India labour laws reforms: The Union labour ministry is pushing for the implementation of labour reforms by March this yearas it seeks to standardise the rules made by state governments. According to a release by the ministry, the primary objective is to harmonise regulations across all 36 states and Union Territories under the four labour codes. This initiative will pave the way for implementing the labour legislation effectively. However, progress is uneven, with Nagaland expected to finalise and publish draft rules within a month, while West Bengal has opted out entirely.
Earlier, the government prioritised the rapid implementation of the labour codes, expanding social security for informal workers, including gig and platform workers, and introducing transformative policies. These reforms aim to consolidate the myriad existing labour laws into four unified codes: the Code on Wages, the Code on Social Security, the Code on Industrial Relations, and the Code on Occupational Health & Safety.
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Balancing central and state jurisdictions
Labour laws in India fall under the Concurrent List of the Constitution, empowering both the Centre and states to frame rules. In case of a conflict, central legislation generally takes precedence unless a state’s law receives presidential assent. Although the four labour codes have been passed by Parliament, they can only be implemented nationwide when both the Centre and states notify the respective rules simultaneously. This simultaneous rollout is crucial to addressing labour market rigidities and reinforcing workers’ rights and welfare.
The new codes introduce a uniform definition of wages, reducing ambiguities and litigation. They also define gig and platform workers, enabling the formulation of social security schemes tailored to their needs. Additionally, the codes extend benefits to unorganised workers, gig workers, platform workers, and their families through organisations like the Employees’ State Insurance Corporation (ESIC) and the Employees’ Provident Fund Organisation (EPFO).
The government has streamlined processes for EPFO members and pensioners while expanding social security through comprehensive worker databases.
Ease of business vs labour protection
The new labour codes aim to enhance job security and provide statutory benefits, such as minimum wages and social security. However, these changes have met with resistance from labour unions, which argue that the reforms undermine rights won through decades of struggle. Union leaders claim the codes restrict the right to strike, complicate union registration, and introduce cumbersome adjudication processes. They also raise concerns about the de-recognition of unions and the centralisation of power to de-register unions.
Citigroup’s employment analysis report suggests the reforms could improve the ease of doing business in India. While this may attract investments, there is concern that it could come at the cost of reduced job security, lower wages, and diminished employee benefits. Balancing business-friendly policies with robust labour protections remains a critical challenge for the government.
The MNC angle
Multinational corporations have frequently exploited outdated labour laws, with employees often subjected to excessive working hours without appropriate compensation. Although the Factories Act of 1948 mandates overtime pay for hours exceeding 8-9 per day or 48 per week, MNCs often circumvent these laws by categorising employees as officers or executives, to whom these protections do not apply. This legal grey area demands urgent attention.
The transition to remote work has further exacerbated these issues, blurring boundaries between personal and professional time. Employees often report working 12-14 hour days without additional compensation, highlighting the need for modernised labour protections.
The challenges ahead
India’s 76-year-old labour laws are increasingly inadequate in addressing modern workplace practices. Trade unions, which historically played a pivotal role in safeguarding worker rights, face declining influence. Weakening unionisation could further erode workers’ rights and entitlements, mirroring the plight of white-collar employees who lack union representation.
India’s socio-economic challenges are deeply intertwined with its labour market. Many citizens struggle to secure gainful employment characterised by decent incomes, safe working conditions, and job security. Labour reforms must prioritise not only increasing employment but also enhancing the quality of employment through stricter business norms.
Overhauling labour codes is an essential step, but it must focus on creating a fair balance between economic growth and worker welfare. Policymakers must ensure that ease of doing business does not come at the expense of labour rights. Addressing loopholes, protecting vulnerable workers, and strengthening union representation are critical to achieving this balance. Only then can labour reforms truly empower workers and contribute to India’s broader socio-economic development.