Labour Code| What Are The Various Labour Codes? Applicability of Labour Codes |Is it be beneficial for labours?

Why Labour Code Needed?

It was the demand of investors that the present labour laws are complex and not investors friendly. Due to the complex nature of labour laws many investors including foreign investors keep a distance from investing in India.

Due to the complexity of labour laws, employers in many times failed to act in accordance with law.

Hence, it was felt necessary to consolidate major labour laws relating to wages, social security, industrial relations and occupational safety and health.

In order to simplify and consolidate the labour laws in India, the Government has introduced 4 labour codes which will consolidate 29 labour laws.

What are the various Labour Codes introduced?

The Labour Codes introduced are namely :

  1.  Code on Wages, 2019
  2.  Industrial relations Code, 2020
  3. Code on Social Security Bill, 2020
  4.  Occupational Safety, Health and Working Conditions Code, 2020


Silent Features of Labour Codes


Common Aspects across the four codes

1.  Definition of “Appropriate Government”

  • The definition of appropriate government is the same for all four codes
  • The Central Government will be the appropriate government for all central Public Sector Undertaking (PSU), even the holding of Central Government in PSU becomes less than 50%.
  • Strategic importance installation and establishments like Railways, mines, oil fields, major ports, air transport services, telecommunications, banking,  insurance companies and other “controlled industries” as may be specified by Central Government, will be regulated by Central Government as appropriate government.
  • All other establishments, including private establishments belonging to none of the above industries, will have the State Government as their appropriate government.

2. Inspector- cum- Facilitators

  • Inspectors-cum- Facilitators“, a new authority established under the OSH, IR and SS Codes.
  • The inspector-cum-facilitators will be carrying out inspections as well as providing information to employers and employees pertaining to compliance.

3. Dispute Resolutions

  • IR and SS Codes provide that offences punishable with imprisonment up to one year or with fine are compoundable. Hence, in case of offences with fine, compounding is allowed for a sum of 50% of the maximum fine provided for the offence.
  • IR and OSH Codes, and partly SS Code bar Civil Courts from hearing any matters arising out of respective Codes.

Applicability of Different Labour Codes

Code on Wages, 2019




  • The definition of “Wages” includes basic salary, allowance and other components capable of being expressed in monetary terms.
  • Floor Wages: The Central Government will fix a floor wage, taking into account the living standards of workers. It can vary with geographical areas.  Minimum wages fixed can not be lower than the floor wages.
  • Overtime wages: Workers are eligible for overtime wages which will be double the normal rate of wage.
  • Payment of wages: Wages can be paid in cash, coins, cheques or by directly transferring to workers’ bank account. The employer must set period o wages as daily, weekly or monthly.
  • Deductions: Deductions (not exceeding 50% of total wage) from an employee’s wages may be made on grounds including fines, absence from duty, accommodation provided by employer or recovery of advances given to an employee, among others.
  • Bonus:  Employees will be entitled to an annual bonus if the salary is up to INR 21,000 in a month. The annual minimum bonus will be at least 8.33% of the wages, or INR 100, whichever is higher. If the allocable surplus exceeds the total minimum bonus payable to employees, a part of the gross profit must be distributed between the employees in proportion to their annual wages. An employee can receive a maximum bonus of 20% of their annual wages.
  • Gender Discrimination: In matters pertaining to wages and recruitment of employees for the same or similar work, the Code on Wages prohibits gender discrimination.


Industrial Relation Code, 2020


  • Worker: A worker means ‘any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether terms of employment be express or implied, and includes working journalists’. Apprentices have been excluded in the definition of workers.
  • Industry: Industry includes all systematic activities carried on by co-operation between employers and workers. Charitable organisations, sovereign functions of the government, domestic service are excluded as Industry.
  • A situation where 50% of more workers are on casual leave simultaneously, is said to fall within the scope of term ‘strike’.
  • Termination due to continued ill-health is no longer considered retrenchment.
  • A new concept of ‘fixed-term employment’ has been introduced. It refers to workers that are hired for a fixed period but will enjoy the same benefits and entitlements as are available to permanent workers.
  • Negotiating Union/Council
    • A Trade Union with at least 51% of the workers as members will be the sole negotiating union.
    • In case no Trade Union has at least 51% of workers as members, a negotiating council will be formed consisting of representatives of Trade Unions that contain at least 20% of workers as members.
    • For every 20% of total workers as members, one representative will be included.
  • Prior permission of the appropriate government
    • Prior permission of the government before closure, lay-off, or retrenchment now needs to be sought only by establishments with at least 300 workers, instead of 100 workers.
  • Worker re-skilling fund
    • This is a new concept introduced under IR Code, where a fund shall be created for contribution by the employer of an amount equal to fifteen days wages last drawn by a worker immediately before retrenchment, and contributions from other sources prescribed by the appropriate government.
    • The fund shall be utilized within 45 days of retrenchment, or as may be prescribed.
  • Model Standing Orders
    • This provision will apply to establishments employing 300 or more workers. Central Government will be drafting Model Standing Orders basis which employers must prepare their own draft standing orders from the date of commencement of IR Code.
    • Employers must consult trade unions or negotiating union before submitting standing orders to certifying officer.
  • Dispute resolution mechanism
    • The Code provides for Industrial Tribunals consisting of an administrative member and a judicial member.
    • Either party to a dispute can approach Industrial Tribunal. However, only Central Government can make a reference to National Industrial Tribunal.


Code on Social Security Bill, 2020


  • Employee Provident Fund (EPF)
    • Provident fund and pension scheme will apply to all establishments employing 10 or 20 employees, and to any other establishments as may be notified by the government.
  • Employees State Insurance (ESI)
    • ESI Scheme will apply to establishments employing 10 or more employees.
    • In case of a pandemic, epidemic or a national disaster, the Central Government can make changes to the employer’s or the employee’s contribution under Employees State Insurance for up to three months.
    • If the employer fails to pay ESI contributions, the ESIC may pay the benefits to the employee and recover it from the employer the capitalized value of the benefit, including the contribution amount, interest and damages, as an arrear of land revenue or otherwise.
  • Registration
    • Every new establishment to which the Code applies is required to register.
    • Establishments already registered under any other Central Law would not be required to register again.
    • Aadhaar-based registration is mandated for all categories of workers.
  • Gratuity
    • Fixed-term employees (i.e. employed for a fixed duration) will be entitled to pro-rated gratuity based on the term of their contract.
    • The threshold period of such an employee will also be a continuous working period of 5 years, as is the case for other categories of employees.
  • Maternity benefit
    • In addition to maternity benefit in terms of paid leaves, every woman is entitled to a medical bonus of up to INR 3,500 (if pre-natal confinement and post-natal care is not provided by the employer).
  • Unorganized workers
    • The Code allows schemes for unorganized workers to be funded by a company’s CSR fund.
    • The Code empowers the Central Government to frame social security schemes for unorganized workers, gig workers (workers outside the traditional employer-employee relationship) and online platform workers (those who access organizations or individuals through an online platform and provide services or solve specific problems.)
  • Offences and penalties
    • The Code prescribes a five-year limitation period for initiating inquiries for payment of dues under EPF and ESI schemes.

Occupational Safety, Health and Working Conditions Code, 2020

  • Definitions
    • The definition ‘Factory’ has been expanded to 20 workers for premises where the process uses power and 40 workers where the process uses no power.
    • Provisions of Code pertaining to contract labour would only apply to establishments involving 50 or more contract labourers.
  • Licenses and registration
    • New Establishments covered by Code must register themselves (within 60 days of commencement of Code) with registering officers, appointed by the appropriate government.
    • Establishments already registered under any other Central Law would not be required to register again.
  • Duties of Employers
    • Issuing appointment letters to employees
    • Ensuring a workplace that is free from hazards that may cause injury or disease
    • Providing periodical health examination to employees in notified establishments
    • Informing relevant authorities in case an accident at the workplace leads to either death or serious bodily injury to an employee
    • There are other duties prescribed for employers in respect of mines, docks, factories, plantations and construction work which include instructing employees about safety protocols and provisioning for a risk-free work environment.
  • Safety and welfare provisions
    • The employer is mandated to provide a hygienic work environment along with adequate ventilation, sufficient space to avoid overcrowding, potable drinking water, arrangements for separate washrooms for male, female, and transgender workers, etc.
    • The Code also provides for a uniform threshold of welfare provisions for all establishments such as a canteen, crèche, first aid, welfare officer, etc.
  • Working hours
    • Appropriate government is empowered to notify working hours for various classes of establishments and employees. For overtime, prior consent of workers is required along with overtime wage.
    • Female workers may work past 7 pm and before 6 am only with their consent, as prescribed by the appropriate government.
  • Relevant authorities
    • Inspectors-cum-Facilitators appointed by the appropriate government can inquire into accidents and conduct inspections. They have been given special powers in respect of factories, mines, dock-works and buildings or other construction works, prohibiting work in hazardous environment.
    • Safety committees may also be formed in certain establishments, and for certain classes of workers, by the appropriate government. These committees will aim to function as a liaison between employers and employees.
  • Leaves
    • No worker in an establishment will be allowed to work for more than six days a week, except as provided for by Code.
    • Every worker shall be entitled to one day of leave for every 20 days of work per calendar year.


What are the concerns raised over the new labour codes?



Analysts have raised concerned for new Labour Codes, 2020.


  1. The increase in the threshold for standing orders from the existing 100 to 300 will give tremendous flexibility to employers in terms of hiring and firing. This is a complete demolition of employment security.
  2. The new Industrial Security Code, 2020 has introduced new conditions for a legal strike. No person employed in any industrial establishment shall go on strike without a 60-day notice and during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings. This will make it almost difficult for going into a legal strike. At present, a person employed in a public utility service cannot go on strike unless he gives notice for a strike within six weeks before going on strike or within fourteen days of giving such notice, which the IR Code now proposes to apply for all the industrial establishments…s-in-west-bengal/



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