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Labor Codes in India and its effects on Employers and Employees


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Updated on:
March 22, 2024
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Updated on :

March 22, 2024
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Labor Codes in India and its effects on Employers and Employees

Labor codes in India play a crucial role in regulating and protecting the rights of millions of workers and ensuring that employers adhere to fair practices. These new labor laws in India aim to provide a balanced economic growth and social justice environment. This article aims to provide an in-depth understanding of the four major labor codes, their key provisions, and their impact on employees and employers.

The four labor codes in India are;

  • Code on Wages, 2019
  • Industrial Relations Code, 2020
  • Occupational Safety, Health, and Working Conditions Code, 2020
  • Code on Social Security, 2020

Code on Wages, 2019

  • The Code on Wages consolidates four existing laws on minimum wages, equal remuneration, payment of bonuses, and payment of wages In India.
  • This code ensures that employees receive accurate payment, bonuses and equal remuneration regardless of gender, age, and race.
  • It disallows discrimination based on gender and ensures employees receive their payment on time.
  • It covers the organized and unorganized sectors in India.

Discover everything you need to know about employment in India here.

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Industrial Relations Code, 2020

  • The industrial relations code governs the affairs of employees and employers in India. 
  • It allows workers to command stronger bargaining power and gives them the right to strike when their grievances aren't heard.
  • This code makes provisions for employers’ flexibility in hiring and terminating employment contracts.
  • It consolidates the trade unions act, industrial dispute, and industrial employment acts.

Occupational Safety, Health, and Working Conditions Code, 2020

  • This code ensures employees’ have excellent working conditions regarding their work safety and health. 
  • The code ensures that organizations meet the minimum workplace safety and health standards.
  • It consolidates more than ten existing laws on workplace safety and health.
  • Provides for annual health examinations, paid leave, and adequate facilities for workers.
  • This code ensures employees in India have excellent working conditions with reduced risks of workplace accidents.

Code on Social Security, 2020

  • The Code on Social Security consolidates all the laws concerning social security, maternity benefits, and insurance.
  • The code extends social security coverage to gig and platform workers and introduces a national social security board to streamline and coordinate social security schemes.
  • It also mandates employers to provide medical insurance and gratuity benefits.
  • Employees benefit from increased social security coverage, while employers gain clarity and simplification of compliance requirements.
  • The code aims to provide a comprehensive social security net for workers across sectors, ensuring financial protection and support during illness, old age, or loss of employment.

Read more on employment laws in India here.

India's labor codes offer a balance of employee protection and freedom compared to labor laws in other nations. Although some countries, like the United States and the UK, have more free labor markets, others, like France and Germany, have more comprehensive worker safeguards.

The Effects of Indian Labor Codes on Employers and Employees

The following are some of the new labor code provisions:

  1. The new labor codes are intended to simplify India's labor laws, making it simpler for businesses to understand and abide by them. The codes include several labor regulations into four major groups: industrial relations, pay, social security, and workplace safety.
  2. Under the laws, companies may hire employees for a fixed-term position of up to two years. Employers now have greater freedom regarding personnel, particularly for projects with strict deadlines.
  3. The laws provide workers with better labor rights and protections, such as minimum wages, mandatory bonus compensations, and access to social security benefits, including health insurance and pensions.
  4. The laws make it simpler for workers to establish and join unions, providing them with more negotiating leverage and a louder voice at work.

Both organizations and employees are expected to see positive and negative impacts from the new labor codes. The higher labor rights and trade union rules may raise expenses and limit companies' flexibility, even though firms are anticipated to gain from the simplified labor regulations and fixed-term employment provisions. On the other hand, the enhanced protections and strengthened labor rights provided by the new rules are advantageous to employees. In general, the effectiveness of the new labor regulations relies on their application and intentionality behind their enforcement, as well as how successfully employers and workers adjust to the new laws and guidelines.

Navigating the Labor Codes in India with Skuad

While the labor codes in India aim to balance employees’ rights with their employer’s flexibility, navigating these laws can be challenging, especially for organizations expanding into India. But with Skuad as your Employer of Record, you can ensure full compliance with the legal requirements in India

Skuad’s global employment and payroll platform enables you to hire and onboard contractors and employees in over 160 countries compliantly. With Skuad, you do not have to worry about legal risks and fines, as Skuad ensures your organization is fully compliant with country-specific laws and regulations. Skuad can help you establish compliance as part of your corporate identity without the hassles.

To know more about Skuad, talk to Skuad experts today.


Is labor law mandatory in India?

Yes, the labor law in India is mandatory. Failure to comply with the labor code statutes can result in penalties and fines.

What are the benefits of labor reforms in India?

Here are some benefits of labor reforms in India:

  • Increased employment opportunities
  • Improved working conditions for workers
  • Enhanced productivity and efficiency in businesses
  • Encouragement for foreign investments
  • Reduction in labor disputes and strikes

About the author

Sandeep Patel is a Content Marketing Manager and Strategist. Over the last five years, he has created and managed content for global brands and fintech startups. He is passionate about remote work and using tech for a better work-life balance.

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