Industrial Relations Code, 2020 (One of Four Labour Codes): Balances Worker Protection with Business Flexibility
SDG 8: Decent Work and Economic Growth | SDG 16: Peace, Justice and Strong
Institutions: Ministry of Labour & Employment
The Industrial Relations Code, 2020, one of the four key Labour Codes, consolidates three existing laws (Industrial Disputes Act, 1947; Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946) to create a balanced and progressive framework aimed at promoting industrial harmony and ease of doing business. The Code is pro-growth, pro-labour, and pro-employment, simplifying compliance by reducing rules, forms, and registers, and providing uniform definitions.
Enhancing Business Flexibility and Growth
Increased Thresholds for Formal Compliance: The Code significantly aids business flexibility by requiring prior government permission for lay-off, retrenchment, or closure only for industrial establishments employing 300 or more workers (up from 100). States have the flexibility to enhance this limit further. Similarly, the applicability threshold for the requirement of certified standing orders is also raised from 100 to 300 employees.
Flexible Hiring: The introduction of Fixed-Term Employment (FTE) allows employers to hire workers via direct written contract for a specified duration. This is expected to reduce excessive contractualization and offer cost efficiency and flexibility to employers, while FTEs are entitled to all statutory benefits on par with permanent employees.
Dispute Resolution: The Code ensures a streamlined and faster dispute resolution mechanism by mandating the establishment of two-member Industrial Tribunals and granting the concerned party direct access to the Tribunal (after conciliation failure) without requiring discretionary government reference.
Strengthening Worker and Union Rights
Statutory Union Recognition: Trade unions gain statutory recognition: a union with 51% membership can be classified as a Negotiating Union with exclusive rights to represent workers. If the threshold is not met, a Negotiating Council is formed. This strengthens collective bargaining rights and industrial democracy.
Expanded Worker Definition: The definition of “worker“ is expanded to include sales promotion employees, working journalists, and supervisory employees earning up to ₹18,000 per month, extending statutory protection to a wider segment of the workforce. The definition of “Industry” is also broadened to include non-profit and low-capital activities.
Worker Re-Skilling Fund: In case of retrenchment, the employer must contribute an amount equivalent to 15 days’ wages to a Worker Re-Skilling Fund, which is credited to the worker’s account within 45 days, supporting short-term relief and skill upgrading.
Strike Regulation: To discourage “flash strikes,” the Code requires a mandatory 14 days’ prior notice for all strikes and lockouts, promoting responsible action and negotiation.
Policy Relevance: The Code represents a crucial policy compromise, trading increased flexibility for employers (higher thresholds for retrenchment and standing orders) for significantly enhanced statutory rights and formalization for workers (FTE parity, expanded worker definition). Successful implementation is vital for encouraging investment by providing stability and predictability, while formalizing a large part of India’s casual workforce.
What is Fixed-Term Employment (FTE) Parity?→ Fixed-Term Employment (FTE) is a contract where a worker is engaged for a specified, pre-determined duration. Under the Industrial Relations Code, FTE Parity means that these workers are legally entitled to receive the same statutory benefits (including wages, allowances, working hours, and gratuity after just one year of service) as permanent employees doing the same work. This aims to provide employers with hiring flexibility while protecting FTE workers from exploitation and denial of benefits.
Follow the full update here: Industrial Relations Code, 2020