The Union government has notified its long-awaited set of four labour codes that promises simplification, wider coverage and modernisation. The codes are pitched as a balancing act between the needs of business and the rights of workers. Yet the reforms have triggered strong pushback from unions, labour economists and several state governments, who argue that the new regime risks weakening protections in an economy that continues to generate too few secure jobs.
The new laws — on wages, industrial relations, social security and occupational safety — seek to replace a complex maze of regulations that often confused firms and workers alike. They introduce uniform minimum wages, expand safety norms and bring women into roles historically restricted by law. They also extend benefits to emerging digital occupations. Gig and platform workers will be covered for provident fund, ESIC and insurance, with aggregators contributing 1–2% of turnover.
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But the modernised framework has a less-discussed feature: states must frame and notify their own rules for the codes to come into force. Several states are yet to complete the process. Variations in rule-making, enforcement budgets and political will mean that the reforms may roll out unevenly. In a sector where 90% of workers remain informal, state readiness could matter more than the text of the law.
Higher layoff threshold and job security
Unions’ sharpest criticism concerns the higher threshold for government approval before retrenchment or closure. The Industrial Disputes Act required firms with 100 or more workers to seek approval before layoffs. The new Industrial Relations Code lifts the limit to 300. Industry sees this as long overdue. Businesses argue that the old threshold discouraged scaling and formalisation. The government believes the change will promote investment.
But the shift also removes a key layer of oversight. With the higher threshold, many mid-sized firms can now downsize without regulatory scrutiny. The law even allows the threshold to be raised further by notification, but not lowered. For workers, the risk is asymmetry. In a labour market with weak bargaining power and limited formal-sector absorption, greater employer flexibility may come at the cost of job security.
Strike rules, collective bargaining and enforcement gaps
The codes tighten rules governing strikes. Workers must give 60 days’ notice — up from 14. Strikes are banned during conciliation, for a week after it ends, and for 60 days after tribunal proceedings conclude. The reclassification of mass casual leave as a strike adds another layer of restriction. Penalties are steeper, including possible imprisonment for “incitement”.
These changes could weaken collective bargaining. The formal mechanisms for dispute resolution are already slow and uneven across states. Labour departments are understaffed. Inspectorates have struggled with low capacity for years. The new compliance regime leans heavily on self-declaration and digital filings. Without strong enforcement, both worker protections and employer flexibilities risk remaining largely on paper.
Fixed-term contracts and the informal sector reality
The codes formally recognise fixed-term contracts, promising parity in wages and benefits. In theory, this gives firms flexibility without encouraging casualisation. In practice, renewal remains entirely at the employer’s discretion. In a weak labour market, that imbalance could deepen job insecurity. Many firms may see fixed-term jobs as an alternative to permanent roles.
The larger issue is the one the codes do not resolve. Most Indian workers remain in micro and small enterprises, or outside formal establishments altogether. Many of these firms will not meet registration thresholds or have the capacity to comply. The codes may end up widening the divide between a small formal sector that benefits from clearer rules and a vast informal sector that stays outside the regulatory net.
Gig and platform workers are included in social security for the first time — an important recognition. But the details matter. Contributions of 1–2% of aggregator turnover may not be enough to fund meaningful benefits. Worker registration systems are still incomplete. Platforms may change contractual classifications to reduce liabilities. States must run the schemes, but many lack the administrative capacity. Without strong oversight, the promise of social security may exceed its delivery.
Federalism, consultation and the legitimacy of reform
Labour is a concurrent subject. States and the Centre share responsibility. Many states were uneasy with the pace of reform and the lack of meaningful tripartite consultation. Some objected to the higher layoff threshold; others raised concerns about funding for gig-worker benefits. The uneven buy-in from states and unions raises questions about the political legitimacy of the new regime. A reform of this scale needs consensus, not unilateralism.
The codes contain progressive provisions for women, including equal pay and the option to work at night with safety guarantees. Migrant workers get portability of benefits and registration. But implementation will be the real test. Night-shift safety requires transport, surveillance and grievance mechanisms. Migrant worker databases need to be updated regularly across states. Without administrative capacity, many of these provisions will remain promises rather than protections.
Labour codes: Reform needs balance, not one-way flexibility
India needs modern labour laws. Regulations must support investment, firm growth and job creation. But the reforms must not shift the balance of power decisively towards employers. Raising thresholds, restricting strikes and leaning on self-certification weaken the checks that protect workers in a market where bargaining power is already limited.
The codes offer simplification and wider coverage. But their success will depend on enforcement, state-level readiness and the political will to preserve worker dignity. Modernisation cannot mean reducing protections in the name of flexibility. India’s labour market needs balance — growth for firms and security for workers — if the reforms are to strengthen both competitiveness and fairness.