The New Labour Codes Explained in Simple Terms

Key Takeaways

The Government of India has consolidated 29 labour laws into 4 comprehensive Labour Codes.
The objective of this major reform is to:
- Simplify compliance
- Modernise outdated provisions
- Promote ease of doing business
- Strengthen rights, protections, and welfare for workers

The Four Labour Codes:

Understanding the Four Labour Codes

1. Code on Wages, 2019

This Code merges four earlier laws:

Minimum Wages Act 1948
Payment of Wages Act 1936
Payment of Bonus Act 1965
Equal Remuneration Act 1976

Key Changes

A “floor wage” has been introduced, ensuring no state fixes wages below this benchmark.
Minimum wages apply across both organised and unorganised sectors.
Gender-neutral wage protection, that is, no discrimination based on gender or transgender identity.
Overtime must be paid at least twice the standard rate.
Labour inspectors now serve as “Inspector-cum-Facilitators,” focusing on guidance and compliance support instead of only enforcement. Know more

2. Industrial Relations Code, 2020

This Code combines:

Trade Unions Act 1926
Industrial Employment (Standing Orders) Act 1946
Industrial Disputes Act 1947

Key Changes

Fixed-term employment is formally recognised, with equal wages and benefits as permanent employees.
Fixed-term employees become eligible for gratuity after one year of continuous service.
The requirement of government approval for retrenchment, closure, and layoffs is increased from 100 to 300 workers, with states permitted to increase the limit further.
Dispute settlement strengthened through two-member industrial tribunals, enabling faster resolution. Know more

3. Code on Social Security, 2020

Brings together nine existing social security laws, including:

EPF Act 1952
ESI Act 1948
Maternity Benefit Act 1961
Payment of Gratuity Act 1972
Employee Compensation Act 1923

Key Changes

Gig workers and platform workers are now officially recognised and eligible for social security schemes.
Aggregator companies may contribute a small percentage of turnover toward welfare funds (within prescribed limits).
The definition of “wages” has been standardised to ensure uniform calculation for PF, gratuity, and pension.
Accidents during commuting are now considered for compensation and benefits. Know more

4. Occupational Safety, Health & Working Conditions Code, 2020

This Code merges 13 earlier labour laws, including:

Factories Act 1948
Mines Act 1952
Contract Labour (Regulation & Abolition) Act 1970

Key Changes

A major compliance simplification:
One registration – One license – One return
Women may be employed in night shifts, subject to safety measures and consent.
The definition of inter-state migrant workers has been broadened, and portability of welfare entitlements (including PDS) is ensured across states. Know more

To check out the official notification, click here.

Why the Labour Codes Were Introduced

For decades, labour compliance in India was spread across numerous laws, ministries, and authorities. Consolidating these into four codes helps to:

Reduce overlapping rules and administrative burden
Bring clarity to employers and workers
Enable easier and modernised enforcement
Align labour laws with current industry standards and employment structures
Build a labour ecosystem supportive of job creation and investment

The process of drafting these reforms spanned from 2015 to 2019 and included multiple rounds of consultation among government, employer bodies, and trade unions.

What This Change Means for Stakeholders

For Workers

More inclusive wage protection
Stronger social security systems
Greater clarity and broader access to benefits
Safer working environments

For Employers

Consolidated laws lead to lower compliance confusion
Simplified processes and more predictable rules
Flexibility for workforce expansion based on demand

For Students & Policymakers

The reform is one of the largest structural overhauls in India’s labour regulation history
It supports a modern, formal, transparent, and accountable labour market

Source: www.pib.gov.in

The new Labour Codes mark a transformative moment. By consolidating multiple laws into four well-structured codes, India is setting the stage for a labour ecosystem that is simpler to understand, fairer for workers, and better tuned for growth. This reform aligns with the vision of an empowered, inclusive, and self-reliant India.