The Consolidation of Labour Laws in India: Promise or Precarity?

Labour Codes India, Labour Law Reform 2020, Industrial Relations Code, Code on Wages, Social Security Code, OSHWC Code, Informal Workers India, Trade Unions India, Labour Law Enforcement, Employment Rights India, Gig Workers Social Security, Indian Labour Jurisprudence

Introduction

“The true measure of any society can be found in how it treats its most vulnerable members,” said Mahatma Gandhi — an ethos that gains renewed significance as India undertakes its most ambitious labour law reform since independence. The consolidation of 29 central statutes into four Labour Codes seeks to create a modern, unified regulatory framework balancing worker protection with economic efficiency. With implementation now underway after years of delay, prompting the central inquiry of this article: Whether these reforms will deliver genuine progress in India’s labour regime or risk entrenching precarity through uneven enforcement and exclusion of informal workers.

This article argues that although the Labour Codes could significantly streamline compliance and widen protections, their transformative potential remains uncertain without coordinated implementation, institutional capacity, and active engagement with India’s predominantly informal workforce. The discussion proceeds by briefly tracing the historical fragmentation of Indian labour law and the rationale for consolidation, followed by an assessment of the Codes’ proposed benefits. It then examines the structural and political challenges that threaten to undermine these reforms, including federal inconsistencies, weak enforcement, and trade union concerns. Drawing on field insights from Bengaluru’s Peenya Industrial Cluster, the article highlights the gap between legislative ambition and workplace realities. The concluding section advances targeted recommendations aimed at strengthening enforcement, expanding social protection, and ensuring that the reforms translate into meaningful change rather than symbolic restructuring.

The grand vision: Consolidating a fragmented system

India’s labour laws, rooted in colonial and post-independence socio-economic circumstances, gradually became fragmented and misaligned with the needs of a contemporary economy. Earlier enactments such as the Factories Act, 1948, the Trade Unions Act, 1926, and the Industrial Disputes Act, 1947 regulated distinct aspects of labour administration, yet towards the end of the 20th century, rapid changes like the rise of services, information technology (IT), and freelancing highlighted their limitations. International critiques, like World Bank’s Doing Business Reports, identified complex labour laws as a brake,¹ prompting both labour and employers to press for simplification.

The evolution of labour laws in India has been deeply influenced by judicial interpretation, with the landmark case Air India Statutory Corpn. v. United Labour Union² standing out as a turning point. In this ruling, the Supreme Court held that contract workers engaged in perennial or continuous work must be treated on par with regular employees in terms of pay and working conditions. The Court, in its emphasis, stated that when abolishment of contract labourers is carried out by notification of Government, the principal employer has a duty to absorb such labourers in regular employment, as well as its conferral of all consequential benefits and rights.

This judgment carried wider constitutional significance, underscoring that the right to livelihood forms an integral part of the right to life under Article 21. By linking employment rights with fundamental rights, the Court took the principle further that workers cannot be deprived of basic protections simply because of the contractual nature of their work. This interpretation strengthened the goals of fairness and equality that lie beneath India’s labour jurisprudence.

The Supreme Court in Bandhua Mukti Morcha v. Union of India³ also observed that the “right to live with human dignity” assured under Article 21 encompasses within its ambit right to livelihood, humane conditions of work, and freedom from exploitation. The Court held that the State is under a constitutional obligation to ensure just and humane conditions of labour as part of the fundamental right to life.

The Codes of labour emerged in recognition of a fact that India’s existing labour laws were antiquated, fragmented, and burdensome. Earlier, in 2002, The Second National Commission on Labour⁴ enumerated more than 50 central and 100 State laws governing employment relations, creating a regulatory thicket that impeded business procedures without being very effective in protecting employees. The new framework consolidates these into four comprehensive Codes:

1. The Wages Code, 2019 consolidates four wage-related legislations, prescribing a single definition of wages and the notion of national floor wage to be applied across all sectors. This Code requires that the basic wages should be at least 50 per cent of the total remuneration, which could increase provident fund and gratuity rates for employees.

2. The Industrial Relations Code, 2020 updates the resolution of industrial disputes by consolidating three principal laws that regulate trade unions, Standing Orders, and industrial disputes. This modernises industrial dispute resolution by merging three major laws governing trade unions, Standing Orders, and industrial disputes. Significantly, it raises the threshold for Government approval of layoffs, retrenchments, and closures from 100 to 300 employees, providing greater operational flexibility to businesses.

3. The Social Security Code, 2020 integrates nine social security legislations and extends coverage to heretofore excluded sections, such as platform and gig workers. For the very first time, digital platform aggregators could pay 1-2 per cent of their turnover during a year towards social security benefits to their employees.

4. The Occupational Safety, Health and Working Conditions Code, 2020 is a codification of 13 laws relating to workplace safety, work conditions, and workmen’s welfare, bringing in stricter safety norms and obligatory health check-ups.

Promise: The potential for transformation

The consolidation promises several transformative benefits that could reshape India’s employment landscape. Ease of compliance procedures is probably the most straightforward advantage, reducing a whole list of licences from a myriad of requirements to a matter of several registrations and reducing 50-60 per cent of registers requested.⁵ This is most beneficial to overseas investors, who have previously found India’s regulatory environment hard to deal with.

Less administrative burden and compliance processes

The consolidations of labour law are likely to simplify life for employers in administrative ways:

1. Single registration: The employers will only need to secure a single registration, not multiple registrations under different laws.

2. Simplified reporting: The new Codes aim to reduce the returns and assessments employers must provide.

3. Digital compliance: These Codes emphasise digital usage for compliance, which could ease procedures for employers.

Compliance obligations and sanctions for non-compliance

The new Labour Codes consolidate and gather 29 laws, and have a two-fold purpose of ease of compliance by employers and strengthened protections for employees.

Key compliance obligations include:

The Code on Wages reinforces the requirement for timely payment of wages, ensuring workers receive their salaries within the prescribed periods. Alongside this, the Occupational Safety, Health, and Working Conditions (OSHWC) Code mandates the implementation of essential workplace safety measures and regular safety audits to maintain a secure working environment. The Social Security Code further broadens employee protection by requiring social security contributions for all eligible workers, including gig and platform workers. Additionally, employers must issue appointment letters to formalise employment terms, promoting clarity and transparency in the workplace.

Dispute resolution and grievance redressal

The Labour Codes have a formalised structure for swift and effective resolution of disputes, in order to reduce reliance on time-consuming legal proceedings.

Key mechanisms include:

1. Grievance Redressal Committees: The Industrial Relations Code, 2020 requires units employing 20 or more people, which are accountable for addressing grievances internally.

2. Conciliation and arbitration: Greater emphasis on conciliation, supported by a two-member Industrial Tribunal to expedite dispute resolution.

3. Time-bound procedures: Conciliation officers must conclude proceedings within 45 days of initiation.

4. Compounding of offences: Certain offences could be compounded by settling a predetermined fee, thus avoiding time-consuming prosecution.

5. Appellate authorities: Established to hear and consider appeals from decisions made under the Codes.

Precarity: The challenges and concerns

Even as the Codes have now been formally implemented at the central level, the pace of State level rule-making remains uneven. While 32 States and Union Territories have pre-published their draft rules⁶, such crucial States as Tamil Nadu and West Bengal are backlogged, leading to undue regulatory unpredictability as well as a lag in taking advantage of the Codes’ desired outcomes. The States’ strategy towards compounding of offences is not uniform.

Further, International Labour Organization Evidence, 2022⁷ shows that 70 per cent of Indian construction workers were not paid appropriate minimum wages, substantiating ongoing lapses in enforcement. The vulnerable state is reflective in India’s informal labour’s socio-economic conditions as well. As of May 2022, more than 94 per cent of labourers who were registered on the e-Shram portal reported receiving Rs 10,000 or less as monthly wages.⁸

India’s labour market experience only reveals deeper issues. The employment patterns are very skewed: Self-employment accounts for 55.8 per cent,⁹ casual employment 22.7 per cent,¹⁰ and regular employment a paltry 21.5 per cent.¹¹ Most labourers endure subsistence wages, dangerous work conditions, and no social coverage, and seasonal migration only consolidates insecurity. The exclusions from such Codes accentuate such insecurity: Exclusion from reforms, except minimum wage legislation, most of the reforms exclude informals, and not even the Code on Wages effectively resists non-payment of wages by enacting procedures in its stead. The platform and gig labourers, though included, are otherwise largely excluded from substantial benefits.

Even as the Codes have been hailed by the Ministry of Labour as the “biggest labour reforms in independent India”¹² their transformative potential is contingent upon political will and effective worker consultations. Without active engagement of unorganised workers and their unions, sectoral concerns could remain unresolved and schemes of welfare may not be effectively formulated. Lacking effective implementation and strong Centre-State coordination, the new Labour Codes may prove toothless, yielding symbolic reform, not meaningful transformation, of India’s labour force.

Resistance from trade unions is another major roadblock. Some central trade unions have threatened enormous protests, including 25 crore workers estimated all India strike.¹³ This resistance does not arise merely from weak implementation but from structural concerns within the Codes themselves. Several provisions are perceived by trade unions as diluting substantive labour protections rather than strengthening them. Their grievances stem from a few fundamental points: ease of retrenchment laws posing a risk to employment protection, constraints of strike rights in requiring 60-day advance notices, and fixed-term employment contracts that may decrease permanent recruitment.

The informal sector, which accounts for nearly 90 per cent of India’s workforce,¹⁴ faces the greatest difficulties in adapting to new regulations due to limited resources and weak institutional support. Small and Medium-sized Enterprises (SMEs) are equally vulnerable, struggling with both financial and administrative burdens. Without targeted measures, these groups risk being excluded from the protections the Codes promise.

Insights from the Peenya Industrial Cluster, Bangalore

The field research in Bangalore’s Peenya Industrial Cluster¹⁵ amongst employees and employers is illuminating in terms of how ground-level stakeholders perceive novel Labour Codes. The workforce remains heavily dependent on non-permanent employment, with 52 per cent of respondents identified as contractual workers, compared to 24 per cent each in permanent and temporary roles.¹⁶ This reliance on contract labour reflects the sector’s structural precarity and raises concerns about whether the new Labour Codes adequately protect vulnerable categories of workers.

The level of awareness of new Labour Codes is remarkably minimal. Only 28 per cent of respondents reported being fully informed about Codes, while 40 per cent reported being unaware.¹⁷ These are figures that reflect a severe gap in dissemination and instruction, and if there are not robust awareness programs, coupled with strong initiatives in training, then the Codes’ presumed protections may not extend to where most necessary.

Perceptions of job security remain mixed, with only 30 per cent expressing confidence in improved job security, while a majority (54 per cent) disagreed or strongly disagreed. Similarly, while 36 per cent acknowledged positive impacts on wage revisions, 44 per cent expressed dissatisfaction,¹⁸ pointing to a disconnect between legislative intent and actual workplace outcomes.

Access to social security is nonetheless limited: 20 per cent had unrestricted access to benefits like Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI), and 44 per cent had no access at all. This gap is a reflection of inadequate enforcement of statutory entitlements, most seriously affecting contract and temporary labourers. Hours of work are a matter of concern as well, as 48 per cent of respondents worked for more than 8 hours a day,¹⁹ reflecting potential violation of rules relating to overtime and rests.

The grievance redressal mechanisms were not functional. Satisfaction was reported by only 28 per cent of employees, and nearly half (48 per cent) of employees were not satisfied with existing procedures.²⁰ Administrative delay and confusion after issuing Codes were reported as well, and very few employees had received formal trainings or orientation programs.

Looking forward: Promise or precarity?

India’s labour law consolidation presents both a major opportunity and a moment of responsibility. The new Labour Codes aim to build a unified regulatory framework in which stronger worker protections and greater business efficiency can reinforce one another. They could make India more attractive to global investors by ensuring predictable labour standards while extending social security to millions. The Social Security Code, for instance, proposes pensions, insurance, maternity benefits, and compensation — measures that can enhance worker welfare and support a more stable, productive labour market beyond the organised sector.

These issues are compounded by institutional and political shortcomings. The Indian Labour Conference has not convened in over a decade,²¹ limiting communication between State, employers, and workers. While concerted actions are increasingly being criminalised, as per Section 111, Nyaya Sanhita (BNS), routine union activities like gate meetings, giving out leaflets, or submitting memoranda may come to be perceived as “organised crime”²² and subject labourers to police action and non-bailable imprisonment. These measures are destructive of democratic rights and create a climate of fear.

Looking ahead, pragmatic reforms could expand protections. Extending ESI and EPF coverage from enterprises with 10 and 20 workers to those with five or more could triple the number of informal workers²³ under these schemes. Sector-specific welfare initiatives may also provide interim solutions. Ultimately, the success of the Labour Codes depends not just on their notification but on political will, Centre-State cooperation, and genuine engagement with workers’ realities. Without this, the promise of reform risks turning into another layer of precarity.

Recommendations for realisation

For the Labour Codes to move from legislative promise to tangible impact, a set of targeted reforms and strategic measures is essential.

Strengthening institutional frameworks

The Government must work closer with employers’ associations and trade unions to bring the Codes at par with International Labour Organization (ILO) standards, with broad-based consultation on minimum wages and social security. A National Labour Code Implementation Council may be set up to coordinate Centre — State Regulations, and Labour Law Facilitation Cells — especially for Micro, Small, and Medium Enterprises (MSMEs) through Small Industries Development Bank of India (SIDBI) or National Small Industries Corporation (NSIC) — would facilitate compliance and awareness at the enterprise level.

Ensuring worker protection

The Occupational Safety, Health and Working Conditions Code requires stronger enforcement, including stepped-up monitoring and inspections, especially for contract workers and small enterprises. With over 60 per cent of India’s workforce in high-risk sectors²⁴ such as construction, mining, and sanitation, and only 35 per cent of factories fully complying with safety norms (CAG, 2022), stringent oversight is non-negotiable.

Expanding social security

The Social Security Code must strive towards higher convergence at the State level by enunciating national minimum norms and firmer rules of implementation. For such a transition, a dedicated Rs 5000 crores Social Security Transition Fund would provide a helping hand to gig and informal sector workers.

Safeguarding collective rights

The Industrial Relations Code should reconsider its restrictive provisions on strikes to better align with ILO Convention No. 87²⁵, ensuring workers’ collective bargaining power remains intact. Protecting the right to strike is vital for fair labour standards and democratic participation. In B.R. Singh v. Union of India²⁶, the Supreme Court also observed that “Strike … is one such mode of demonstration by workers for their rights… . Though not raised to the high pedestal of a fundamental right, it is recognised as a mode of redress for resolving the grievances of workers.”

Conclusion

The real test of the of India’s Labour Codes lies not only in enforcement but also in the structural limitations of the Codes themselves. Political will, Centre-State coordination, and genuine consultations with workers are essential to bridge the gap between legislative ambition and ground reality. Unless these shortcomings — both in design and implementation — are addressed with seriousness and sensitivity, the Labour Codes risk becoming another missed opportunity in India’s long history of partial and unfinished reforms.