster Dispute Resolution
The IR Code promotes:
- Use of Industrial Tribunals
- Time-bound dispute resolution
Also allows voluntary arbitration.
Impact:
- Faster resolution of disputes
- Reduced litigation burden
8. Re-skilling & Worker Welfare Focus
Apart from the reskilling fund, the code emphasizes:
- Worker welfare
- Industrial peace
- Balanced employer-employee relations
Key Benefits of the IR Code
For Employers:
- Simplified compliance
- Greater flexibility in hiring and layoffs
- Reduced legal complexity
For Employees:
- Equal benefits for fixed-term workers
- Structured dispute resolution
- Reskilling opportunities
Challenges and Concerns
While the code brings many reforms, some concerns remain:
- Reduced job security due to higher thresholds
- Limited coverage for small establishments
- Potential imbalance in employer-employee power
Want to dive deeper? Check out this resource for more insights.
