In a bid to protect workers’ rights, the Government of India has introduced the most significant labour reforms since Independence.
The Union government has consolidated 29 central labour laws into four comprehensive Labour Codes—on Wages (2019), Social Security (2020), Occupational Safety, Health and Working Conditions (2020), and Industrial Relations (2020).
The Industrial Relations Code, 2020, introduces landmark reforms aimed at easing business operations, skilling freshers, encouraging women’s participation in the workforce, and expanding the definition of “workers” to include working journalists and supervisory staff.
“With pro-women measures encouraging equal representation and working flexibility, the Code fosters inclusive participation. Overall, it is pro-growth, focusing on a uniform, faster, and efficient system,” said a press release issued by the Government of India on Monday
The simplified framework came into force on November 21, 2025. The National Commission on Labour unified the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946, laying the foundation for the Industrial Relations Code, 2020, to streamline a system historically affected by delays and inconsistencies.
Expanded Definition of “Worker”
The Code expands the definition of a “worker” to include sales promotion employees, working journalists, and supervisory staff earning up to ₹18,000 per month. This ensures broader access to statutory labour protections. The pro-labour benefits of the expanded definition include income equality, economic resilience, access to healthcare and sick leave, and recognition of their contribution, the statement noted.
Industry
As per Section 2(p) of the Industrial Relations Code, 2020, the term “industry” now covers any systematic activity carried out through cooperation between employer and worker, regardless of capital investment or profit motive. This brings non-profit and low-capital entities under its purview, according to the press release.
The new definition simplifies access to formal dispute resolution through conciliation officers and industrial tribunals, broadens collective bargaining rights, and extends statutory benefits.
Wages
“The Industrial Relations Code, 2020, provides a 50% ceiling on wage exclusions to ensure statutory benefits such as gratuity, retrenchment compensation, and social security contributions are calculated on a fair and substantial portion of actual earnings. This prevents employers from artificially splitting wages to reduce obligations,” the statement said.
“This uniform definition of wages will ensure higher lay-off and retrenchment compensation, prevent wage manipulation, promote transparency, and reduce disputes,” it added.
Statutory Recognition of Trade Unions
The Code introduces statutory recognition of trade unions. Any union with 51% membership will be designated the Negotiating Union. If no union meets this threshold, a Negotiating Council representing major unions will be formed.
This reform is expected to strengthen industrial democracy, streamline negotiations, and prevent employer interference in union activities.
Fixed-Term Employment
“The concept of Fixed-Term Employment (FTE) has been introduced, allowing workers to be engaged through a direct written contract for a specified duration. Such employees will receive all benefits—working hours, wages, allowances, and statutory entitlements—on par with permanent workers,” the release noted.
This reform is expected to reduce excessive contractualisation, enhance cost efficiency for employers, and help freshers gain experience and specialised skills more rapidly.
Simplified Dispute Resolution Process
Several minor offences that previously attracted imprisonment or criminal liability have been decriminalised. Certain violations can now be compounded through monetary penalties for first-time offences.
Industrial Tribunals will now consist of two members—one judicial and one administrative—to expedite case disposal. Parties may approach tribunals directly if conciliation fails within 90 days, ending the long-standing requirement of government reference and reducing delays.
Strikes
To discourage abrupt work stoppages, the definition of a “strike” now includes mass casual leave taken by more than 50% of workers. The Code mandates a 14-day notice period for strikes and lockouts to promote negotiation and dialogue before escalation.
Retrenchment and Layoff Provisions
Worker Reskilling Fund: Employers must deposit an amount equal to 15 days’ last drawn wages into a dedicated Reskilling Fund within 45 days of retrenchment. The expanded definition of “worker” will support smoother job transitions and greater long-term stability.
Higher Threshold for Layoffs and Closures: Industrial establishments employing 300 or more workers must now obtain prior government approval before layoffs, retrenchment, or closure. States have the flexibility to raise this limit further.
Women’s Representation and Modern Workplace Features
The Code mandates adequate representation of women in grievance committees to ensure gender-sensitive handling of disputes. Model Standing Orders now explicitly support work-from-home arrangements, particularly benefiting women in the service sector. The applicability threshold for Standing Orders has been raised to 300 workers, reducing the compliance burden for smaller industries.
Digital Compliance for a Modern Economy
Electronic record-keeping, online registrations, and digital communication have been incorporated into the compliance framework to promote transparency and efficiency.