As the long-awaited implementation of India’s four labour codes remains stalled, several states have taken proactive steps to amend their labour law.
These reforms aim to attract investments, boost manufacturing, and address industry demands.
States have moved forward with significant changes despite the Centre delaying the notification of labour codes, which Parliament passed in 2019 and 2020.
The Centre has been nudging states to implement reforms within the existing legal framework.
A task force led by Cabinet Secretary T.V. Somanathan is working on best practices for states to follow.
However, the Centre’s reluctance to notify the codes without addressing union concerns reflects its cautious approach.
This article explores the reasons behind the delay, the reforms undertaken by states, and their implications for India’s labour market.
The Labour Codes: A Brief Overview
The four labour codes—Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020)—were introduced to consolidate 29 existing labour laws.
These codes aim to simplify compliance, promote ease of doing business, and enhance worker welfare.
However, their implementation has been delayed due to the need for states to frame rules under the concurrent list of the Constitution.
Labour Law : Reasons for the Delay in Implementing Labour Codes
The delay in notifying the labour codes can be attributed to several factors:
- State-Level Readiness: Many states have yet to finalize their draft rules, creating a legal vacuum that hinders the rollout of the codes.
- Labour Union Opposition: Trade unions have raised concerns about the codes being employer-friendly and undermining workers’ rights. Their demands for a thorough review have slowed the process.
- Consultations and Consensus: The Centre has been holding consultations with states and unions to address concerns and build consensus. This has further delayed the notification.
State-Level Reforms
Despite the delay, states have amended their labour law to align with industry demands and attract investments. Key reforms include:
- Increased Retrenchment Threshold: At least 19 states and Union Territories (UTs) have raised the retrenchment threshold from 100 to 300 workers, allowing companies to lay off employees without government approval.
- Higher Worker Limits: The applicability thresholds for the Factories Act and Contract Labour Act have been doubled in many states, enabling smaller units to operate with fewer compliance requirements.
- Night Shifts for Women: Thirty-one states and UTs have permitted women to work night shifts, subject to safety measures.
- Fixed-Term Employment: Twenty-five states have introduced fixed-term employment, allowing companies to hire workers for specific durations to meet seasonal demands.
- Compounding of Offences: Several states have allowed for the compounding of minor offences, reducing the burden on judicial systems.
Implications of the Reforms
The state-level reforms have significant implications for India’s labour market:
- Investment Attraction: By easing compliance and aligning with industry needs, states aim to position themselves as investment-friendly destinations.
- Job Creation: The focus on manufacturing and industrial growth is expected to generate employment opportunities.
- Worker Concerns: Critics argue that some reforms may dilute worker protections and lead to exploitation.
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