Q. 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 in this regard?

Model Answer:

Labour Codes

The four Labour Codes – on Wages, Industrial Relations, Social Security, and Occupational Safety – represent a significant step in India’s labour market reforms. These codes aim to consolidate and simplify numerous existing labour laws.

Merits:
• Simplification: The codes reduce over 40 central labour laws to just four, streamlining compliance for businesses. For instance, the Code on Wages harmonizes the definition of ‘wages’ across various acts.
• Expanded coverage: The Social Security Code extends benefits to gig and platform workers, potentially covering about 400 million unorganized sector workers.
• Ease of doing business: The Industrial Relations Code allows firms with up to 300 workers to retrench without government approval, up from the previous 100-worker threshold.
• Formalization: Mandatory written employment contracts and digitization of records aim to reduce informal employment and improve transparency.

Demerits:
• Worker concerns: The increased threshold for standing orders (from 100 to 300 workers) may affect job security and working conditions for many.
• Collective bargaining: The requirement of 75% worker support for unions to be sole negotiators could fragment union representation.
• Implementation challenges: States need to frame and notify rules, requiring significant coordination and capacity building.
• Flexibility vs. security: Fixed-term employment provisions, while increasing hiring flexibility, may reduce long-term job security.

Progress so far:
• All four codes were passed by Parliament in 2019 (Wage Code) and 2020 (other three codes).
• The central government has drafted rules for implementation, but a concrete timeline is pending.
• As of today, over 20 states have published draft rules, but final notifications are still awaited in most cases.
• Implementation has been delayed due to state-level preparations and ongoing consultations with stakeholders.
• Partial implementation has occurred, such as the inclusion of gig workers in ESIC coverage.

Conclusion:
The Labour Codes signify a major shift in India’s labour landscape, balancing modernization with worker protection amid implementation challenges.