New Labor law codes


Labor laws are subject of concurrent list of the Indian Constitution of Schedule 7 so both center and state governments have power to make laws on it.

Before this according to a data presented by the central government there were about 40 central statutes and 100 state statutes which were prevailing in the country under Labor Law. As per the government, these bills will help in consolidating the different scattered labor laws in India. In this article we will understand the four codes individually and then their impact on the business community.

  • Code on Wages 2019
  • Code on Social security 2020
  • Industrial Relations Code 2020
  • Occupational Safety, Health & working conditions Code 2020

Code on wages 2019

This code primarily stipulates the minimum wages payable, governs the manner in which wages are paid, applies to all workers irrespective of wages drawn and covers all workers and employees in an organization, both in the organized and unorganized sectors.

The actual sector-specific floor wages will be fixed by government notifications (issued from time to time) after the code is brought into force. While certain types of wage deductions will be permitted, such deductions cannot exceed 50 percent of the total wages drawn by an employee or worker. Furthermore, “wages” have also now been given a unified structure as opposed to the varying definitions stipulated before. The definition of “wages” under the Wage Code encompass (i) basic pay; (ii) dearness allowance; and (iii) retaining allowance and categorically excludes components such as statutory bonus, value of house accommodation, overtime, gratuity, etc, unless such exclusions exceed more than 50% (fifty percent) of all remuneration, in which case the amount which exceeds 50% (fifty percent) shall be considered as remuneration and be added to the wages thereof. The Wage Code has also introduced the concept of “floor wages” which will be fixed basis the minimum living standards of a worker within the relevant geographical area, and where the minimum rate of wages fixed by the respective State Government is higher than the floor wage, then the former shall be retained.

This code also makes specific provisions for timely payment of wages and payment of bonuses and overtime wages, and it enhances penalties (from current levels) for noncompliance. The code comprises 69 sections in total. It has been made after consolidating the provisions of four acts that existed prior to the passing of this code which are listed below-

  • Payment of Wages Act, 1936
  • Minimum Wages Act, 1938
  • Payment of Bonus Act, 1965
  • Equal Remuneration Act, 1976

Social Security Code 2020

The new code aims at the laws relating to social security of all employees and workers either in the organized or unorganized sector, it extends the benefit to the workers of all sectors. This code has subsumed nine central laws, namely-

·       The Employees Compensation Act, 1923,

·       The Employees State Insurance Act, 1948

·       The Employees Provident Fund and Miscellaneous Provisions Act, 1952

·       The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959

·       The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972

·       The Cine Workers Welfare Fund Act, 1981

·       The Building and Other Construction Workers Cess Act, 1996

·       The Unorganized Workers’ Social Security Act, 2008)

This code also states that the Employment Provident Fund scheme would now be applicable to establishments that have twenty or more workers. Besides this, an employee can voluntarily join the EPF scheme. Also, there have been changes in the Employees State Insurance. The ESI previously was applicable only to some notified areas but after this code, it is applicable to PAN India. Normally ESI would be applicable to an establishment that has employed 10 or more workers but in case of hazardous occupation, the government extends it irrespective of the number of employees in the occupation. The Gig workers, platform workers and unorganized sectors are also under the umbrella of this scheme.

Industrial relations code 2020 

The code here deals with the laws relating to Trade Unions, conditions of employment in industrial establishment and undertaking, investigation and settlement of industrial disputes.

The Code here amalgamates or repeals three central labor laws which are:

·       The Industrial Disputes Acts, 1947

·       The Trade Unions Act, 1926 and

·       The Industrial Employment (Standing Orders) Act, 1946

The bill aims at protecting the interests of the workers to form trade unions and in case of any conflict with the employer for which an easy settlement be reached.

Provisions related to Lay Off, Retrenchment and Closure have waived off the requirement of prior permission from the appropriate government for retrenchment, lay off or closure for establishments such as mines, factories and plantations not less than 300 workers. However, it is not necessary to obtain prior permission in cases where in such lay-off is due to the reasons such as natural calamity, shortage of power, and in the case of a mine, such lay-off is due to the causes like flood, fire, excess of inflammable gas or explosion. The code makes any lay-off illegal if it is done without permission or it is done even after the refusal of permission. Closure of an establishment requires a 60 day s notice to be served to the government, also during retrenchment if a worker has been working for more than 1 year, a 60 day s notice or payment in lieu of notice period is prescribed.

Occupational Safety, Health and Working Conditions Code 2020 

This code will cover all mines and docks and all business establishments and factories employing a minimum of 10 workers, and it prescribes the standards to be followed by companies to ensure the safety and health of employees and workers.

Companies will have to provide certain benefits to employees, such as providing free annual health examinations and issuing a letter of appointment to all employees. After the code comes into force, companies will have to register their establishments within 60 days; registration is compulsory for all business establishments under purview of the code, and no employment is permissible without registration. Compulsory licenses are required to employ contract labor.

Employers as well as employees are obliged to maintain and follow good health and safety practices. Employers as well as employees will attract penalties for noncompliance.

The OSH Code has modified the number of minimum contract labor to fifty (50) from twenty (20) for the OSH Code to apply. Welfare facilities as specified under the OSH Code are to be provided by the principal employer of the establishment to the contract labor employed in such establishment. The OSH Code has also safeguarded the rights of the Inter-State Migrant Workers by ensuring that the contractor extends all benefits as are available to a worker under the various labor laws to inter-state migrant workers as well. Furthermore, the employer of every applicable establishment is required to pay to every inter-state migrant worker, a lump sum fare for to and fro journey to his native place from the place of his employment.

The Industrial Relations Code, 2020 consolidates and amends three acts namely

The Industrial Disputes Act, 1947

The Trade Unions Act, 1926

The Industrial Employment (Standing Orders) Act, 1946


There have been several acts in the field of labor law but with these new codes they are now well amalgamated within. The New Labor law codes have come as a much needed requirement in labor law system of the country. These labor reforms aim to shrink down the oversized legislations enacted long time ago and also add up modern elements to the old age law as the business and work environment has changed drastically.


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