India Starts Biggest Labour Reform Drive in Decades

The biggest overhaul of India’s labor laws in more than half a century came into force on Friday, 21 November, reshaping how the country regulates wages, hiring, social security and workplace conditions. 

The government called the four new labor codes a historic reset that will “empower workers” and make compliance easier, while unions and opposition leaders warned that the shift risks weakening protections and tilting the balance of power toward employers.

The codes replace 29 laws drafted between the 1930s and 1950s, many of them written for an industrial economy that no longer exists. 

Prime Minister Narendra Modi said the reforms mark “a historic reform” and are designed to align India with global standards while building “a workforce ready for the future.” 

The government said the earlier system had become a patchwork of “restrictive frameworks” that added confusion, increased compliance burdens and failed to keep up with new forms of work.

The changes coincided with upbeat employment figures released by the government. According to official data, employment rose from 475 million in 2017–18 to 643 million in 2023–24, while unemployment fell from 6% to 3.2%. 

The administration framed the new codes as part of a broader push toward Aatmanirbhar Bharat, or a more self-reliant economic model.

The codes introduce wide-ranging rules covering minimum wages, social security, industrial relations and workplace safety. The new framework guarantees a minimum wage across all sectors, requires written appointment letters for every worker, expands social security to gig and platform workers, and mandates more transparent wage payments. 

It includes free annual health check-ups for workers over 40 and requires employers to support women working night shifts. The government said these measures will make the system simpler and more predictable after decades of regulatory fragmentation.

Industry groups said these changes could bring overdue clarity to an economy that has struggled with complex labor regulation for decades.

Technology and services firms expect some of the most immediate effects. 

Information technology industry lobby NASSCOM said that once fully implemented, the codes would “bring more predictability and transparency to the technology industry and its workers.” 

It highlighted provisions on written appointment letters, social-security coverage for gig and platform workers, and fixed-term contracts with equal benefits, calling them “especially important for the skilled and mobile workforce in IT and IT-enabled services.” 

It added that timely salary payments, equal pay for equal work and clearer grievance redressal will improve mobility and trust within the workforce.

Manufacturers echoed the sentiment. Pankaj Mohindroo, chairman of the India Cellular and Electronics Association, said: “India’s new Labor Codes are a major step towards a modern and efficient labor ecosystem. For the IT and electronics sectors, these reforms bring stronger social security, operational clarity, and a more stable workforce environment. These factors will enhance productivity and enable long-term competitiveness.”

Much of the impact, however, depends on the states. Labor is a concurrent subject and the codes require individual states to notify detailed rules before they become fully operational. 

Several major states have not yet completed the process, creating uncertainty over when the changes will take effect in practice. Analysts said the federal-state gap could delay uniform enforcement for months.

The Industrial Relations Code has attracted particular scrutiny. It raises the threshold for prior government approval for retrenchment, layoffs and closure from 100 workers to 300 workers, a long-standing demand of industry.

It also formalizes fixed-term employment and requires employers to recognize the largest union in an establishment. Critics said these provisions may ease restructuring for companies but weaken job security for workers.

Unions said they were not adequately consulted. The New Trade Union Initiative called the enforcement “undemocratic and unconstitutional,” saying the changes “harm workers and undermine the rule of law” in a way that benefits large companies.

Opposition leaders raised similar concerns. Leader of India’s main opposition Congress party Jairam Ramesh asked whether the reforms meet what he called five essential demands of Indian workers. 

“Will these codes make these five essential demands of India’s workers for Shramik Nyay a reality?” he said. 

His charter calls for a national minimum wage of ₹400 a day, a Right to Health law offering coverage up to ₹25 lakh, an urban employment guarantee, comprehensive social security for all unorganized workers, and a binding commitment to end contractualization in core government functions.

Several provisions have drawn specific criticism. While the codes set a universal minimum wage, the floor wage remains below the ₹400 benchmark demanded by unions. 

The expansion of social security for gig and platform workers requires aggregators to contribute to a social-security fund, but critics said coverage remains uneven and fragmented. 

The Industrial Relations Code allows fixed-term contracts with equal pay and benefits but stops short of banning contractualization in government work, a long-standing demand of labor groups.

Employers in IT and IT-enabled services must pay salaries by the 7th of each month, offer equal pay for equal work and improve facilities for women on night shifts. 

Companies with high-allowance salary structures will also need to adjust to the new statutory definition of wages, which requires that at least half of an employee’s compensation be counted as basic wages, affecting provident fund and gratuity calculations.

The consolidation of licensing, registration and reporting into digital systems is meant to reduce paperwork, though analysts said compliance will depend on how quickly states roll out their own rules.

Supporters of the reform said consolidating 29 laws into four will reduce friction and lower compliance costs for firms operating across states. Unions warn that easing layoffs for midsized firms, expanding the use of fixed-term contracts and allowing continued contractualisation risk weakening a fragile social-security net.