New Labour Codes: How Modi’s Government Simplified Labour Laws

India’s labour law framework had, for decades, consisted of 29 separate central laws covering different aspects of employment, wages, industrial relations, and workplace safety, a fragmented structure widely criticised as confusing for both employers and workers to navigate. Modi’s government consolidated these into four unified codes, passed between 2019 and 2020. This article explains what changed and why implementation has taken years longer than originally planned.

The Four Codes and What They Consolidate

The Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code, together passed between 2019 and 2020, consolidate the previous 29 separate central labour laws into these four unified statutes, according to Labour Law Reporter’s tracking of the codes, aimed at reducing the compliance complexity businesses previously faced navigating dozens of overlapping, sometimes contradictory individual laws.

The Long Road to Implementation

Despite being passed in 2019 and 2020, the codes did not take immediate legal effect, since labour falls under India’s concurrent list, meaning both the central government and individual state governments need to frame and notify their own implementing rules before the codes become operational in practice. Business Standard’s reporting from October 2024 found 25 states had by then finalised their draft rules, still short of full nationwide implementation years after the codes’ original passage, a gap RANE’s analysis, published through Stratfor Worldview, specifically examined under the heading “India’s Labor Codes: Challenges to Nationwide Adoption.”

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What the Codes Change in Practice

Among the most discussed practical changes, the codes standardise the legal definition of “wages” across previously inconsistent definitions in different laws, expand social security coverage to include gig and platform workers for the first time, a category of workers, including ride-hailing and delivery app drivers, that fell largely outside earlier labour law protections, and adjust rules around fixed-term employment and the threshold at which companies need government permission before layoffs or closures.

The Union Opposition

Trade unions have been consistently and vocally opposed to the codes since their initial passage. Analysis published by the Institute of South Asian Studies at the National University of Singapore specifically examined what the piece characterised as a “decline of trade union influence” tied to the codes’ passage, while Business Today’s coverage, headlined “Explained: Why new labour codes have triggered protests,” documented specific union grievances, including concerns that the codes make it easier for larger companies to conduct layoffs without prior government approval and that they weaken previously guaranteed rights to strike and collectively bargain.

The Precarity Critique

Beyond the union-specific opposition, broader analysis has questioned whether the codes adequately address underlying structural problems in India’s labour market. The Wire’s assessment, headlined “Implementation of Four New Labour Codes Doesn’t Address the Precarity of Indian Labour Market,” argued that consolidating existing laws into a simpler four-code structure, while a genuine administrative simplification, does relatively little on its own to address the much larger share of India’s workforce that remains in informal, unprotected employment entirely outside the formal labour law framework these codes govern, whether the old fragmented version or the new consolidated one.

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The Government and Business Community’s Defence

Supporters of the codes, including much of the organised business community, have defended them as a long-overdue simplification that reduces compliance costs and regulatory uncertainty for employers, arguing that easier compliance and more predictable rules around hiring and layoffs could encourage more formal-sector job creation over time, even if the codes don’t directly address informal employment, a genuinely disputed causal claim that will likely only be testable once the codes are fully implemented nationwide and enough time has passed to observe formal employment trends.

The Wage Floor Question and Remaining Holdout States

One specific, still-unresolved piece of the transition involves the actual wage floor the Code on Wages is meant to establish. India’s existing National Floor Level Minimum Wage, a non-binding reference figure state governments were merely encouraged to follow, has stood at just Rs 176 per day since June 2017, according to PolicyCircle’s tracking of the wage code’s implementation, and the Labour Ministry, as of the most recent tracking, was still finalising the new binding national floor the Code on Wages is designed to introduce, with a Central Advisory Board still working through the specific rate calculation. On the state-adoption side, the Tribune’s reporting identified Kerala and West Bengal as the only two states that had not yet begun the process of implementing the four codes, a holdout that matters given labour’s concurrent-list status means the codes cannot take full legal effect in a state until that state’s own government notifies its implementing rules.

Bottom Line

Modi’s government consolidated 29 separate central labour laws into four unified codes passed in 2019 and 2020, aimed at simplifying compliance and extending social security to gig workers for the first time, but full implementation has taken years longer than planned due to the need for state-level rule-making, and the codes remain a source of sustained opposition from trade unions concerned about weakened layoff protections and collective bargaining rights.

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Abhyudaya Verma