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New Labour Codes Explained

Why should all employees & workers be worried about the new labour codes?

By Jai Vipra, AIITEU Delhi

In 2022–23, the Modi government will likely see through the implementation of 4 new “labour codes” that will replace 29 existing labour laws. The government claims that these labour codes will simplify labour-related governance and bring uniformity in labour rights countrywide. In reality, these codes will actually deprive workers of many of the rights they have won through sustained struggle.

While the neoliberal model of state withdrawal from enforcing people’s rights has faced its share of criticism from all quarters, these codes do not merely sanction state withdrawal. In many instances, they provide for excessive state interference in matters that should be governed by the workers themselves. This includes workers’ ability to organise, as well as their ability to manage their own money. The codes transfer power to the central government not only from workers, but also from the Parliament and the democratic process.

This article is an attempt to explain some of the most important rights we will lose as workers if these codes are implemented. These explanations will be more meaningful if you read them in the context of when you may have problems with your employer, whether due to being treated unfairly at work or because you feel you are not valued adequately at work. The rights we will lose are guarantees for our benefit in such situations, acquired through many decades of struggle and sacrifice.


This code adversely affects:

⟶Your salary

⟶Your ability to hold your employer accountable

This code defines “employee” and “worker” separately, but keeps conflating the two terms to create a confusion in the rights attributable to both. It also leaves out any person “employed in supervisory capacity” who earns more than Rs. 15,000 per month or an amount notified by the Central Government. It does not define supervisory capacity — in the IT sector, many have some supervisory responsibility but are clearly workers who need workers’ rights. 

This provision is an attempt to exclude vast swathes of workers from their rights. The exception should only be for persons who have the ability to terminate the employment of other workers.

The definition of “wages” now excludes overtime, paid leave and holiday wages. In effect, this means such pay is no longer legally guaranteed. Besides, the code does not define minimum wages and provides for a government-dominated procedure for determining minimum wages — the committee(s) that will make this determination will have more government representation that employer and employee representation, and their recommendations will not be binding on the government. This is blatant centralisation of power. It also provides for a “floor wage”, which can be arbitrarily low, have no input from employees (or even employers), and can effectively replace the minimum wage required for workers’ survival.

The code also dilutes the rights of employees to a bonus, by not allowing them to examine and question the company’s accounts for the surplus available to distribute as employee bonuses.

Under the prevailing system, there is a provision for inspectors to drop in unannounced on an establishment to examine whether it complies with labour laws. While rife with corruption, this system was still an important enforcement mechanism against errant employers. This new code renames inspectors as “facilitators” and allows for “web-based inspection”. It also requires the consent of the appropriate government before inspection, removing the surprise element of enforcement entirely. With this, the government has completely hollowed out its own enforcement system. It has provided for self-reporting by companies, but has no provisions for employees to examine or challenge these reports, making the entire law toothless.

Under this code, workers effectively have no recourse to ensure that their employer follows the law.


This code adversely affects:

⟶ Your right to unionise

⟶ Your right to choose your own union leaders

⟶ Your right to go on strike

⟶ Your right to a notice period

⟶ Your right to be protected against arbitrary firing

This code severely restricts workers’ ability to unionise as they wish and to collectively bargain. It makes the registration of a trade union almost impossible through a web of red tape. It gives unbridled powers to bureaucrats to deny or cancel registration for a trade union, or to take forever to make a decision on registration.

It restricts workers’ ability to choose trade union leaders who are not necessarily employed in the same industry as workers. In the history of successful trade unions, persons from outside the industry have played a key role because their own jobs cannot be threatened by vindictive managements. Restricting workers’ rights to choose their own representatives in this manner tips the balance in favour of employers.

The code further dilutes the process of determining which trade union (or council of trade unions) should have the right to negotiate with the employer in case of an impasse. The existing provision of a secret ballot for determining the strength of different trade unions in an establishment has been removed. Open voting is an open invitation for intimidation and targeting of workers. A secret ballot is workers’ basic right, and this has been denied despite repeated demands of all trade unions. The code also changes other dispute resolution mechanisms in favour of employers.

This code makes it more difficult for workers to go on strike by providing confusing and long periods of mandatory notice to be given to employers before a strike. It makes it easy for the government to denote any strike as “illegal”, and to impose heavy fines and even imprisonment on workers who go on “illegal” strikes. Not just workers, but those who help workers with the strike process can also be penalised under this code. In effect, the code makes striking an inordinately costly affair for workers, for which they will have to take on the risk of being imprisoned and persecuted by the state machinery.

Strikes have historically been the most powerful instrument of worker action. Strikes have led to the institution of minimum wages, the weekend, and the 8 hour work day. Strikes terrify despotic employers & governments. Strikes only occur when the vast majority of workers in any establishment are convinced that the onslaught on their rights is no longer acceptable, and are a basic democratic action. This government is very clearly trying to make strikes unviable.

The industrial relations code also in effect provides for the conversion of all regular employment (protected by rights) to a type of contract employment known as “fixed term employment”. Under this code, an employer can keep hiring workers under fixed term contracts of less than a year, renewing those contracts, and effectively making these workers work like permanent employees. However, the employer is not obligated to provide any of the rights that a permanent employee would ordinarily be entitled to — not even a notice period.

Under this code almost all employees in private sector will now have no legal protection whatsoever against mass firings. Under the earlier law, employers who employed more than 100 workers required prior government approval for mass layoffs or retrenchments. This provision was meant to ensure that vindictive mass firings did not take place, and that employers exhausted all other options before depriving large numbers of people of their livelihoods. It provided a basic condition under which employers agreed to do business in India. In tune with the erosion of this right across the world due to the global mobility of capital, the industrial relations code has raised the threshold of prior approval to 300 workers, and has also removed the ability to change this threshold again from Parliament. That ability now belongs to the government.


This code adversely affects:

⟶ Your Employee Provident Fund

⟶ Your Employee State Insurance

⟶ Your gratuity

The government claims that this code “universalises” social security benefits, but in reality it creates barriers in access to social security. The benefits apply to only establishments above a certain size by employee number; workers have to register themselves to avail of benefits; workers need to provide an Aadhaar card to avail of benefits. Anyone who does not have an Aadhaar card or does not want to provide theirs, is excluded. Besides, the code directly excludes many categories of workers by not mentioning them, such as scheme workers (eg. ASHAs), part time workers, and agricultural labourers. No actual schemes for funding social security for new categories of workers in the code have been devised. The code does not obligate the central government to make any financial contribution towards social security in the country.

The rate of contribution to the Employees’ Provident Fund has been reduced from 12% to 10% of the wage, reducing the amount that will accrue to workers. The central government is given the power to notify any rate of contribution for any group of workers. The code allows any establishment to exit the EPF scheme if employers and most employees agree. Under the peculiar employer-employee power imbalance seen especially in small enterprises, this will lead to employers en masse coercing their employees into opting out of a much-needed social security scheme.

The Employees’ State Insurance Scheme is also diluted by curtailing the powers of the enforcement authority (the ESI Corporation) and removing certain obligations for employers to pay ESI contributions. Maternity benefits have not been extended to enterprises employing less than 10 workers.

The code allows the central government unrestrained power to exempt enterprises from obligations, appointing authorities and fixing contributions. This is not only an appropriation of the powers of Parliament as well as of tripartite bodies of the government, workers and employers, but also a level of centralisation that will lead to inefficiency, corruption and arbitrariness. This is clear appropriation of the management of workers’ own money, as there is no contribution from the government towards these funds.


This code adversely affects:

⟶ Your safety at your workplace

⟶ Your overtime work

⟶ Your right to food and rest at work

This code demonstrates the pitfalls of simplification for the sake of simplification. It does away with a litany of sector-specific laws which were brought about because every sector requires different safety standards, and in the process dilutes safety standards for all workers.

It also leaves out most MSMEs in India from coverage entirely — this means that factories using electrical processes employing less than 20 workers, and other factories employing less than 40 workers, do not have to follow the provisions of this code at all. It is as if the government believes that workers working in establishments below this (high) threshold do not deserve legal safety standards at their workplaces.

The code dilutes all available rights of contract workers, including the right to equal pay and benefits as permanent workers. This is important because about 70% workers in the private sector and about 50% workers in the public sector are contract workers. These workers will have no recourse to legal protection even for occupational safety. This includes migrant workers, who after the way they were treated in the first lock-down, clearly require more and better legal protection, not less.

The code has removed earlier limits on overtime work, i.e. work beyond 12 hours a day. The worker’s right to refuse overtime work has been made meaningless with this provision. The code also allows the appropriate government to allow work beyond 6 days a week on its own whims.

The code also does not provide for any inspection of work premises based on complaints by workers or their unions — thus if you complain to the newly minted “inspector cum facilitator” that your boss makes you work in a server room prone to fire, he is not required to even inspect your workplace.

The government has also appropriated to itself the power to prescribe safety standards for women’s employment, leaving no role for women’s trade unions. Even more egregiously, the government has appropriated to itself the power to prescribe all safety standards for all types of workplaces, repealing all previous specific legal safety requirements. Now establishments with less than 500 workers are not even required to have an ambulance at the ready; canteens are required only in establishments with 100 or more workers; lunch and rest rooms are required only in establishments with 50 or more workers. Evidently, workers in small enterprises do not need medical attention, food, or rest.

Since 2019 and alongside the protests by the farmers, trade unions have been voicing their opposition to these new labour laws. It is important for us as IT & ITeS workers to assess these labour codes not on the basis of fluffy media articles and PR pieces, but on the basis of their content and the analysis of previous labour laws.

The resistance to this wanton erosion of our hard-won rights needs to be strong, articulate and fearless.

NB: This article was compiled by building on the incredible work of the Centre of Indian Trade Unions (CITU), particularly that of Comrade Karumalaiyan.



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All India IT and ITeS Employees’ Union

All India IT and ITeS Employees’ Union

AIITEU is a union for all employees/workers in the technology sector and all technology workers in other sectors.