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The Labour Code Bills (23 September 2020)

The Labour Code Bills (23 September 2020)

Why in News:

The Rajya Sabha on Wednesday passed 3 Labour Code Bills for the welfare and protection of the workers.


The three labour code bills aimed at labour welfare reforms covering more than 50 crores organized and unorganized workers in the country. This also includes gig, platform and also opens up the doors for social security to those in the self-employment sector.  These three Bills are (i) Industrial Relations Code, 2020 (ii) Code on Occupational Safety, Health & Working Conditions Code, 2020 & (iii) Social Security Code, 2020.


In June last year, the government decided to condense 44 existing labour laws into four codes which involve social security, occupational safety, health and working conditions and industrial relations.

The three Bills that merge 25 laws were passed by the Lok Sabha on Tuesday. The first of the four codes proposed by the government, the Code on Wages, was passed by Parliament in 2019.

Summary of the Debate

Salient features of the Bill:

Industrial Relations Code, 2020:

  • Reskilling Fund: To set up a re-skilling fund for training of retrenched workers with contribution of the employer of an amount equal to 15 days last drawn by the worker.
  • For legal strike: No person employed in an industrial establishment shall go on strike without a 60-day notice and during the pendency of proceedings before a Tribunal and sixty days after the conclusion of such proceedings.
  • Fixed Term Employment: After recognition of Fixed Term Employment, workers will get the option of Fixed Term Employment instead of contract labour.
  • National database: Making a national database of migrant workers.
  • Compensation: In the event of the death of a worker or injury to a worker due to an accident at his workplace, at least 50 % share of the penalty would be given. This amount would be in addition to Employees Compensation.
  • Trade Unions: Provision has been made for giving recognition to Trade Unions at Central and State level. This recognition has been given in the labour laws for the first time and after this recognition, Trade Unions would be able to contribute more affirmatively and more effectively at the Central and State level.

Code on Occupational Safety, Health & Working Conditions Code, 2020:

  • Appointment Letter: A legal right for getting Appointment Letter given to workers for the first time.
  • Health checkup: Free health checkup once a year by the employer for workers which are more than a certain age.Explained: Labour Laws Reforms for UPSC Exam - Legacy IAS Academy
  • Gender Parity: To employ women in all establishments for all types of work. They can also work at night, that is, beyond 7 PM and before 6 AM subject to the conditions relating to safety, holiday, working hours and their consent
  • Inclusion of inter-state migrant workers: An Inter-State Migrant Worker has been provided with the portability to avail benefits in the destination State in respect of ration and availing benefits of building and other construction worker cess.

Social Security Code, 2020:

  • National Social Security Board: It will recommend to the central government for formulating suitable schemes for different sections of unorganised workers, gig workers and platform workers
  • Social Security Fund: A “Social Security Fund” will be created on the financial side in order to implement these schemes.
  • Social security for gig workers: Work to bring newer forms of employment created with the changing technology like “platform worker or gig worker” into the ambit of social security has been done in the Social Security Code.
  • Gratuityfor Fixed Term Employee: Provision for Gratuity has been made for Fixed Term Employee and there would not be any condition for minimum service period for this.

Major concerns:

  • The companies may introduce arbitrary service conditions for workers.
  • More flexibility to employers for hiring and firing workers without government permission.
  • Restrictions on strikes and demonstrations led to assault on the freedom of industrial actions.
  • Making women to work during night time raises the issue like women safety.
  • The new laws related to layoffs and closures apply only to companies with more than 300 workers, leaving out millions of workers in smaller firms.


  • This is a watershed moment for India’s labour law regime. There were some labour policy changes that actually made flexibility of hiring and firing was almost done away with. The employers had the freedom with responsibility of retrenching employees. Since then the government have tried to reform the labour laws, make it more flexible, make it more industry friendly even while ensuring that labours and workers do not lose their protection or safety net.

Important points made by the Guests

Shankar Aggarwal, Former Secretary, Ministry of Labour & Employment, GoI

  • For being successful in a globalized economy, it is important to be competitive in terms of prices and in terms of quality.
  • Competitive in terms of prices means productivity has to be higher and the cost of production has to be low and the labour is very important there. On the one side, it is important to keep labour motivated and to safeguard their interests, on the other hand, it is necessary to make sure that they are productive and they are evident while discharging their responsibilities and duties.
  • Most of these labour laws were created primarily for the welfare of the workers, but many of these laws were created way back in 1930s and then after 1940s and then after independence.
  • Earlier, women were not encouraged to be employees of manufacturing units or of enterprises which are working in three shifts or two shifts. There were too many restrictions on the employee and many times the laws did not permit at all to engage women after certain hours or after sunset.
  • The issue regarding the flexibility in hiring and de-hiring and that has been done to a large extent in the provision of this fixed employment.
  • Earlier, as per the provision, they had to be engaged on a full employment basis that means even if they do not have any work in the organization, they had to continue and they had to be paid.
  • We got to create a new mechanism so that people in unorganized sector covered with social security. Even today they are covered under social security like Atal Pension Yojana. But we wanted to create a very robust, reliable and fairly decent social security package for workers of unorganized sector as well.
  • Almost 90 percent people are working under the unorganized sector and that includes migrant labour also. They are workers but since they are not organized, they find it very difficult to survive and to get decent treatment from their employer, in terms of wages, security at site, housing, education for their children, etc. So, attempt has been made to take care of the migrant labour and basically the workers of organized sector in a big way.

Dilip Chenoy, Secretary General, FICCI 

  • From the industry standpoint there are multiple positives in these four codes. The first thing actually simplifies the ease of actually registering being a part and reported. There is now a single type of registration here from the company’s point of view.
  • If there would be some problem then there is a scheme of compounding. So, it is not necessarily that you get a hold of the port or any jail term, it actually enables to go on.
  • From the employer point of view, there was a lot of confusion regarding recognizing trade unions, rights of workers to go on strike, etc., all of these actually been put in this code.
  • The architecture of these four codes aims at simplifying and giving a definition of different types of workers like migrant workers, gig workers or the other economy workers.
  • The occupational safety bill will impart flexibility in adapting technology changes and dynamic factors in matter related to health safety welfare and working condition of workers

In terms of gender parity, they have done three things:

  • Equal pay for equal work: Women forms a substantial part of the migrant workforce and also in the building and construction workers and the self-certification and self-assessment of the building and workers cess and the payment for that actually protects a lot of women.
  • Framework for maternity leave: Maternity leave is a matter of right for every female employee but in unorganized sector, if a lady delivering a child, she is not being given any maternity benefit leave. The 2020 Bill provides that women will be entitled to be employed in all establishments for all types of work under the Bill. The new bill brings these sections of women workers under the ambit of social security schemes that include maternity benefits.
  • Work 24/7: We tend to discount the number of women that work in the gig economy.

A.K. Bhattacharya, Editorial Director, Business Standard

  • The organized working unions made sure that those labour law reforms did not proceed any further.
  • Earlier, if a company with more than 100 employees required to lay off some people, it was virtually important for the company to do that even though the company would go sick.
  • This facility is now being raised in the sense that companies with less than 300 employees are free to rehire or fire with retreatment benefits the employees they don’t need because of work exigencies. So, essentially an employer is now relatively free in hiring people up to 300 in the secure feeling that if the business does not do well, he does not have to go through a tortuous process like getting local government permission to get rid of his people.
  • In terms of ease of doing business, a major change and the second change is in the space of the contract workers where the system employment as an idea has now been institutionalized where existing companies at least up to 50 employees can actually go for contract or all of their employees without any restrictions. If you are more than 50 then you have to make sure that your contract workers will have to operate in non-core areas and all the contract workers will get all the statutory benefits.
  • These two provisions actually make the job of running a business and at the same time providing adequate compensation to an employee if the employee is not needed when the business does not exist anymore.



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