Discuss the merits and demerits of the four ‘Labour Codes’ in the context of labour market reforms in India. What has been the progress so far?

Introduction

You can start your answer by mentioning the four labour codes and highlighting the need for their implementation.

• The four Labour Codes introduced in India

1. Code on Wages (2019), 
2. Industrial Relations Code (2020), 
3. Social Security Code (2020)
4. Occupational Safety, Health and Working Conditions Code (2020)

aim to simplify and consolidate complex labour laws into a more unified framework.

•  India, with a large labour force of approximately 501 million workers, faces challenges such as poor working conditions and insufficient incomes, particularly in the unorganised sector.

Body

Merits of the Labour Codes:

• Simplification and Consolidation: The Labour Codes consolidate 29 central labour laws into four streamlined codes, reducing complexity, overlapping regulations, and making compliance easier for businesses.
  • E.g It simplifies the compliance burden on employers by harmonising definitions, filing requirements, and dispute resolution processes.
• Boost to Ease of Doing Business: They promote flexibility for employers in hiring and firing workers and ease industrial relations by modifying rules for strikes and layoffs.
• Dispute Resolution: The establishment of Industrial Tribunals under the Industrial Relations Code allows for quicker and more structured dispute resolution, reducing legal ambiguities and backlog in labour courts.
• Social Security Coverage Expansion: The Social Security Code provides provisions to extend social security benefits like ESI (Employee State Insurance) and PF (Provident Fund) to more categories of workers, including those in the gig economy and informal sector.
• Gender Parity: The new codes mandate that women work in all sectors, including night shifts, with safety measures in place, promoting gender parity in employment.
  • E.g. The Maternity Benefit Amendment Act, 2017 extends to all sectors under the new codes, ensuring better protection for working mothers.

Demerits of the Labour Codes:

• • Inspector-cum-Facilitator Role: While the codes introduce the Inspector-cum-Facilitator to promote compliance and resolve disputes, the dual nature of this role may result in conflict of interest and weaken enforcement. Inspectors might prioritize facilitation over ensuring strict compliance.
  • Non-Inclusion of Charitable or Non-Profit Establishments: The Occupational Safety, Health and Working Conditions Code does not include charitable or non-profit organisations, which leaves a significant part of the social service sector out of these protections.
  • Lack of Provisions for Invisible Labour: Unpaid domestic work or invisible labour, predominantly performed by women, remains outside the scope of the labour codes. These codes do not address the needs of unpaid caregivers, household workers, or those involved in informal, unregistered work.
    • E.g. In India, unpaid care work contributes an estimated $10 trillion to the global economy but receives no formal recognition.
  • Limited Worker Protection: The flexibility in hiring and firing workers, particularly in larger enterprises (300 or more workers), raises concerns about reduced job security. 
  • The Industrial Relations Code has provisions that allow employers to lay off workers without prior government approval, making job tenure precarious.

• E.g. In June 2024, trade unions protested against implementing the labour codes.

Progress of Labour Code Implementation:

• Delay in Implementation: The four Labour Codes are yet to be fully implemented, as several states have not yet finalised their rules. Labour being a subject in the Concurrent List, states must frame their own rules for effective enforcement.
• Pilots and Partial Implementation: Some states (24), like Madhya Pradesh and Gujarat, have begun implementing parts of the new framework to test its effectiveness, while others are still aligning existing regulations with the codes.

Conclusion

The four Labour Codes are a major reform to simplify India’s labour laws, promoting ease of doing business and expanding social security to more workers. A balanced approach that includes the protection of workers’ rights while fostering economic growth is essential to achieving inclusive and sustainable development

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