NEW DELHI: In a major reform push, the Centre on Friday announced the implementation of the four new labour codes, which were first passed five years ago to replace 29 outdated labour laws. The rollout, which will require the notification of specific rules, comes just days after a significant electoral win for the NDA in Bihar, following similar successes in Maharashtra, Haryana, and Delhi.
These reforms represent the most significant overhaul of workforce regulations in decades. The aim is to increase employment opportunities for women, ensure workplace safety, extend social security benefits to gig workers, guarantee timely wage payments, and establish a national minimum wage.
At the same time, the new laws offer greater flexibility and stability to businesses, a move intended to help them navigate the challenges of a global economy. India’s antiquated labour laws have long been cited as a key obstacle by investors, with many choosing to set up factories in countries like Vietnam and Bangladesh instead.
Prime Minister Modi described the reforms as the “most comprehensive and progressive labour reforms since Independence.”
Government officials confirmed that the rules for the four labour codes—covering wages, industrial relations, social security, and occupational safety and health—will be notified within 45 days to ensure enforcement.
While the laws were initially enacted as part of the government’s Covid-19 response, opposition-led states were reluctant to implement them, leading to delays. However, with over two dozen states now expressing support for the changes, the Modi administration has decided to push ahead after extensive consultations.
All states, except West Bengal, have published draft rules for the new labour codes, officials said. States that fail to implement their own rules will be required to adopt the Centre’s finalised versions, as labour laws fall under the concurrent list of the Indian Constitution.
One of the key changes in the new codes is a cap on the share of allowances in a salaried employee’s total compensation. This measure aims to prevent companies from structuring pay in ways that minimize their social security contributions. Additionally, the new laws establish a national floor wage, although states have the option to set higher wage rates.
Gilbert F. Houngbo, Director-General of the International Labour Organization (ILO), commented, “We are closely following the developments surrounding India’s new labour codes announced today.”
The reforms also bring important benefits for workers. Under the new system, fixed-term employees will become eligible for gratuity after one year of service, and social security coverage will be extended to all workers. This means that all employees will be entitled to benefits like Provident Fund (PF), Employee State Insurance Corporation (ESIC) coverage, insurance, and other social security protections. Additionally, employees aged 40 and above in certain sectors will be required to undergo annual health check-ups.
These long-awaited labour reforms are expected to reshape India’s workforce landscape, benefiting both businesses and employees alike while providing a boost to the economy as a whole.
