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  • Raghav Sand

Decoding the Labour Code

The passage of three labour welfare legislations on 23rd September, 2020 was a landmark moment. 40-50 crore workers from the unorganized / organized sector are expected to benefit from these legislations. Indian labour laws had lost relevance with time and needed a complete overhaul. The three codes that got approval from both houses of Parliament cover social security, occupational safety and industrial relations. In 2019 these three bills were introduced, but were later referred to the Standing Committee on Labour; the government re-introduced the bills in September 2020.

The Code on Wages, 2019

In 2019, the The Ministry of Labour introduced ‘The Code on Wages, 2019’, which sought to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out. It replaced the following four laws: (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976.

The Code applies to all employees. The central government makes wage-related decisions for employments such as railways, mines, and oil fields, among others. State governments will make decisions for all other employments.

Key terms

  1. Wages include salary, allowance, or any other component expressed in monetary terms. It does not include bonus payable to employees or any travelling allowance, among other

  2. Floor Wage will be fixed by Central Government after considering living standards; it may differ from one geographical location to another.

  3. Minimum wage must be higher than the floor wage. In case the existing minimum wages fixed by the central or state governments are higher than the floor wage, they cannot reduce the minimum wages. It is prohibited to pay lower than minimum wages.

  4. Revision and review must be done by the central or state governments at an interval of not more than five years.

  5. Overtime shall be at least twice the normal wages. The Code fixes the maximum limit at eight hours per day.

  6. Payment of wages can be done through currency notes or coins or by electronic means. The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly.

  7. Deductions from wages can be done on certain grounds (i) fines, (ii) absence from duty, (iii) accommodation given by the employer, or (iv) recovery of advances given to the employee, among others. These deductions should not exceed 50% of the employee’s total wage.

The Occupational Safety, Health and Working Conditions Code, 2020


  1. The 2020 Code increases the threshold to: (i) 20 workers for premises where the manufacturing process is carried out using power, and (ii) 40 workers for premises where it is carried out without using power.

  2. In case hazardous activity is carried out, the threshold of minimum workers does not hold good.

  3. Establishments or contractors employing 50 or more workers (on any day in the last one year) are also covered in the code.

The appropriate government can exempt any workplace or activity from the Code in case of a public emergency, disaster, or pandemic for up to a year. The 2020 code empowers the state government to exempt any new factory from the provisions of the Code in order to create more economic activity and employment.

Duties of Employers

Duties of employers include: (i) providing a workplace that is free from hazards, (ii) providing free annual health examinations in notified establishments, and (iii) informing relevant authorities in case any accident at the workplace leads to death or serious bodily injury to any employee. Additional duties are prescribed for employers in factories, mines, docks, plantations, and building and construction work, including provision of a risk-free work environment, and instructing employees on safety protocols.

Work hours:

The Code fixes the maximum limit at eight hours per day


Workers cannot be required to work for more than six days a week. Further, they must receive one day of leave for every 20 days of work per year.

Safety committees

The government may require certain establishments to constitute safety committees in case of a certain class of workers. The committees will be composed of representatives of the employer and workers and will function as a liaison between them. The number of representatives of workers in the committee must not be less than that of the employer.

Inter-state migrant workers

The 2020 code provides for certain benefits for inter-state migrant workers. These include: (i) option to avail the benefits of the public distribution system either in the native state or the state of employment, (ii) availability of benefits available under the building and other construction cess fund in the state of employment, and (iii) insurance and provident fund benefits available to other workers in the same establishment.

The Code On Social Security, 2020

The 2020 code states that the central government may, by notification, apply the Code to any establishment (subject to size-threshold as may be notified). The code states that the central government will set up a fund and state governments will also set up and administer separate social security funds for unorganised workers. The 2020 code also makes provisions for registration of all three categories of workers – unorganised workers, gig workers and platform workers.

Role of Aggregators

The 2020 code clarifies that schemes for gig workers and platform workers may be funded through a combination of contributions from the central government, state governments, and aggregators. For this purpose, the code specifies a list of aggregators in Schedule 7. These mention nine categories including ride sharing services, food and grocery delivery services, content and media services, and e-marketplaces. Any contribution from such an aggregator may be at a rate notified by the government falling between 1-2% of the annual turnover of the aggregators. However, such contribution cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.

Special Provions for Working Journalists

The 2020 code reduces the gratuity period from five years to three years for working journalists. The maximum imprisonment for obstructing an inspector from performing his duty has been reduced from one year to six months.


Similarly, the penalty for unlawfully deducting the employer’s contribution from the employee’s wages has been changed from imprisonment of one year or fine of ₹50,000 to only fine of ₹50,000. The 2020 code empowers the state government to exempt any new factory from the provisions of the Code in order to create more economic activity and employment.

Employment of Women

The 2020 code provides that women will be entitled to be employed in all establishments for all types of work under the code. It also provides that in case they are required to work in hazardous or dangerous operations, the government may require the employer to provide adequate safeguards prior to their employment.

woman wears yellow hard hat holding vehicle part

Inter-state Migrant Workers

The 2020 Bill adds that any person who moves on his own to another state and obtains employment there will also be considered an inter-state migrant worker. The 2020 Bill also specifies that only those persons will be considered as inter-state migrants who are earning a maximum of ₹18,000 per month, or such higher amount which the central government may notify.

Database of Migrant Workers

The 2020 Bill requires the central and state governments to maintain or record the details of inter-state migrant workers in a portal. An inter-state migrant worker can register himself on the portal on the basis of self-declaration and Aadhaar.

The Industrial Relations Code, 2020

The Industrial Relations Code, 2020 was introduced in Lok Sabha on September 19, 2020. This will apply to establishments with at least 300 workers. It replaced three labour laws: (i) the Industrial Disputes Act, 1947, (ii) the Trade Unions Act, 1926, and (iii) the Industrial Employment (Standing Orders) Act, 1946.

Prior Government Approval

The 2020 code provides that prior permission will be required for lay-off or retrenchment for an establishment with at least 300 workers.

Negotiating Union and Council

  1. Sole Negotiating Union: If there are more than one registered trade union of workers functioning in an establishment, the trade union having more than 51% of the workers as members would be recognized as the sole negotiating union.

  2. Negotiation Council: In case no trade union is eligible as sole negotiating union, the code provides that a negotiating council will be formed consisting of representatives of unions that have at least 20% of the workers as members.

Continuous Service

Continuous service in relation to a worker, means the uninterrupted service of such worker, including his service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal or a lock-out or a cessation of work which is not due to any fault on the part of the worker.

Strikes and Lock-outs

No person employed in an industrial establishment shall go on strike, in breach of contract —

(a) without giving to the employer notice of strike, within sixty days before striking; (b) within fourteen days of giving such notice; or (c) before the expiry of the date of strike specified in any such notice; or (d) during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings; or (e) during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days, after the conclusion of such proceedings; or (f) during the pendency of arbitration proceedings before an arbitrator and sixty days after the conclusion of such proceedings

Implementation and Oversight Will Be Key

A legislation is judged by the impact it creates in the real world. Those charged with governance have the responsibility to monitor the implementation in both letter and spirit. These labour reforms shall have have to prove their mettle in the progress of industry and worker welfare.

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