Budget 2025: Labour codes to be mandatory for large firms from FY26, Budget to reveal phased rollout plan, says report

Labour codes

The government may unveil the plan for the phased rollout of labour codes in the upcoming Union Budget 2025. The Union Ministry of Labour and Employment is currently in talks with the state government of West Bengal and Delhi to finalise the draft rules, The Economic Times reported citing government sources.

The labour codes are set to be implemented in phases from the next financial year (FY26). Large firms with over 500 employees will mandatorily have to comply with the codes in the first year of rollout, followed by mid-size firms with 100-500 employees in the second year and firms with up to 100 employees in the third year, the report added.

The government, in 2020, had decided to simplify the complex labour laws by consolidating its 44 statutes into four comprehensive labour codes. These are the Code on Wages, Industrial Relations Code, Occupational Safety, Health and Working Conditions Code, and Code on Social Security. They aimed to simplify compliance, enhance flexibility, and promote a conducive environment for businesses to thrive.

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The Code on Wages was designed to simplify wage structures, bringing transparency and consistency. The Industrial Relations Code sought to streamline the complex web of industrial relations, making it easier for employers and employees to engage in a productive dialogue. The Occupational Safety, Health and Working Conditions Code aimed at ensuring the well-being of workers, and the Code on Social Security aimed at expanding the social security net.

The Industrial Relations Code, Code on Social Security, and Occupational Safety, Health and Working Conditions Code were passed by the Parliament in 2020. In the Monsoon Session of 2019, the Code on Wages was passed but the rules necessary for their implementation have not been formulated and notified since then.

'Labour' is in the Concurrent List of the Constitution and the power to make rules is entrusted with the Centre and states.

The Economic Survey 2024, tabled by Finance Minister Nirmala Sitharaman on July 22, nudged states to expedite the enactment of labour codes, saying rules needed to implement them have not been framed or notified.