India’s labour codes promise a protected, future-ready workforce and resilient industries
India has successfully pulled off one of its most ambitious economic rewrites in decades. After years of conferences, consultations, committees, and court cases, 29 central labour laws have been consolidated into four labour codes on Wages, Industrial Relations, Social Security and Occupational Safety, Health and Working Conditions. While this may appear to be simple legislative maintenance, it is closer to what Keynes once called ‘the gradual encroachment of ideas, ’ a fundamental reset of how India governs work, manages labour-market risk, and distributes economic reward. Politically, the new codes represent a liberalisation of labour markets; however, this captures only part of the larger story. The underlying message is a structural transition from a system obsessed with permissions to one oriented toward protections, moving the state away from hiring and firing controls and instead building a portable social security architecture that allows workers to carry benefits across employers, states, and even work arrangements. In a Schumpeterian world of turnover and creative destruction, the real question is no longer whether change can be stopped, but whether workers can survive—and benefit from—it.
This shift is overdue. India has a labour market designed for a world of lifetime jobs in large factories, but actually runs on small firms (99%), informal contracts (58% regular wage/salaried employees have no written job contract), and gig work (around 1.2 Cr; 2% of the labour force). Even among the formal workforce (19%), a rising share is on short contracts or in platform-mediated roles. Trying to govern this with a thicket of mid-20th-century laws was a recipe for confusion, non-compliance, and permanent mistrust. The labour codes attempt to correct this through four structural interventions.
- Standardisation: The Code on Wages establishes a single national architecture for minimum wages and wage payments, replacing a patchwork that varied not only by state but also by factory. The OSH Code consolidates provisions that were once scattered across more than a dozen laws. For employers operating in multiple states, particularly in manufacturing, logistics, and services chains, it creates an actual rulebook rather than regulatory roulette. While compliance may still involve cost, it becomes predictable, and this predictability drives long-term investment decisions.
- Recognition: For the first time, India’s law explicitly recognises gig and platform workers in the Social Security Code. This is not a semantic change; it is a power shift. The gig workforce is projected to grow (about 2.5 Cr by 2029–30 at 13% CAGR; 4–5% of the total workforce). Parallelly, the government’s e-Shram portal already has a pool of unorganised workers (over 31 crore), including large numbers from transport, construction, and platform work. India’s labour market has quietly moved from lifetime jobs to lifetime employability. Legal recognition is a necessary (though far from sufficient) step toward extending social insurance in a world where the traditional employer–employee relationship is steadily eroding.
- Redefine: The real ideological battlefield is the Industrial Relations Code, historically the zone where ideology often trumped economic arithmetic. The code raises the threshold for prior government permission for retrenchment, closure, and layoffs from 100 to 300 workers for factories and certain establishments. Below that threshold, employers can restructure without asking the political approval, reducing the fear of formalisation that has historically kept Indian firms small. This matters as India has far fewer large employers than economies at a similar income level security which kills job creation. This bet is not risk-free; offering flexibility without safety nets leads to higher turnover without more dignity. If we can offer both flexibility and safety, we will achieve what every labour economist desires – more formal jobs in larger, more productive firms.
- Portability: Over the last decade, social security coverage has broadened substantially – EPFO expansion, ESIC, Atal Pension Yojana (APY), PMSYM for unorganised workers, and now e-Shram. Various government and ILO estimates suggest that a clear majority of workers now have, in principle, at least some form of social security coverage. Coverage, however, is not the same as protection; timely and reliable payout is what ultimately matters. The litmus test is whether a worker transitioning from informal to formal employment, moving from Bihar to Bengaluru, or shifting from a salaried job to a platform can retain their identity, contributions, and entitlements. The Social Security Code points precisely to this kind of portability, enabled by digital IDs, common databases, and multiple social security funds, including for gig and platform workers. If this architecture is executed well, the Indian state’s role in the labour market will shift from being a permissions-issuing gatekeeper for factories to becoming the architect and operator of a portable safety net for workers. That would mark a profound reallocation of risk between capital, labour, and the state.
Policymakers still face three hard truths. First, rights are easier to legislate than to enforce. The codes mandate the issuance of appointment letters, working-hour norms, implementation of safety standards, and safeguards for women on night shifts; however, enforcement capacity has not scaled at the same pace. Without the support of digital systems and grievance redress, we are likely to end up with only a few islands of large companies complying with these standards, while the vast informal ocean where the law is poetry, not practice.
Second, flexibility without workers’ voice breeds mistrust. Higher thresholds for retrenchment approvals may encourage investment, but they must be balanced with modern forms of worker representation, genuine collective bargaining, and credible internal grievance committees if workplaces are to become equitable rather than fragile.
Third, data must move from counting to correcting. The government now has rich streams from e-Shram, EPFO, ESIC and APY, but too often uses them to celebrate headline coverage rather than diagnose system failures. The harder questions remain under-asked: How much income do benefits actually replace? How quickly do payouts arrive? How many registered gig workers successfully settle claims? The next reform phase must make portability as seamless as a UPI transaction, fund serious enforcement, and translate provisions on women’s night work into reality through safe transport and secure workplaces. Otherwise, India risks ending up with world-class labour codes resting on a 19th-century labour market.
The new labour codes do not complete India’s labour market reform; they place it on a new trajectory. They replace an informal, ad hoc bargain—marked by low productivity, low wages, and weak protections—with the possibility of predictable regulation and structured firm-level restructuring. In return, workers are promised portable and transferable protections. As Amartya Sen reminds us, true freedom is not merely the absence of restraint but the presence of capabilities. Whether this bargain ultimately materialises will depend not on what Parliament has already enacted, but on how governments enforce, firms comply, and unions adapt. The law has opened the door to a fairer and more dynamic labour market. Turning that possibility into a lived reality is the hard work that begins now.
