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With four new labour codes announced, the Government of India has been setting the stage for a remarkable reform in the Indian Labour Law, some of which dates to 1926. These four new labour acts, include:

• Code on Social Security 2020,
• Occupational Safety, Health and Working Conditions (OSHW) Code 2020,
• Industrial Relations (IR) Code 2020,
• Code on Wages 2019.

These acts will subsume the current 29 central labour and industrial laws, with the intention to facilitate the ease of doing business in-country and to improve the terms of employment and wages for workers.

The pandemic has thrown a spanner in the works to this landmark reform in the labour landscape in India. The original implementation target date for compliance for all businesses in India was 1st April 2021, whereby the Central Government would have notified each of the State Governments to implement the Labour Codes. This has now been deferred.

Given the ambitious scope of this reform and the numerous changes being introduced, we have curated a few of the many key highlights from India’s four new Labour Codes.

Labour Laws in India, Explained

Code on Wages, 2019

Code on Social Security, 2020

Provisions under the Social Security Code will be extended to gig economy workers, fixed term employees and those in the unorganised sector. For example, gratuity will have to be paid to eligible fixed term employees on a pro-rata basis, while permanent employees are paid on the basis of the definition of wages for the entire tenure of employment of the employees (including the past period). This may result in a substantial increase in the CTC given that gratuity will be calculated on the basis wages, which will increase by the new definition.

OSHWC Code, 2020

The Industrial Relations Code, 2020

The Risks of Non-compliance with Indian Labour Codes

For general non-compliance such as non-maintenance or improper maintenance of records, failure to submit standing orders within prescribed time, or contravention of other rules or provisions, employers could be sanctioned fines ranging from Rs. 10,000 to Rs 1000,000. Second or default offences may result in a fine of up to Rs 2000,000 or/and imprisonment up to 6 months. A failure to pay or deposit contributions deducted from employees’ wages is subject a fine up to INR 100,000 in addition to imprisonment. The employer, factory occupier/ or the individual who has ultimate control over the establishment may be deemed culpable.

While the Indian government has enacted the 4 new labour codes, the implementation and enforcement of these codes have been delayed but come in due course. The complexity of these legislative changes means that businesses and employers who operate in India should makes use of this hiatus to prepare and ensure that they are ready and compliant.

Why IRIS HR Consulting

The risks of non-compliance are too high and costly for a business operating overseas. As labour codes are reformed and changed, it helps to seek expert advice from an in-country specialist like IRIS HR Consulting. Receive help navigating the complex and changing landscape regarding labour codes in India today.


For more information on how we can help, get in touch.