Centre to notify Labour Code rules before winter session of Parliament

The four Codes that are part of the Centres's attempts to enact labour reforms have remained stuck, with neither the Centre nor the states moving to notify them yet

The Union government has finally decided, after a long delay, to notify the rules under the four Labour Codes before the winter session of Parliament starts on November 25, a government official has said.

 

Labour reforms are one of the government’s most challenging tasks, more so than  tax reforms, such as the GST rationalisation that happened in September and changes to income tax rates announced in February this year.

 

To modernise India’s labour laws to benefit workers and reduce the arbitrary use of state power against companies, the Centre had combined 29 laws into four Codes, issued in 2019 and 2020. But a turf battle between the Union and state governments over how workers must be employed has meant these Codes have remained unimplemented.

 

Labour is a concurrent subject under the Constitution, which means it is a subject that can be legislated upon by both the Centre and the states.

 

Until now, the Centre has only 'pre-published' draft rules, as have several states. In reality, all that these pre-published statements mean is they signify the willingness of the states and the Centre to revise the laws.

 

But the ball has stopped there.

 

No one has taken the next step to issue the signed notifications that are needed to make the Codes operational. This means the Codes remain letters of intent, despite receiving Parliament’s approval and the President’s assent. Chakshu Roy, head of legislative and civic engagement initiatives at the think-tank PRS Legislative Research confirms that this is indeed the case.

 

Kingshuk Sarkar, Professor (General Management and Public Policy) at Goa Institute of Management, said “there is nothing which stops the government from notifying these Codes. There seems to be no explanation for the long delay.”

 

In a written reply in Parliament in the monsoon session, the labour ministry said that “As per available information, 32 States and Union Territories have pre-published their draft rules under four Labour Codes”.

 

Industrially-advanced Tamil Nadu has pre-published its draft rules under only one Code, the one on Social Security. Delhi, too, has pre-published the rules under a single Code –  that on Wages. The most difficult of these Codes, on Industrial Relations relating to how workers will be hired or terminated from their jobs, is not on the list of either Tamil Nadu or Delhi. Meanwhile, West Bengal has not pre-published the draft rules for any of the four Codes.

 

Since labour is a concurrent subject, from now on, all states have to convert the draft rules under all four Codes into notifications for them to have legal validity. The Centre has to do the same.

 

In a recent meeting with Prime Minister Narendra Modi, labour ministry officials pointed to this stasis. The meeting was meant to provide urgency to labour reforms in the wake of a challenging global geo-economic situation.

 

Within this landscape, said the government source cited at the start of this article, rising levels of employment as shown in the monthly Periodic Labour Force data is a positive trend that can be built upon. The overall unemployment rate among persons aged 15 years and more was 5.2 per cent in September, the most recent month for which data is available. This number can be improved upon sharply once the labour Codes are notified.

 

The Centre is particularly keen that moves on the labour Codes should not be framed as something that hurts the interests of workers. Indeed, the Codes can help the cause of workers, particularly those in the unorganised sector. These include provisions on statutory minimum wages and their timely payment, social security, occupational safety, and healthcare.

 

The Industrial Relations Code, for instance, has expanded the definition of workers to include those in sales promotion (call centres) as well as those in supervisory capacities. It has also forced more sectors, including non-profits, to be clubbed under the definition of industries. The rights of workers under each disparate law have consequently been merged instead of being administered under separate Acts that allowed companies to offer differing definitions of basic pay. These rights also offer similar access to dispute resolution, and collective bargaining, including the right to be notified in time about any changes to service conditions.

 

In October this year, the ministry of labour and employment released the draft National Labour & Employment Policy - Shram Shakti Niti 2025 for public consultation. It integrates key national databases such as EPFO, ESIC, e-Shram, and NCS into a unified Labour Stack, envisioning an inclusive and interoperable digital ecosystem that supports lifelong learning, social protection, and income security.

 

The challenge for the Centre and the states is how to communicate the benefits to workers, particularly those in the organised sector. Of the 643 million employed in the country as per the KLEMS database of the Reserve Bank of India, just about 5 per cent have formal employment status in the organised sector. Both levels of the governments would wish to drastically change this picture, but opposition to any labour reforms comes from the organised segment, who apprehend loss of their benefits. Of particular concern to them is the new category of Fixed Term Employment that offers employers the flexibility to hire workers for a fixed duration and for work that may not be permanent in nature.

 

As a government official involved in the discussions said, “The Industrial Relations Code merges the Industrial Disputes Act, Trade Unions Act and Industrial Employment (Standing Orders) Act. Simplified compliance reduces administrative burden, encouraging businesses to expand and create more jobs, while making it easier for workers to understand and exercise their rights.”

 

It is for workers to also perceive the Codes in a similar fashion – before the start of a difficult round of state elections early next year, which could see a sharp focus on jobs and labour rights.