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Picture Courtesy: PIB

Context:

The Government of India has undertaken one of the most extensive labour sector reforms in independent India by consolidating 29 labour legislations into four integrated Labour Codes — the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and the Occupational Safety, Health and Working Conditions Code (2020).

Four new Labour codes:

Achievement of labour reforms:

• Employment rose from 5 crore (2017–18) to 64.33 crore (2023–24), a rise of 16.83 crore jobs. (Source: PIB)
• Unemployment fell from 6% to 2% in the same period.
• 56 crore women entered the formal labour force, reflecting greater inclusion.
• The proportion of Indians living below the international poverty line has declined, supported by an expanding social protection system—now one of the largest globally.

Picture Courtesy: PIB

Why we need to codify 29 labour laws?

Simplify compliance: For decades, employers had to deal with multiple registrations, licences, and returns across different Acts. This increased compliance costs and discouraged the hiring of formal workers which led to widespread informality (over 90% of Indian workers). A medium-sized manufacturing unit in Gurugram earlier required six different registrations, such as: Registration under Factories Act, Registration under Employees State Insurance, Registration under Contract Labour Act, Registration under Shops and Establishments Act, Registration for bonus, wages, and gratuity obligations. NITI Aayog (Ease of Doing Business Report, 2018) highlighted that Indian firms spend over 30% of their regulatory compliance time on labour-related paperwork.

Under the new codes, this becomes a single registration, reducing time and administrative burden. 

Streamline enforcement: Different labour laws meant different inspectors, registers, rules, and penalties causing delays, harassment, rent-seeking, uncertainty for employers and workers. The Comptroller and Auditor General’s Report (2017) revealed that over ₹26,000 crore of construction cess remained unused because States could not coordinate across multiple labour legislations.
The new Social Security Code fixes this through uniform self-assessment and a single implementation authority. 

Modernized outdated laws: India’s labour framework did not consider gig and platform work, remote work, fixed-term employment, aggregator-based service models (Ola, Swiggy, Uber, Zomato), digital workplaces, growing service sector, contracting and outsourcing practices. A 2022 study by Oxfam India found that nine out of ten gig workers lacked health insurance or accident coverage. With the new Code, they now get access to ESIC coverage and accident benefits.

Improve ease of doing business and promote Job Creation: Older regulations, especially relating to retrenchment, contract labour, standing orders, and factory registration were seen as restrictive, discouraging firms from growing beyond certain sizes (e.g., 100 workers). World Bank’s Doing Business Report noted that India’s labour regulation complexity discouraged investment and the codes reduce paperwork and improve predictability, a key factor for global investors under programs like Make in India. 

What are the transformative impacts of the labour code?

Modernized Legal Framework: Earlier labour laws were nearly a century old and did not anticipate current realities like gig work, digital platforms, fixed-term jobs, automation, hybrid workplaces, and large-scale contracting. The Labour Codes update regulatory structures to reflect digitised workplaces, platform-based services (Ola, Swiggy, Zomato), fixed-term employment, growth of service economy, remote and flexible working. According to NITI Aayog’s “India’s Booming Gig and Platform Economy” (2022):

• India has 7 million gig workers
• Expected to reach 5 million by 2030

The Social Security Code is India’s first law to recognise gig/platform workers and mandate a social security fund for them. 

Universal coverage of wage, safety, and social security rights: Earlier laws applied to narrow categories (e.g., “scheduled employments”), which leads to exclusion of workers.

The Labour Codes extend minimum wages, safety protections and social security (pension, insurance, provident fund) to every worker, including domestic workers, construction labour, gig/platform workers, migrant workers, fixed-term employees and unorganised workers. 

Simplified compliance through digital processes and uniform definitions: Earlier, employers had to maintain 20+ registers, file 8–10 different returns, and seek multiple licences. World Bank Enterprise Survey (2020) observed that Indian firms spend 30–35% of compliance time on labour regulations alone.

The new labour codes introduce single registration, single return, standardised wage definition, online licensing, and digital inspections

Greater investment & job creation through predictability and flexibility: Rigid laws discouraged firms from hiring more than 100 workers due to restrictive rules on retrenchment, layoffs, and standing orders. The Industrial Relations Code raises thresholds from 100 to 300 workers, offering firms flexibility without compromising compensation rights. 

Conclusion:

The consolidation of 29 labour laws into four comprehensive Labour Codes represents a major structural reform aimed at creating a modern, inclusive, and efficient labour governance system in India. By simplifying compliance, expanding worker protection, integrating gig and platform workers, and promoting transparent digital enforcement, the Codes strike a balance between safeguarding workers’ rights and enabling enterprise growth. If implemented effectively, they can help formalize employment, attract investment, and strengthen India’s transition toward a more productive and equitable labour market.

Source: PIB