Explained: The four labour codes and what they mean for India's workforce

India's Parliament, in the last monsoon session, passed three labour codes - the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 amidst massive criticism and protests, especially in northern parts of the country. In the monsoon session last year, it also passed the Code on Wages. Together, these four codes merged 44 pre-existing labour laws.

The government introduced the codes aiming to streamline and simplify the country's existing and overlapping labour laws. Since the subject of labour comes under the Concurrent List of the Constitution, there were hundreds of state and central labour laws.

While the industry and employers have welcomed the labour codes for spurring employment and the overall business environment, labour unions and opposition parties across the country have strongly critiqued the labour codes calling them highly anti-worker and pro-employer in nature.

What are the key proposals in the four labour codes? 

The Industrial Relations Code aims to streamline the laws regulating industrial disputes and trade unions in India. The Code would replace three existing labour laws - Trade Union Act 1962; Industrial Employment (Standing Orders) Act, 1946 and The Industrial Disputes Act of 1947. The code stipulates that companies with up to 300 workers will not be required to take prior government approval for firing employees and shutting down the plant or factory. However, those with over 300 workers will still be required to seek government approval. Further, the code also introduces conditions on the rights of the workers to go on strike. It proposes that employees working in an industrial establishment will be required to provide 60 days' strike notice. Further, if the proceedings are pending before an Industrial tribunal or a labour tribunal, the workers cannot go on a strike for 60 days after the proceedings have been completed. Also, flash strikes have been made illegal.

The Code on Social Security, 2020 has for the very first time extended social security benefits like maternity leave, disability insurance, gratuity, health insurance and old age protection to workers in the country’s booming unorganized sector. These include gig workers, platform workers, contract workers, freelancers and home-based workers. It also stipulates the gratuity benefits to fixed-term employees without any conditions on minimum service. The Code proposes the creation of a social security fund for extending these benefits to workers in the unorganized sector. The scheme for the social security fund envisages that the platforms and aggregators make contributions to the fund which would be either 1-2 percent of the turnover or 5 percent of the worker’s wages. Central and the state governments can also contribute to the social security fund. It integrates nine previous regulations relating to social security namely, The Employees Compensation Act, 1923; The Employees Provident Fund and Miscellaneous Provisions Act, 1952; The Employees State Insurance Act, 1948; The Maternity Benefit Act, 1961; The Unorganized Workers’ Social Security Act, 2008; The Payment of Gratuity Act, 1972; The Employees Exchange Act, 1959; The Building and Other Construction Workers Cess Act, 1996 and The Cine Workers Welfare Fund Act, 1981.

The Occupational Safety, Health and Working Conditions Code aims to regulate the safety, health and working conditions of workers employed in establishments. The Code proposes to widen its applicability to different varieties of workers, namely inter-state migrants, sales promotion employees and audio-visual workers. Further, attempting to promote gender equality, it also proposes to let women workers work during the night time after gaining their consent. It also proposes to let inter-state migrant workers avail the benefits of the Public Distribution System in either their home state or the state of employment. The Code integrates thirteen labour laws relating to safety, health and working conditions.

The Code of Wages was passed in August 2019. It makes provisions for minimum and timely payment of wages to all the workers in India. It consolidates four laws relating to wages and bonus, namely - Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976. The Code introduces the concept of floor wages wherein the rates will be fixed by the central government by taking into account the minimum living standards of the workers. Once the code is enacted, the minimum rates of wages fixed by the State Government cannot be less than floor wages as determined by the Central Government. The Code applies to all the establishments irrespective of the number of employees working in the establishment. It also applies to all the employees employed in both the organized and the unorganized sector.

What are the Changes between the earlier Labour Laws and the present Labour Codes?

As for the IR Code, 2020, earlier, firms with up to 100 workers didn't require the government's permission to fire workers. However, now firms with up to 300 workers don't require government permission to fire workers. Also, earlier, two weeks' strike notice was required to be submitted whereas now 60 days' notice is required.

Earlier, the unorganized sector was not eligible for social security cover, but now, it can avail the benefits under CSS 2020. Another feature is that workers with only 1 year of service are eligible to draw gratuity whereas earlier they were eligible to do so after 5 years of service.

Under the OSH Code, the maximum work hours should not exceed 12 hours a day unlike the previous provision of 9 hours a day.

Previously, there was no provision for minimum wages for the workers, while now under the Code on Wages, the central government will determine the minimum wages.

Why are Trade Unions seeing the Codes as a cause for concern?

Many experts and labour union bodies across the country have deemed the labour codes to be highly anti-worker and pro-employer in nature.
For instance, one key feature that has emerged from the labour codes is that they provide size-based applicability to industrial establishments. Thus, thousands of industrial units employing a lesser number of workers do not fall under the ambit of the Codes.

While the government argues that raising the threshold for government approval in case of winding up and firing employees to 300 will increase employment creation, the labour unions are of the opinion that this move would allow employers to hire and fire as many 300 workers freely as per their will. The IR code is therefore seen as being highly skewed in favour of employers.

Furthermore, by increasing the strike notice period to 60 days, the negotiating power of the unions has been diminished. This has made it difficult for workers to collectively agitate against wrongful practices of employers and in fact, has yielded more power in the hands of industrial establishments. The unions say that the government has rolled out the code to delegitimize the system of strikes. The unions have also noted that the right to strike has not been extended to workers in the unorganized sector.

Have the Gig and Platform Worker’s welcomed the Code on Social Security, 2020? 

Another drawback that has emerged is for workers from the unorganized workforce. Representatives say the government has done very little to extend social welfare benefits to gig and platform workers. While the government has recognized the need to extend those benefits, unlike full-time employees, the gig and platforms workers will receive the social security benefits in lieu of lower cash in hand. They also argue that not all the benefits of regular employees have been offered to unorganized workers. Another interesting argument raised by the representatives of gig workers was that CSS 2020 is merely a scheme and not an established law which the governments can change easily.