“How can we say labour codes are employee-friendly then?” All India Trade Union Congress (AITUC) general secretary Amarjeet Kaur said in an interview with Moneycontrol, arguing that the most consequential change under the new labour codes is the expansion of the government approval threshold for layoffs to 300 workers from 100 earlier.
Can this shift make layoffs significantly easier for companies, and what are the implications going forward? This is particularly significant as the new provision pushes a majority of factories outside the government permission purview.
Here is a detailed analysis of the new labour codes and the key provisions with respect to job cuts
Termination norms under new labour codes
The new labour codes, which took effect from 21 November 2025, significantly relaxed these controls. Under the IRC, prior government approval is needed only if an establishment has 300 or more workers. As per the old law, this threshold was set at 100.
This effectively means that most factories now fall outside the approval system. Kaur pointed out that 60–70% of industrial units in India have fewer than 300 workers, meaning the majority can now lay off workers without seeking government permission. “The IRC has now made layoffs of workers much easier,” she told Moneycontrol, questioning how such a framework can be described as employee-friendly.
While workers will still receive retrenchment compensation based on the 15 days’ wages per year formula, the government has added a Reskilling Fund. Employers must deposit an amount equal to 15 days’ last drawn wages for every retrenched worker into this fund. In effect, the focus has shifted from preventing layoffs to helping workers cope after they lose their jobs.
The Code on Wages, 2019, also introduces clearer timelines for exit payments, requiring companies to settle all dues within two working days of a worker’s departure, whether due to resignation, retrenchment or closure.
Safety norms: Fewer units under the microscope
The Occupational Safety, Health and Working Conditions (OSH) Code, 2020, changes when a unit is officially treated as a factory. Now, only units with 20 or more workers using power, or 40 or more workers without power, must follow factory-level safety rules. Earlier, the limits were much lower, 10 and 20, respectively.
Factories that fall under this definition must obtain licenses and follow rules on drinking water, sanitation, first aid, working hours, overtime, and timely payment of wages.
By raising the threshold, the new law excludes many smaller units from these safety requirements. Kaur warned that this could affect lakhs of workers and weaken basic protections, as she told Moneycontrol.
Migrant workers and diluted entitlements
Another concern that Kaur raised is that the new rules do not fully protect the migrant workers. Under the old law, migrant workers were entitled to a displacement allowance, which was equal to 50% of their monthly wages and were issued a passbook with their employment conditions and benefits.
However, under the new system, the employers must still maintain records and issue appointment letters, but both the displacement allowance and the passbook right have been removed.
Trade unions: Higher barriers to organisation
The IRC also makes it harder for workers to form and get recognition for trade unions. Earlier, just seven workers could form a union. Now, a union must have at least 10% of the workforce or 100 workers, whichever is lower. “Why can’t 10 workers form a union. Why do they have no right to protest?” Kaur told Moneycontrol.
To be recognised as the main negotiating union, it must have the support of at least 51% of workers. If no single union meets this mark, a Negotiating Council is formed with unions that have at least 20% support.
Kaur called this process “arbitrary, undemocratic and anti-worker”, arguing that it weakens collective bargaining at a time when job security has already been diluted.
Termination and retrenchment provisions under the older Labour code
Under the earlier framework, termination and retrenchment were governed by the Industrial Disputes Act, 1947. Workers could only be let go with the state’s approval. This prevented arbitrary job losses.
If a worker had completed at least one year of service, the employer had to give one month’s notice (or pay in lieu) and compensation equal to 15 days’ average pay for every completed year of service. In factories with 100 or more workers, prior government permission was compulsory before any layoff or retrenchment. If this approval was not taken, the layoff could be declared illegal.
This system was put in place to ensure that large-scale job cuts were closely regulated by the government; however, many businesses opined that the system was slow and rigid.
New labour laws: Who really benefits?
For employers and businesses, the new law provides greater room for flexibility to restructure their operations, scale the workforce and respond quickly to the market conditions.
For workers, while core protections like notice and compensation remain, the weakening of approval requirements, reduced safety coverage, and stricter union rules raise serious concerns about how these rights will be enforced on the ground.
As Kaur put it, if most factories can now lay off workers without approval and operate outside strict safety oversight, “who will ensure timely payment of wages?”i
