Overview
The Government of India has undertaken significant labour reforms by consolidating 29 labour laws into four comprehensive Labour Codes. These codes aim to streamline compliance, modernize outdated provisions, and create a simplified, efficient framework that promotes ease of doing business while safeguarding workers’ rights and welfare. The reforms reflect the government's commitment to empowering labour as a cornerstone of India’s growth.
Key Developments
Labour at the Core of India’s Growth
The empowerment of labour is central to building an empowered, prosperous, and Aatmanirbhar India. Employment in India has shown substantial growth, rising from 47.5 crore in 2017–18 to 64.33 crore in 2023–24, a net addition of 16.83 crore jobs in just six years. During the same period, the unemployment rate declined sharply from 6.0% to 3.2%, and 1.56 crore women entered the formal workforce, underscoring the Government’s emphasis on inclusive and sustained labour empowerment. This positive outlook has led to broader socio-economic transformation, including a declining proportion of people below the international poverty line. India’s social protection system has also expanded rapidly to become one of the largest globally.
Rationale Behind Codification
The codification of 29 existing labour laws into four Labour Codes was undertaken to address long-standing challenges and make the system more efficient and contemporary. The key reasons behind this reform include:
- Simplifying compliance: Multiplicity of laws leads to difficulty in compliance.
- Streamlining enforcement: Multiplicity of authorities in different labour laws led to complexity and difficulty in enforcement.
- Modernizing outdated laws: Most labour legislations were framed during the pre-Independence era, necessitating alignment with today’s economic realities and technological advancements.
Formulation of 4 Labour Codes
The rationalization of labour laws via codification simplifies the registration and licensing framework by introducing the concept of a Single Registration, Single License, and Single Return, thereby reducing the overall compliance burden to spur employment. The second National Commission on Labour recommended grouping the existing Labour Laws into four/five Labour Codes on a functional basis. The four Labour Codes were enacted after deliberations held in the tripartite meeting of the Government, employers’ industry representatives, and various trade unions during 2015 to 2019. The Code on Wages, 2019 was notified on 8th August, 2019, and the remaining three Codes were notified on 29th September, 2020.
The Four Labour Codes
Code 1: The Code of Wages, 2019
The Code on Wages, 2019 seeks to simplify, consolidate, and rationalize the provisions of four existing laws:
- The Payment of Wages Act, 1936
- The Minimum Wages Act, 1948
- The Payment of Bonus Act, 1965
- The Equal Remuneration Act, 1976
It aims to strengthen workers’ rights while promoting simplicity and uniformity in wage-related compliance for employers.
Major Highlights of the Code on Wages, 2019
- Universal Minimum Wages: The Code establishes a statutory right to minimum wages for all employees across both organized and unorganized sectors.
- Introduction of Floor Wage: A statutory floor wage shall be set by the Government based on minimum living standards, with scope for regional variation.
- Criteria for Wage Fixation: Appropriate Governments will determine minimum wages considering workers’ skill levels, geographic areas, and job conditions.
- Gender Equality in Employment: Employers shall not discriminate on the basis of gender, including transgender identity, in recruitment, wages, and employment conditions for similar work.
- Universal Coverage for Wage Payment: Provisions ensuring timely payment and preventing unauthorized deductions will apply to all employees, irrespective of wage limits.
- Overtime Compensation: Employers must pay all employees overtime wages at least twice the normal rate for any work done beyond the regular working hours.
- Responsibility for Wage Payment: Employers, including companies, firms, or associations, shall pay wages to employees employed by them.