The labour laws in India have been historically complex, fragmented, and often criticised for their lack of clarity and enforcement. India's labour laws have developed over decades due to industrialisation, social movements, and international labour standards. The legal framework governing employment relations has been influenced by colonial-era legislation and subsequent reforms addressing various aspects of working conditions, wages, social security, and industrial relations.

However, the abundance of laws, overlapping jurisdictions, and outdated provisions have often created challenges for employers and workers. Acknowledging the need for comprehensive reform, the Government of India has initiated a major legislative overhaul by introducing the new Indian Labor Codes. These codes aim to streamline and consolidate existing labour and employment laws, enhance business efficiency, promote job creation, protect worker rights, and align with contemporary economic realities. 

Labour Reforms Background in India

Labour falls under the concurrent list of the Constitution of India, meaning that both the Parliament and State Legislature have the authority to enact laws related to it. Before the enactment of the new labour codes, the Central Government observed that there were over 40 central laws and more than 100 state laws pertaining to labour.

In 2002, the Second National Commission on Labor recommended consolidating the central labour laws into categories such as industrial relations, wages, social security, safety, welfare, and working conditions. This recommendation was made due to the outdated, complex, and inconsistent nature of the existing labour laws. The commission proposed simplifying the labour codes to promote transparency and uniformity.

In 2019, the Central Government introduced four bills on labour codes intending to consolidate 29 central laws.

These bills are:

• Code on Wages
• Industrial Relations Code
• Social Security Code
• Occupational Safety, Health, and Working Conditions Code

Although the Wages Code was passed in 2019, the other three bills were sent to a Standing Committee on Labor. Following the Committee's recommendations, the government replaced these bills with new ones in September 2020, which were subsequently passed in the same month. The Ministry of Labor has indicated that the Rules for all four labour code bills will be notified simultaneously. Therefore, even though the draft Rules for the Wages Code were circulated in 2019, the Ministry opted to withhold its finalization and implementation.

Code on Wages, 2019

The Code on Wages, 2019, was passed by the Parliament to regulate wages and bonus payments in all employments where any industry, business, trade, or manufacturing is carried out. This code replaces four labour laws related to wages.

The code applies to all employees. The Central Government will make decisions on wages for employment in mines, railways, oil fields, etc., while for all other types of employment, the state governments will make the decisions. Wages are defined as including basic pay, dearness allowance, and retaining allowance or any other monetary component, but not bonuses, travelling allowances, or house rent allowances.

The code introduces the concept of a Floor wage. The Central Government will fix the national floor wages considering the workers' living standards, which may vary depending on the geographical location. The minimum wages decided by the central or state governments should be above the floor wages. If the existing minimum wages are higher than the floor wages, the central or state governments cannot reduce the minimum wages.

When fixing the minimum wages, the difficulty level of the work and the workers' skill levels should be considered. The minimum wage will be reviewed by the government at least every five years. Employers cannot pay wages lower than the minimum wage.

The number of working hours and overtime work will be fixed by the central or state governments. In the case of overtime work, the worker is entitled to overtime compensation, which should be at least twice the normal wages. Employers can determine the wage period as daily, weekly, fortnightly, or monthly. Deductions from wages for fines, absence from duty, accommodation provided by the employer, and advances given to the employee should not exceed 50% of the worker's wages.

All employees whose wages do not exceed a specific monthly amount will be entitled to an annual bonus. The Code prohibits gender discrimination in wages and the recruitment of people for the same work or work of a similar nature. Work of a similar nature is defined as "work for which the skill, effort, experience, and responsibility required are the same".

Advisory boards will be set up by the Central and State Governments, consisting of an equal number of employees and employers, state government representatives, and independent persons. One-third of the boards will consist of women members. These boards will advise the governments on minimum wage fixing and increasing employment opportunities for women.

The Code specifies penalties for offences committed by an employer in contravention of any provision of the Code or for paying less than the minimum wage to the employees. The maximum punishment is three-month imprisonment along with a fine of Rs. 1 lakh. 

The new Wages Code has raised several concerns that need to be addressed:

1. Lack of clarity on the formula for determining the minimum wage.
2. The basis for setting minimum wages, such as geography, skill, and the difficulty of the work, could lead to discretionary powers for administrators, potentially resulting in adverse effects like lobbying.
3. Arbitrary clauses for wage deductions may discourage workers from forming unions due to fears of wage deductions.
4. The Code doesn't clearly outline the principal employer's liability to pay wages if the labour contractor fails to do so. This lack of clarity is especially problematic in India, where many workers are contract labourers.
5. The Code limits workers' access to courts for contesting wage-related violations, allowing them to seek recourse only through quasi-judicial bodies and appellate authorities established under the Wage Code.

The Industrial Relations Code, 2020

The Industrial Relations Code, 2020 aims to strike a balance between the interests of employers and workers, fostering industrial harmony/peace and minimizing disputes. It consolidates three major labour laws.
Under the previous Industrial Employment (Standing Orders) Act, of 1946, it was mandatory for employers of industrial establishments with 100 or more workers to define the conditions of employment and rules of conduct for workmen using standing orders or service rules, and to inform the workers.

However, the new Code raises the minimum number of workers employed for an establishment to have standing orders to 300. The increased threshold is intended to make it more flexible and easier to hire and fire, potentially leading to increased employment, according to the government. However, it may weaken the rights of workers in industrial establishments with less than 300 workers. Employers in smaller establishments have been given complete flexibility in hiring and firing workers, which could lead to job insecurity.

The new Code also mandates prior permission from the government before the closure, lay-off, or retrenchment of employees in establishments with more than 300 workers. The increased threshold for layoffs and retrenchment provides greater operational flexibility, potentially encouraging investment and business expansion.

The code provides a revised definition of industry, which is previously provided under the Industrial Dispute Act, 1947, i.e., "any systematic activity carried on by co-operation between the employer and workers for the production, supply or distribution of goods or services to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature) with certain exceptions like charitable social and philanthropic services, sovereign functions and domestic services etc."

This code set up Industrial Tribunals in the place of existing multiple adjudicating bodies like the Court of Inquiry, Board of Conciliation and Labour Courts. Also, it removes the reference system for adjudication of Industrial Disputes, except the reference to the National Industrial Tribunal for adjudication. Additionally, the formalization of fixed-term employment contracts can help manage workforce needs more efficiently. The employees in fixed-term employment get all the benefits like that of a permanent worker (including gratuity), except for the notice period after the conclusion of a fixed period, and retrenchment compensation.

The Code also introduces new conditions for legal strikes, prohibiting employees from going on strike without giving a 60-day notice. Strikes are also prohibited during the pendency of proceedings before a Tribunal or a National Industrial Tribunal, and employees should not go on strike before 60 days have passed after the tribunal proceeded. The requirements for legal strikes have become stricter, making it nearly impossible for workers to call a legal strike due to the increased notice period. The new Code also proposes the establishment of a re-skilling fund for training retrenched workers, with contributions from the employer equal to 15 days of the worker's last drawn salary.

The Code on Social Security, 2020
The Code on Social Security, 2020 aims to extend social security benefits to all workers, including those in the unorganized sector. It consolidates around nine laws.

The Code aims to provide social security coverage to all workers, including those in the gig and platform economy. The definition of employees has been widened to include inter-state migrant workers, construction workers, film industry workers and platform workers. A Social Security Fund is to be established, and financed through contributions from employers, employees, and the government.

This fund will be used to provide benefits to unorganized workers, platform workers, and gig workers. Extending social security to a larger segment of the workforce can lead to increased consumption and economic stability. It can also reduce poverty and inequality, contributing to social cohesion. The Code introduces a single registration process for all social security schemes, simplifying the administrative process and ensuring better coverage. Workers, particularly those in the unorganized sector, benefit from enhanced social security coverage. This can improve their quality of life and provide safety during times of need.

The Code proposes the establishment of a National Social Security Board for recommending to the central government the formulation of schemes for the various sections of unorganised, gig and platform workers. There is a provision for the central government to decrease or defer the employer's or employee's contribution towards the PF or ESI for up to 3 months in the event of a pandemic, national disaster or epidemic. The consolidation of social security laws simplifies compliance and reduces administrative costs. However, the requirement to contribute to the Social Security Fund may increase financial burdens, especially for small and medium enterprises. 

The Occupational Safety, Health and Working Conditions Code, 2020
The Occupational Safety, Health and Working Conditions Code, 2020 aims to ensure safe and healthy working conditions for all workers. It consolidates around 13 laws.

The Code mandates the formulation of safety and health standards for various industries, ensuring a safe and healthy working environment for all types of workers. A healthier and safer workforce can lead to increased productivity and reduced absenteeism. This can have positive implications for economic growth and competitiveness. The standardization of safety and health regulations simplifies compliance for employers. However, they may face increased costs in ensuring compliance with these standards and providing the required welfare facilities.

The Code fixes the daily work hour limit to a maximum of eight hours. The Code empowers women to be employed in all kinds of establishments and at night (between 7 PM and 6 AM) subject to their consent and safety. The regulation of working hours and mandatory rest periods can also improve the overall well-being of workers.

It defines an inter-state migrant worker as someone who has come on his/her own from one state received employment in another state and earns up to Rs.18000 per month. They can avail benefits in the destination state as regards ration and benefits of building and other construction worker cess. The Code also proposes a Journey Allowance – this is a lump sum fare amount to be paid by the employer for the journey of the worker from his/her native state to the place of employment.

Broader Implications of the New Labour Code
The new labour codes introduce greater flexibility in the labour market, particularly through provisions related to fixed-term employment and the increased threshold for layoffs and retrenchment. This can help businesses adapt more quickly to changing economic conditions and reduce the costs associated with hiring and firing. However, it is essential to strike a balance between flexibility and job security to ensure that workers' rights are protected.

The extension of social security benefits to workers in the unorganized sector is a significant step towards formalizing this segment of the workforce. This can lead to better working conditions and increased income stability for millions of workers. However, effective implementation and monitoring will be crucial to ensure that these benefits reach the intended beneficiaries

The emphasis on equal remuneration for men and women and the provision of maternity benefits are important steps towards promoting gender equality in the workplace. This can encourage greater female participation in the labour force and contribute to economic growth. However, cultural and societal attitudes towards gender roles need to be addressed to achieve meaningful progress.

While the new labour codes simplify and consolidate existing laws, effective compliance and enforcement will be key to their success. This will require robust administrative mechanisms, regular inspections, and stringent penalties for non-compliance. The government will need to ensure that adequate resources are allocated for this purpose.

Small and medium enterprises (SMEs) may face challenges in complying with the new labour codes, particularly in terms of the financial burden associated with social security contributions and welfare facilities. It is important to provide support and guidance to SMEs to help them navigate these changes and ensure that they are not disproportionately affected.

By creating a more flexible and efficient labour market, the new labour codes have the potential to attract investment and boost economic growth. Improved labour relations and a safer working environment can enhance productivity and competitiveness. However, it is important to monitor the impact of these changes on employment levels and ensure that the benefits are widely distributed.

Conclusion
The new labour codes in India aim to simplify and rationalize the existing labour laws while ensuring the welfare and rights of workers. The consolidation of laws into four comprehensive codes is a step toward creating a more efficient and flexible labour market. The success of these reforms will depend on effective implementation, robust compliance mechanisms, and a balanced approach that considers the interests of both employers and workers. It is essential to foster a collaborative approach involving the government, employers, workers, and other stakeholders to navigate the challenges and opportunities presented by these new labour codes and create a dynamic, inclusive, and sustainable labour market for India's economic growth.