Opinion: Hidden flaws in India’s Labour Codes

A closer look reveals that the reforms prioritise employer flexibility over worker security, raising concerns about long-term labour welfare

By Muhammed Riyas

The passage of India’s consolidated labour codes — merging 29 different laws into four major codes — is being hailed as a landmark in modernising the country’s labour framework. The government has repeatedly presented these reforms as a long-overdue effort to remove outdated regulations, simplify compliance for employers, and bring workers under a unified system. It emphasises that the new approach will provide universal social security, ensure a transparent wage system through a national floor wage, and improve occupational safety through standardised norms across States and sectors.

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Much has also been said about the inclusion of gig and platform workers, who until now operated in a regulatory vacuum. Framed this way, the labour codes appear to be progressive, balanced and growth-oriented. They are advertised as reforms that will both boost investment and protect workers in an increasingly competitive global economy.

Concealing Reality
Yet these headline claims, while attractive, conceal a range of deeper structural concerns. When examined closely, the labour codes seem to shift the balance of power decisively in favour of employers, often at the cost of job security, collective bargaining rights, and meaningful social protection.

• Centralisation
A major issue is the extent of centralisation embedded within the framework. Labour markets in India vary widely across States, shaped by different industrial histories, local economic conditions and political priorities. For decades, federal flexibility allowed States to set higher minimum wages or tailor labour protections to local needs. The introduction of a centrally determined national floor wage, without ensuring that it is scientifically fixed and periodically adjusted, risks turning a minimum into a ceiling. If States are pressured to align with a low floor wage, workers in regions with stronger labour standards may end up losing protections rather than gaining them. Centralisation also extends to rule-making, as the Union government retains considerable power to frame subordinate legislation, weakening the autonomy that States have historically enjoyed in labour regulation.

Labour protections in India serve as minimal guarantees of dignity, fair treatment and economic stability in a deeply unequal labour market, and the new labour codes, instead of strengthening these guarantees, risk weakening them further

• Thresholds for layoffs
The next concern lies in the expanded thresholds for layoffs and retrenchments. Under the Industrial Relations Code, establishments employing up to 300 workers can now hire and fire without seeking prior approval from the state. This is a dramatic shift from the earlier threshold of 100 workers and fundamentally alters the landscape of job security. Most Indian factories employ fewer than 300 workers, which means that a large share of the workforce will be left without key protections.

While industry argues that such flexibility is necessary to remain competitive, research has shown that rigid labour laws were rarely the main barrier to investment. Issues such as poor infrastructure, unpredictable regulatory changes, and high logistics costs have historically played a much larger role. By making it easier to dismiss workers, the code reduces stability in employment and makes long-term workforce planning more uncertain for workers who already face significant economic vulnerability.

• Weakens trade unions
The weakening of trade union rights is another troubling aspect of the codes. By requiring a union to have 51 per cent membership to be recognised as the sole negotiating agent, the law effectively sidelines minority unions in workplaces where multiple groups represent different sections of workers. This undermines pluralism and reduces workers’ capacity for collective bargaining. The expanded definition of strikes and the imposition of a mandatory 14-day notice period, even in non-public utility services, impose additional restrictions on workers’ right to organise and protest. In a country where informalisation already diminishes labour bargaining power, these provisions add further constraints on the limited avenues workers have to raise grievances or negotiate fair working conditions.

• Ambiguous Social Security
The much-touted promise of universal social security also merits scrutiny. While bringing gig and platform workers within a statutory framework is a welcome step, the Social Security Code does not specify clear benefits, contribution structures or funding mechanisms. In the absence of dedicated resources, the provisions remain largely aspirational. Expecting gig workers — whose earnings are often irregular and low — to make significant contributions is unrealistic. For truly universal coverage, the state would need to commit substantial financial support, something that the code does not guarantee.

Moreover, the implementation of social security schemes for unorganised workers is tied to the creation of databases and identification systems that remain incomplete or uneven across States. Without robust administrative systems, the promise of coverage could remain largely theoretical.

• Flaws with fixed-term
Another contentious feature is the formalisation of fixed-term employment across sectors. While this may reduce the exploitative use of informal contract workers hired through contractors, it simultaneously normalises short-term employment without offering any guarantee of renewal or pathways to permanent jobs. For employers, this provides flexibility; for workers, it institutionalises insecurity. Fixed-term workers may technically receive the same wages and benefits as permanent workers, but the absence of long-term employment prospects weakens their bargaining power and increases their vulnerability to sudden job loss.

• Inspection regime
Safety and inspection mechanisms also undergo a quiet but significant transformation. The Occupational Safety, Health and Working Conditions Code expands coverage to more establishments and introduces uniform standards. However, it simultaneously shifts from a strict enforcement model to a “facilitator” approach. Inspections will increasingly be based on randomised selection, and inspectors are tasked with advising as well as enforcing compliance. In a context where industrial accidents, construction site deaths and mining hazards are already poorly monitored, weakening the inspection regime risks further endangering workers’ lives. Regulatory dilution under the guise of simplification may benefit employers, but leaves workers exposed to avoidable risks.

Ignoring Reality
Taken together, the labour codes embody a vision of economic reform that prioritises flexibility for employers over security for workers. They seem aligned with an international narrative that sees labour protections as obstacles rather than safeguards. For a country where more than 90 per cent of the workforce is informal and lacks basic job security, such an approach is problematic. Labour protections in India are not merely regulatory hurdles; they serve as minimal guarantees of dignity, fair treatment and economic stability in a deeply unequal labour market. The reforms, instead of strengthening these guarantees, risk weakening them further.

India undoubtedly needs labour reforms, but reforms must be grounded in the realities of workers’ lives rather than the imperatives of global competitiveness rankings. A transformative labour policy would aim to enhance social security, expand worker representation, strengthen safety enforcement and respect the diversity of state-level labour markets. It would treat workers not as costs to be minimised but as central contributors to economic growth. The current labour codes, however, appear to move in the opposite direction.

As India prepares to implement these sweeping changes, it is essential to look beyond the celebratory rhetoric. The critical question is whether these reforms genuinely improve the conditions of work and life for India’s labouring classes, or whether they leave them more precarious than before. A democratic society committed to dignity at work must examine the labour codes with the seriousness they deserve, rather than accepting the promise of simplification at face value.

(The author is a Public Economist based in Bengaluru)