“Discuss the new labour codes and their impact on formal and informal labour in India.” (2020)
Parliament consolidated 29 central labour laws into four codes: the Code on Wages, 2019, and the Industrial Relations (IR) Code, Code on Social Security (SS) and Occupational Safety, Health and Working Conditions (OSH) Code, all of 2020. They came into force on 21 November 2025. The government presents them as simplification and universal coverage; trade unions see them as flexibility for capital. Their effects differ sharply for India’s small formal workforce and its vast informal one.
Main provisions
| Code | Key changes |
|---|---|
| Wages | Minimum wage extended to all employees; a statutory national floor wage; equal pay regardless of gender; timely payment |
| Industrial Relations | Standing orders and prior government permission for layoff, retrenchment and closure now apply only to units with 300+ workers (earlier 100); fixed-term employment with parity of benefits; 60 days’ strike notice in all industrial establishments; negotiating union with 51% membership; re-skilling fund of 15 days’ wages for retrenched workers |
| Social Security | Definitions of gig, platform and unorganised workers; aggregators contribute 1–2% of turnover (capped at 5% of payouts); gratuity after one year for fixed-term workers |
| OSH | Mandatory appointment letters; women allowed night shifts with consent and safeguards; free annual health check-ups for workers above 40 |
Impact on formal labour
Gains
- Appointment letters and fixed-term gratuity improve rights on paper.
- Women gain access to night-shift jobs.
Losses and risks
- Easier hire and fire: raising the threshold to 300 frees most factories from prior permission. Critics expect firms to stay just under it or split units.
- Contractualisation: contract workers already made up 40.7% of factory workers in 2022-23 (Annual Survey of Industries). Fixed-term hiring could replace permanent jobs further. Jan Breman’s description of “formal enterprise, informal worker” may become the norm.
- Weaker collective action: a 60-day notice period limits the strike, the main weapon of organised labour. Ten central trade unions called a nationwide general strike against the codes on 12 February 2026.
Impact on informal labour
Gains
- Recognition: for the first time, gig and platform workers are legal categories. The Social Security (Central) Rules, notified in May 2026, set eligibility at 90 days with one aggregator or 120 days across several in a year.
- Registration: over 31.89 crore unorganised workers had joined the e-Shram portal by August 2026. The government claims social security coverage rose from 19% of the workforce in 2015 to 64% in 2025.
- A universal minimum wage in principle reaches domestic, shop and small-unit workers left out of the old scheduled-employment lists.
Limits
- No employer, no enforcement: in 2025, 56.2% of workers were self-employed and 20.2% casual (PLFS). Wage and safety rules assume an employer and an inspector that most informal workers never meet.
- Welfare, not rights: schemes depend on budget and registration, not on an enforceable employment relationship.
- Social regulation persists: Barbara Harriss-White (India Working, 2003) shows informal work governed by caste, gender and kinship. Codes cannot easily reach these hierarchies.
- Federal unevenness: labour is a concurrent subject, so enforcement varies by state.
Perspectives
- A liberal-market view expects flexibility to attract investment and formal jobs.
- A Marxian view sees a shift of bargaining power to capital, disciplining labour through insecurity.
- Guy Standing (The Precariat, 2011) warns that registration without security creates a class with identity cards but no stable work.
Conclusion
The codes formalise recognition but flexibilise employment. Formal workers gain procedural rights but lose job security, while informal workers gain visibility but not yet real protection. In Karl Polanyi’s terms (The Great Transformation, 1944), they combine market freedom with a thin protective counter-movement. Their real test will be state enforcement and whether registration turns into benefits.