Policy Analysis

New Labour Codes, 2022

Author: Sajal Bhardwaj, a student at Fairfield Institute of Management and Technology


Labors are an integral part of any country’s economy and for the growth of the economy, it becomes essential to frame laws in such a way that it empowers the workers. According to the data given by the Government, 90% of workers work in the unorganized sectors that do not have access to all the social security. The total number of workers, comprising organized and unorganized sectors, is more than 50 crores. In India, labor laws are a concurrent subject which means that both the center and state can make laws on them. Earlier the labor laws were very complex and diversified and making legal compliance very difficult. So, to bring the solution to this problem the Second National Commission on Labour was established in 1999 and they submitted their report in 2002 in which they said that the labor laws are very old and outdated and it is need of the hour to bring reforms in the labor law. In the furtherance of agreeing on the report of the Commission, the Government decided to make four labor codes and these were: Code on Wages, Code on Industrial Relations, Code on Social Security, The occupational Safety Health and Working Conditions Code.

The Centre enacted and notified the Code on Wages in November 2019, and it enacted and notified the Code on Industrial Relations, 2020, Code on Social Security, 2020, and Code on Occupational Safety, Health, and Working Condition, 2020, in September 2020. The four labor codes which will subsume 29 labor legislations in the country will come into effect once the Union government announces the commencement date.

For simplifying the complexity and increasing the efficiency of labor laws, Central Government has amalgamated 4 laws in the Wage Code, 9 laws in the Social Security Code, and 13 laws in The Occupational Safety, Health and Working Conditions Code, 2020, and 3 laws in the Industrial Relations Code.

Code on Wages, 2019

It is because of this code it is the very first time that all the workers whether an organized or unorganized sector will get the right to minimum wage. These minimum wages will be reviewed every 5 years. In November 2017, the Payment of Wages Act increased the wage ceiling from Rs. 18000 to Rs. 24000.

Social Security Code, 2020

This code will secure the right of labor for pension, gratuity, Maternity benefits, insurance, etc. As the name suggests this code aims to help the laborers to achieve social security completely. 

The laborers will get the benefit of free treatment under the hospitals and dispensaries of ESIC. ESIC will be open for the laborers of all the sectors along with the workers of the unorganized sector. ESIC hospital dispensaries and branches will be available in all the 740 districts of the country. Each labor who is engaged in hazardous work will be given ESIC benefit. Also, the benefit of a pension scheme (EPFO) will be given to all the workers no matter whether they are from the organized, unorganized, or self-employed sector.

Code on Occupational Safety, Health and Working Condition, 2020

As the name suggests this overall code is for employee’s safety, security, and working conditions this court tells about what types of safety equipment a factory should have for fire fighting and whether to have any fighting drill If you are using any chemical what precaution should be taken services to be done what all care and equipment are needed so that workers are not injured or if injured what precautions can be taken so all these things will be covered under this code.

There is also a provision to give legal identity to the migrant workers so that they can get all the benefits from the government scheme. Earlier this was done by the contractor but now the workers can independently do this by uploading their profile to the national portal. Also, Instead of 240 days, now if a worker has worked 180 days, he shall be entitled to one-day leave for every 20 days of work done.

Industrial Relations (IR) Code, 2020

This code governs the relationship between employee and employer. When lockout, a strike can be done, terminate an employee, punishment the employee, or make unions all these rules will be governed by this code.

There will be provision for faster justice for the workers through the Tribunal. And all the worker’s disputes are to be resolved within a year in the Tribunal. Industrial Tribunals will have 2 members to facilitate faster disposal of cases.

Changes after New Labour Codes

The new labor code will introduce major changes in the working hours of the employees. The working hours were based on the Factories Act, 1948 at the national level for workers in factories and other such workplaces while, it is governed by the Shops and Establishment Acts of each state for office workers and other employees.

As per the new labor laws, the daily working hours have been increased to 12 hours from 8 hours while the weekly working hours have been fixed at 48 hours. This means that the companies/factories can make it a four-day-work week. Also, over time has increased from 50 hours to 125 hours in a quarter across industries.

The new labor laws suggest that the basic salary of an employee will have to be at least 50% of the gross salary. As an effect, the employees will be making more contributions to their EPF accounts and gratuity deductions will also increase which will decrease the take-home salaries of most employees.


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