Reform or Rollback? India’s Labour Codes Face Praise and Pushback

India’s labour market is the latest to undergo a significant legislative and regulatory overhaul, following the Narendra Modi government’s notification of four new labour codes last week. The new codes on wages, industrial relations, social security, and occupational safety and working conditions replace 29 older laws to establish a unified and simplified framework. The government says the codes modernise labour regulations and are intended to support business activity by streamlining compliance requirements that were previously governed by multiple outdated laws.

Positioned as reform-oriented, the new codes have been welcomed by industry bodies, which view the reforms as long overdue. At the heart of the favourable response is the government’s promise of a significant reduction in the compliance burden for companies through a unified system that will cut down on extensive filings and paperwork that previously constrained businesses. The government has described the new framework as forward-looking and capable of boosting investment while extending stronger protections to millions of workers, especially in the informal sector.

The Code on Wages has been described as a landmark move to broaden the definition of wages, establish a nationally set floor wage to ensure basic income security, guarantee a statutory right to minimum wages, and mandate higher overtime pay, among other provisions. The Social Security Code, for the first time, includes platform and gig workers within the scope of social security benefits, formally recognising a segment of the workforce that has remained outside the safety net. The government has said that social security will be portable across jobs and states, improving conditions for migrant workers.

The Industrial Relations Code governs relations between employers and employees, aims to reduce workplace conflict, formalises fixed-term employment, provides a mechanism for dispute resolution, and sets rules around union activity. The Occupational Safety, Health and Working Conditions Code focuses on workplace security and safety, mandates health check-ups, promotes work-life balance, penalises discrimination against women, and requires safety protocols to enable women to work night shifts — measures seen as potentially improving labour force participation and reducing gender gaps.

Despite these objectives, overhaul has drawn strong criticism from trade unions, opposition parties, and several labour scholars, who argue that the codes disproportionately favour employers and weaken worker protections. A major concern is the increase in the threshold for government permission to lay off workers from 100 to 300, which critics say will allow companies to retrench workers more freely and undermine job and income security.

Unions also argue that the new requirements for calling strikes make industrial action nearly impossible, reducing workers’ bargaining power. Critics contend that the promise of social security for gig and unorganised workers lacks guaranteed funding and clear implementation timelines. They argue that formalising fixed-term employment could increase short-term contractual jobs rather than stable, permanent employment, and that mandatory social security contributions may reduce take-home pay in the short run.

As for wages, critics maintain that declaring a national floor wage will have a limited impact unless it is set at a level that ensures basic living standards. The real test will lie in where the wage floor is set, and implementation will be closely monitored to determine whether workers experience material improvements in income, particularly in informal and unorganised sectors.

Concerns have also been raised about enforcement. The shift from labour inspectors under the previous framework to “inspector-cum-facilitators” who are empowered to guide employers and encourage compliance — alongside provisions for self-certification — may weaken regulatory oversight in a country where industrial accidents remain a serious risk. Critics warn that moving away from penalty-based inspections may increase the risk of lax safety standards, particularly in hazardous industries.  

Like any major regulatory reform, the new labour codes are expected to face initial implementation challenges. While they have been praised for simplifying processes, enabling faster settlement of gratuity payments, and supporting women through targeted measures, they also risk placing the interests of blue-collar and informal-sector workers behind the goal of improving ease of doing business. Whether the codes ultimately benefit workers will depend on how the rules are framed and how effectively states implement them. Until then, the concerns raised by trade unions remain significant.