Implementation Of The Four Labor Codes: The Much Needed Change

Reforms in labor laws have been long due, but now it seems the wait is finally over. The union labor and employment ministry plans the implementation of the four labor codes this year. In addition, the ministry is also planning to bring a social security welfare scheme for platform workers and those who are a part of the gig economy.

The government is working with all the states and union territories to understand their concern before rolling out these new labor codes. Many states have already shared their agreement with the labor codes and prepared draft rules. The government’s responsibility is to ensure that not even one state or union territory is defied, becoming a part of and benefitting from such a far-sighted program. The government is also trying to integrate the already present social security scheme for the informal sector with the existing database for the industry.

Experts see the implementation of the four labor codes as the Indian government’s modern-day approach to overhauling traditional labor laws that are no longer relevant. It is a measure to bring them in line with the business and investment needs of the 21st century. The new regime will separate all the 44 existing labor laws into 4 codes – Health and working conditions & Occupational Safety Code, Industrial Relations Code, Social Security Code, and Wage Code.

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As far as the approval and acceptance of these codes go, both the President and the Parliament have already shared their consent. The government intends to implement these new codes as soon as possible. Here are the 4 labor codes in some detail:

  • Industrial Relations Code (2020): This code brings together all the three existing labor laws – The Trade Unions Act (1926), The Industrial Employment Act (1946), and The Industrial Disputes Act (1947). With this code, the government aims to make the business environment better for everyone involved by saving industries from the usual labor compliance challenges.
  • Health and working conditions & Occupational Safety Code (2020): This code will help the government regulate the working condition of the worker employed in companies with 10 or more workers and docks and mines. This code aims to drastically improve the working conditions for workers, irrespective of their industry.
  • Social Security Code (2020): This code brings together all the maternity and social security benefits laws. It intends to maximize the benefits mentioned under these laws for workers.
  • Wage Code (2019): This code is applicable for every employee, whether from the organized or unorganized sector. It will help control how wage and bonus payments are determined and made to respective workers, regardless of their type of employment. This code also ensures that workers doing similar jobs are paid equal remuneration. 

Every organization and business needs to understand the changes in the labor codes. This will help them re-align and restructure their processes according to the new labor codes.

It would be an understatement to say that employment and labor regulations are essential to organizations, irrespective of their type and industry. These regulations play a critical role in building and maintaining mutually harmonious relationships between employees and employers. If there is not a good relationship between employees and employers, it will likely hamper the business’s overall productivity. The new labor codes will also have a significant impact on the structure of the employee and labor costs of an organization. Also, the new labor regime will require organizations to revisit, reconsider, and revise their existing labor compliances, employment contracts, registrations, and compensation structure, amongst other things. It will be a big transition that every organization should prepare itself for. Here are some of the benefits that the new labor codes are expected to offer:

  • The new labor codes are expected to bring consistency in the understanding of the term “wages” across the business world. The existing labor laws define wages in many different ways, which has been creating a lot of confusion and legal issues for organizations all this while. The new regime is expected to bring a stop to these concerns.
  • The new labor codes will also help organizations make more sense of the exclusions and inclusions in wages. The new Wage Code makes this part very clear for organizations to understand. There is no blurring of the line or confusion. To comply with these regulations, organizations must relook their employee remuneration components and employment letters and make amendments wherever necessary.
  • The new labor codes will also considerably impact the take-home salary and social security benefits. The changes in different social security components and the definition of wages will impact the payouts released in the name of retirement and social security benefits. The take-home salary of employees is another area that will likely be affected by the new labor codes.
  • The new labor codes will provide much more comprehensive coverage to all the employees than the existing regulations, regardless of their work and the remuneration they draw. The new rules also consider new work models that have emerged over the last few years. They cover platform workers, contract labor, gig workers, fixed-term employees, and other working models. These codes are inclusive and built keeping the future of work in mind.


  • Four labor codes will be implemented in 2022; welfare scheme for gig workers on the anvil: MoS Labor Rameswar Teli | Money Control | PRASHANT K NANDA | FEBRUARY 18, 2022
  • New Labor Codes: How will they impact social security, take-home salary | Financial Express | Priyadarshini Maji | March 26, 2021

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