More than five years after Parliament passed four labour codes, the Centre on Friday formally brought them into effect, marking a watershed moment in India’s labour governance. The move aims to modernise working conditions, strengthen wage protection, improve productivity, and accelerate job creation — key prerequisites for sustaining high economic growth over long periods.
For decades, India’s labour regime had been criticised for being rigid, complicated and outdated. Investors and businesses routinely pointed out that the complex tangle of laws discouraged expansion and hiring, restricting job creation in a country where millions enter the workforce each year.
Government readies rules for immediate enforcement
To streamline this framework, the government consolidated 29 labour laws into four comprehensive codes between August 2019 and September 2020, aimed at improving the ease of doing business and attracting investment. A government official said the rules will be issued in 5-7 days, after which they will also be enforced immediately. “Rules will keep coming. But all the sections that do not require rules will be implemented immediately,” the official said.
Veena Gopalakrishnan, employment law partner, Trilegal, termed the notification one of the most significant and long-awaited overhauls of India’s employment law framework. As with any systemic shift, a number of practical questions emerge on how the transition from the older legislations to the new regime will unfold. Industry is looking for clarity on the mechanics of migration — how existing accruals will be honoured, how ongoing proceedings will be treated, and how compliance frameworks will evolve. “We hope that sustained dialogue between lawmakers, industry bodies, employers, and civil society will help ensure that the transition is as smooth as possible, with minimal friction, even if not entirely seamless,” she added.
Aparajita Rana, partner, AZB & Partners, said the codes include new provisions relevant for gig workers, fixed term workers, and ESI coverage, as well as bring in some consistency in the labour law landscape in India. “However, the states were asked to frame their own rules and supplement the central Act, while many states are ready with their rules, many aren’t — so the effective compliance will come into play once the states too notify their own rules,” Rana said.
The Code on Wages, 2019 significantly widens legal protections for workers. It extends both floor wage and minimum wage coverage to all employees — about 224.7 million people, representing nearly half of India’s 468.8 million workforce as per the 2018-19 Periodic Labour Force Survey. An additional 76.4 million wage earners are expected to gain from clarity in wage definitions, payment timelines, and uniform enforcement across sectors. By standardising wage-related provisions, the code intends to reduce disputes and ensure fair compensation for a substantially larger share of the labour market.
The Industrial Relations Code, 2020 introduces greater flexibility for firms in managing labour, particularly in manufacturing. It raises the threshold for retrenchment, layoffs or closure without government approval from 100 to 300 workers. Policymakers argue that the earlier limits discouraged firms from scaling up, contributing to India’s fragmented manufacturing landscape. For instance, textile and apparel units in India employ only 40-60 workers on average, compared to nearly 2,000 in Bangladesh, undermining India’s global competitiveness. The revised norms are expected to help firms expand operations and create more jobs in the long run.
Worker welfare and safety are strengthened under the Occupational Safety, Health and Working Conditions Code, 2020, which substantially broadens safety coverage across sectors. The code mandates double wages for overtime, limits working hours to eight per day, and restricts workweeks to six days. It also lifts restrictions on women working between 7 pm and 6 am, provided employers ensure adequate safety arrangements. This is expected to unlock greater female participation in sectors such as manufacturing, logistics, hospitality and IT services.
Social Security net widened
The Code on Social Security, 2020 marks the first comprehensive attempt to extend social protection to unorganised-sector workers, who form a significant portion of India’s workforce but remain outside formal welfare systems. The code mandates benefits such as life and disability insurance, health and maternity cover, provident fund, and skill upgradation.Importantly, it formally defines gig workers, platform workers and aggregators for the first time. Aggregators must contribute 1-2% of their annual turnover, capped at 5% of their payouts to workers, to a welfare fund supporting social security and accident compensation, including during travel between home and work.
Prime Minister Narendra Modi described the codes as a “strong foundation for universal social security, minimum and timely wages, safe workplaces and remunerative opportunities, especially for nari shakti and yuva shakti.” The government says the reforms will reduce excessive contractualisation and promote formalisation.
Gender inclusivity features prominently in the framework. Women may now work in night shifts and in sectors such as mining and heavy machinery, subject to consent and safety protocols. They may also include parents-in-law under family definitions for benefits.
To ease employer compliance, the codes introduce single registration, a pan-India licence, and a single return. ESIC coverage has been expanded: it is mandatory for establishments with even one employee engaged in hazardous work, and voluntary for units with fewer than 10 workers.
This long-awaited reform brings India in line with global standards, eases compliance, empowers enterprises, and strengthens the foundations for higher productivity, greater competitiveness and accelerated job creation, said Chandrajit Banerjee, director general of industry body CII.
Experts said implementation across states could be an area of concern. Labour is a “concurrent subject,” meaning both central and state governments must enact rules and frameworks. Coordination and rule-making at the state level will be critical.
Workers’ groups have warned that some provisions favour business flexibility at the cost of worker rights, especially in relation to strike rights and contract labour. With the four labour codes now in force, the focus shifts to rule-making (both central and state), capacity building (inspections, data systems, grievance redress), and monitoring outcomes (worker wages, social-security coverage, industrial disputes, safety incidents).
If implemented well, the reform could mark a turning point: more inclusive, transparent, and streamlined labour governance. If not, the risk is that old problems — informality, weak enforcement, rights deficits — persist under a new legal shell. In a country where labour markets are central to growth, productivity, equity and social stability, these reforms carry heavy promise. The test now is execution, experts said.
