Labour Codes 2023: Decoding the New Labour Reforms and What It Means for India’s Employers and the Nation-Building Frontline Workforce

A total of 29 labour laws which have remained unchanged since Independence will now be codified into the four new labour codes, namely Industrial Relations Code, Code on Wages, Occupational Safety, Health and Working Conditions Code, and Social Security Code.

The Central Government of India has finally passed the four new labour codes in an effort to bring about reforms to the existing labour laws, and to establish rules and regulations which will govern employee-employer relations.
labour codes
labour codes

A total of 29 labour laws which have remained unchanged since Independence will now be codified into the four new labour codes, namely Industrial Relations Code, Code on Wages, Occupational Safety, Health and Working Conditions Code, and Social Security Code.

What Prompted the Introduction and Passing of the Four New Labour Codes?

The empowerment of workers, for a prosperous, empowered and self-reliant India; that’s the true motive, according to the current government in power.

The 4 labour codes aren’t exactly “new”. They were first introduced in the parliament on September 29, 2020. It’s only now that they’re seeing the light of day. India, and her 50 crore workers in the organised and unorganised sectors still don’t have access to the various social security schemes, even after 74 years of Independence.

What’s more, 90% of this over 50 crore figure are workers in the unorganised sector. And that, according to the current government, is what prompted the introduction of the new labour laws. In simple terms, the codification aims to provide respect, security, health, safety and other welfare schemes to India’s neglected frontline workforce.

But there are more reasons; not just the upliftment of India’s workers. The codification has been a topic of discussion and a must-execute campaign, 18 years in the making. It was the Second National Commission of Labour that recommended codification at the central level of the various labour laws in 4 or 5 Labour Codes back in 2002, which unfortunately didn’t happen.

There weren’t any labour reforms that were carried out either in 1991 when economic reforms were being introduced.

These very reasons, in conjunction with ensuring the ease of doing business for enterprises by bringing the ‘Inspector Raj’ system to a close, reducing compliance, and terminating excessive, rigid, and redundant regulations, culminated in the introduction (and now the execution) of the new labour codes.

The Minimum Wages Code — Workers Earn What They Deserve

Of the 29 existing codes, 4 have been clubbed under the Minimum Wages Code to give workers the right to minimum wages for the first time.

Key Highlights of Minimum Wages Code

  • Minimum wages to be reviewed every 5 years
  • Timely payment of wages guaranteed for all workers
  • Equal wages for both male and female workers
  • Provision of floor wage eliminates regional disparity in minimum wages
  • Minimum wages to be decided based on skill level and geographical area
  • Payment of Wages Act (in effect since 28 September, 2017) has increased the wage ceiling from ₹18,000 to ₹24,000
  • Social, health, and wage security to over 50 crore workers in the organised and unorganised sectors

The OSH Code — Enhanced Worker Well-Being and Women Empowerment

The Occupational, Safety, Health and Working Conditions Code, 2020 aims to provide a safe working environment for workers. It amalgamates 13 labour laws and ensures occupational health and safety at the workplace.

Key Highlights of the OSH Code

  • Inter-state migrant workers can register themselves on the national portal to create legal identities which will help them avail social security schemes and benefits
  • Employer-sponsored annual travelling allowance for inter-state migrant workers
  • Mandatory and free annual health checkup sponsored by the employer
  • Building and construction workers migrating between states to receive a direct benefit from the Building and other Construction Workers’ Cess fund
  • Migrant worker in one state and their dependants in another to get ration facilities under the ‘One Nation-One Ration Card’ scheme
  • Dedicated helpline for addressing migrant workers’ grievances
  • Creation of a national inter-state migrant worker database
  • One-day leave for every 20 days of work done — number of mandatory work days slashed from 240 to 180
  • Women workers can work at any establishment
  • Women workers can work at night with their consent and employers have to make necessary arrangements for their safety and provide necessary facilities
  • Paid maternity leave for women workers, increased from 12 to 26 weeks
  • Establishments with 50 or more women workers to set up creche facility

The IR Code, 2020 — An Undisputable Reform To End All Disputes

The Industrial Relations Code (IR Code, 2020) subsumes 3 labour codes and safeguards trade unions and workers’ interests. It also ensures that no disputes between workers and industrial units arise in the future.

Key Highlights of the IR Code

  • Workers who lose their jobs to get an allowance under the Atal Bimit Vyakti Kalyan Yojna
  • Workers from organised sectors who have lost jobs to get unemployment allowance under the the Atal Bimit Vyakti Kalyan Yojna
  • Retrenched workers to get 15 days’ wages credited to their bank accounts for re-skilling
  • Speedy justice and settlement of workers’ disputes (within a year) by a tribunal
  • Two-member industrial tribunal for quick disposal of disputes and cases
  • Trade union with 51% votes to be the negotiating party for workers
  • A council of trade unions to be set up to negotiate with employers if no single trade union gets 51% votes

The Social Security Code — Security for Disadvantaged Workers

9 pre-existing labour codes have been combined to constitute the Social Security Code, 2020. This code will provide access to various security schemes like pension, maternity benefit, gratuity, insurance and so on.

Key Highlights of the Social Security Code

  • Free treatment at ESIC-run dispensaries and hospitals through a small contribution
  • Workers from unorganised sectors and all sectors get access to ESIC hospitals
  • ESIC dispensaries, hospitals and branches for all 740 districts in India
  • ESIC benefit for workers engaged in hazardous work
  • Platform and gig workers in tech to get ESIC access
  • Establishments engaged in hazardous work to compulsorily register with ESIC
  • Plantation workers to get ESIC benefit
  • EPFO (PF) scheme extended to self-employed individuals and workers in both organised and unorganised sectors
  • Minimum service clause removed for payment of gratuity to fixed-term (contractual) employees
    Same social security benefits for fixed-term and full-time employees
  • Creation of national database of workers in the unorganised sector through registration on the e-shram portal
  • Employers with 20+ workers to report vacancies online
  • Unorganised sector workers to get Aadhaar-based UAN for ESIC and PF scheme benefits

What Does the Codification and Labour Reform Mean for Employers and Workers?

For employers, the amalgamation of pre-existing codes could give some structure and shape to the unorganised frontline workforce. Let’s not forget that one of the reasons behind the introduction of new codes is the removal of multiplicity, i.e.,the pre-existing labour laws, before this monumental step, were unorganised and confusing.

Now, it’s structured. The same can happen for the frontline workforce, once they’re implemented. Atleast, this is a (really good) start, for now.

Speaking of structure, the centralised, platform-based, national database of workers where employers have to compulsorily report job vacancies online and register employees through a portal can remedy many complications associated with frontline workforce management.

For instance, the centralised database and platform-based approach can help employers tap into a colossal, job-ready talent pool.

The idea is to bring everything under one roof. And the proposition to centralise data, register workers through a portal or platform sure does sound promising; there is scope for more fine-tuning that can bring about greater efficiencies.

The centralised talent pool can be optimised, if synergies with tech companies and startups can be built. A seamless cross-integration between the database and tech platforms, like an external skilling platform integrating with the talent repository for instance, can enrich the talent pool.

In doing so, workers can gain essential skills that can further their careers and help them find jobs quickly. On the other hand, enterprises can access pre-skilled workers, cut costs on training and upskilling, and hit the ground running from day one.

As for the workers, the benefits — listed under each labour code above — are clear and out in the open for all to see. All in all, they’re getting access to social security benefits like everyone else — finally!

They’ve always been getting the short end of the stick. The new labour laws could improve their lives, dignity, and wellbeing. By enabling insurance coverage for workers, the government has ensured that their economic welfare is preserved and enhanced.

Benefits administration for gig workers is another knock-on effect. By putting gig workers in the same league as permanent employees, the streamlining of the gig economy could be feasible. This move could eventually encourage other workers to jump on the gig bandwagon and improve their earning potential.

The new labour codes don’t only tend to frontline workers, but also to enterprises, industries, and sectors. Infinite possibilities, unlimited potential; that’s what the new labour codes promise. It remains to be seen how this monumental move affects frontline workers, employers, and their relationship. Only time (and results) will tell.

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