Highlights Of New Labour Codes



The four labour codes – Code on Wages 2019, Code on Social Security 2020, Industrial Relations Code 2020, and Occupational Safety, Health and Working Conditions Code 2020 consolidate 29 Central Labour Laws. The Codes received Presidential assent between 2019 and 2020 but the states are yet to finalize their rules under these codes. The key objectives of the consolidation is to simplify, amalgamate and rationalize the relevant provisions of the existing Central Labour Laws.


The Code on Wages, 2019 (commonly referred as the Wage Code) replaces the following laws:

  1. Payment of Wages Act, 1936
  2. Minimum Wages Act, 1948
  3. Payment of Bonus Act, 1965
  4. Equal Remuneration Act, 1976
  1. As per the Code – (i) basic pay, (ii) dearness allowance and (iii) retaining allowance have been included as components of ‘wages’. Further, the Code excludes the following components from the definition of wages: (a)bonus payments; (b) value of the house-accommodation, supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by an order of the appropriate Government; (c) employer contributions to any pension or provident fund; (d) conveyance allowances; (e) sums paid to the employee to defray special expenses on him by the nature of his employment; (f) house rent allowance; (g) remuneration payable under award or settlement between the parties or order of court or tribunal; (h) overtime allowance; (i) commission payable to employee; (j) gratuity payments; and, (k) retrenchment compensation or other retirement benefit payable to the employee or any ex-gratia payment made to the employee on the termination of his employment. Where previously the definition of wages varied across labour legislations, the Code now provides a single definition as applicable to minimum wages, payment of wages and payment of bonus.
  2. Contractors are covered by the term ‘employees’ under the Code.
  3. The term ‘floor wage’ has been introduced under Section 9 which mandates that the Central Government shall fix floor wage considering minimum living standards of a worker in a prescribed manner. The minimum floor wage shall not be less than the floor wage fixed by the Central Government.
  4. Exempted components are capped at 50 per cent
  5. Section 17 prescribes the time limit for payment of wages. The payment of wages shall be done before the 7th day of the succeeding month irrespective of the number of employees.
  6. Section 17 further stipulates that in the event of removal, dismissal of an employee from service, retrenchment, or resignation from service by the employee, the wages shall be paid to the employee within two working days of his removal, dismissal, retrenchment or resignation, as the case may be.
  7. Section 29 lays down that persons convicted of sexual harassment would not be eligible for bonus.

The Code on Wages is a well-rounded legislation that seeks to balance the interests of the employer and the employee. It aims to remove the ambiguity in the existing labour laws by having a common definition of ‘wage’. This is likely to have a significant impact on the net payable salary of the employees. The Code will further aid in ease of doing business by replacing obsolete provisions and streamlining the laws.


The Code on Social Security, 2020 (commonly referred as the Social Security Code) subsumes the following 9 laws:

  1. The Employees’ Compensation Act 1923
  2. The Employees’ State Insurance Act 1948
  3. The Employees’ Provident Fund and Miscellaneous Provisions Act 1952
  4. The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959
  5. The Maternity Benefit Act 1961
  6. The Payment of Gratuity Act 1972
  7. The Cine Workers Welfare Fund Act 1981
  8. The Building and Other Construction Workers Cess Act 1996
  9. The Unorganized Workers Social Security Act 2008
  1. The Code has included fixed term employees, platform workers, gig workers, inter-state workers etc. in its ambit.
  2. Section 3 of the Code stipulates that all covered establishments are required to be registered under the Code unless they are already registered under other labour laws.
  3. It has introduced the term ‘career center’ meaning any office (including employment exchange, place or portal) established as prescribed by the Central Govt. for providing career services.
  4. The Code allows for an establishment to voluntarily opt in or out of coverage of Employees’ Provident Fund (Chapter III) and Employees’ State Insurance Scheme (Chapter IV), even if the number of employees is less than the specified threshold. This provision has been inserted as an afterthought in the context of the pandemic.
  5. Section 53(2) of the Code provides that in case of fixed term employees, gratuity shall be paid on pro- rata basis and not on continuous service of five years.
  6. The Code empowers the Central Government. to frame social security schemes for unorganized workers, gig workers, and platform workers as well as members of their families with respect to providing benefits under the Employees’ State Insurance Corporation (ESIC).
  7. The Code also lays down penalties and offences. Highlights are- Section 134 which talks about penalties for repeated offenders and Section 137 which allows the employer an opportunity to correct a non- compliance for any offence under the Act prior to initiation of prosecution or proceedings.
  8. A provision has been made under Section 144 wherein employers’ or employees’ contribution may be deferred or reduced for a period of three months in the event of pandemic, endemic or national disaster.

The goal of this Code is to extend social security to all employees and workers either in the organized, unorganized sector or any other sectors. It also includes gig workers (persons who perform work or participate in a work arrangement and earn from such activities outside of traditional employer-employee relationship) and platform workers (a work arrangement where workers or individuals/ organizations use online platform to solve specific problems or to provide specific services or any other such activity in exchange of payment). Hence, the SS Code has not only extended the social security coverage to more employees but has also enhanced the coverage.


The Occupational Safety, Health and Working Conditions Code, 2020 (commonly referred as the OSH Code) subsumes the following 13 laws:

  1. The Factories Act, 1948
  2. The Plantations Labour Act, 1951 
  3. The Mines Act, 1952
  4. The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955 
  5. The Working Journalist (Fixation of rates of wages) Act, 1958
  6. The Motor Transport Workers Act, 1961
  7. The Beedi and Cigar Workers (Conditions of Employment) Act, 1966 
  8. The Contract Labour (Regulation and Abolition) Act, 1970
  9. The Sales Promotion Employees (Conditions of Service) Act, 1976
  10. The Inter – State Migrant workmen (Regulation of Employment and Conditions of Service) Act, 1979
  11. The Dock Workers (Safety, Health and Welfare) Act, 1986
  12. The Cine Workers and Cinema Theatre Workers Act, 1981
  13. The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
  1. This Code applies to all establishments employing 10 workers or more, except mines and docks where the Code would be applicable even with 1 worker.
  2. It stipulates that there shall be registration for all establishments having 10 or more workers.
  3. It has enhanced safety compliance by mandating safety requirement for all establishments.
  4. Section 57 of the Code prohibits employment of contract labour for core activities.
  5. The Code clarifies that a contractor who deploys his own employees and provides statutory benefits is not contractor and the employees, not contract labourers.
  6. Section 55 of the Code stipulates that the contractor shall pay salary via bank transfer only. Where the contractor fails to pay wages, the principal employer shall be liable to pay.
  7. Section 48 lays down that only one license for pan India deployment for a contractor needs to be obtained which shall be valid for 5 years.
  8. Section 32 talks about leave encashment and stipulates that where the total quantum of leave exceeds 30 days, a worker shall be entitled to encash such excess leave. Workers are entitled to encash the remainder of leaves that is not carried forward.
  9. Through the draft rules, the Code sets the overtime threshold at 125 hours per quarter.
  10. Section 2(1)(zf) lays down that the definition of ‘interstate migrant worker’ in the Code includes individual traveling to another state for work, provided the wages are below Rs.18,000/- per month.
  11. Section 61 further lays down that the interstate migrant worker is entitled to yearly journey allowance.

The OSH Code has come at a critical juncture where the rights of the workers have been in debate and their conditions have been brought to the fore owing to the pandemic. The Code clearly addresses issues like that of the migrant workers that needed much attention. Further, it simplifies compliance for employers in the industry by introducing the provision of a single license pan India.


The Industrial Relations Code, 2020 (commonly referred as the IR Code) amalgamates the following 3 laws:

  1. Industrial Disputes Act, 1947
  2. Trade Unions Act, 1926
  3. Standing Orders Act, 1946
  1. Under the Code, the term ‘industry’ now specifically excludes charitable, social, philanthropic and domestic services.
  2. The definition of ‘worker’ has been expanded to include working journalists and sales promotion employees. Further, any individual drawing a salary less than Rs. 18,000 per month has been brought under this definition.
  3. The system of a Grievance Redressal Committee is mandatory for establishments employing 10 or more workers and the Code has done away with the provision of an alternative mechanism.
  4. The Code has replaced ‘Labour Courts’ with ‘Industrial Tribunals’.
  5. The Code introduces a new provision for ‘fixed term employment’ under Section 2(o) which means that engagement of a worker can be made on the basis of a written contract of employment for a fixed period provided that they are eligible for all benefits like that of a permanent worker. Further, they shall be eligible for gratuity if they render services for a period of one year.
  6. The threshold for applicability of the Standing Orders has been raised to 300 from the earlier set limit of 100.
  7. The Code has also decreased its threshold for a trade union to have the status of a sole negotiating union from 75% set in the 2019 Bill to the one that has 51% of the employees as its members.
  8. Further, to constitute a negotiating council, where no single union meets the 51% threshold, the council can be constituted with representatives from various unions provided they have at least 20% of employees as its members.
  9. The Code prohibits strikes and lockouts in all establishments without i) giving a 14 days notice, ii) during pendency of the proceedings before a conciliation officer iii) during pendency of proceedings before the tribunal or iv) during pendency of arbitration or settlement or while an award is in operation.

The Code ensures that industries continue to work smoothly, avoiding repeated disruptions in work by imposing curbs on strikes during pendency of litigation In the same vein, introduction of the sole negotiating union will help reduce the time taken in reaching amicable settlements with employer.

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