India’s long-awaited transition to a unified, modern labour framework moved decisively forward with the notification of the four Labour Codes-a reform package that has been pending since 2020. This marks one of the most ambitious overhauls of labour regulation since Independence, consolidating 29 disparate laws into a streamlined structure meant to expand worker protection, boost formalisation, and enhance India’s global competitiveness. Yet the path to implementation has been rocky, and the debate around the codes remains deeply polarised.
At the heart of the reforms lies a major expansion of universal social security. Gig workers, platform workers, contract labour, and migrant workers-groups historically left outside the safety net-will now be entitled to PF, ESIC, insurance, and maternity benefits. Aggregators must contribute a share of their turnover toward gig-worker welfare funds. The codes create a national floor wage, ensuring that no state fixes minimum wages below a centrally determined benchmark. For millions of workers in low-wage states, this is expected to raise incomes and reduce exploitation. Mandatory appointment letters, portability through an Aadhaar-linked Universal Account Number, and statutory timely payment of wages further strengthen formalisation and job security.
Women workers stand to gain from expanded rights: legally enforceable grievance committees, protection from discrimination, and permission for night-shift work with enhanced safety provisions. Fixed-term employees – an increasingly common form of employment in services and manufacturing – will receive all statutory benefits at par with permanent staff, with eligibility for gratuity after just one year. Workers above 40 years of age will be entitled to annual free health check-ups, while hazardous-sector employees will receive strengthened health protection.
However, trade unions have been consistently critical of the codes – not necessarily for what they add, but for what they dilute. Their strongest objection concerns the Industrial Relations Code, which raises the threshold for requiring Government approval for layoffs, closures and retrenchment from 100 to 300 workers. This, they argue, weakens job security and promotes “hire-and-fire” flexibility without adequate safeguards. Unions also fear that longer daily work hours-increased from 9 to 12 hours in factories and from 9 to 10 hours in shops and establishments-could be misused despite overtime provisions. They warn that linking benefits to establishment size could exclude millions of informal and home-based workers unless state-level rules bridge the gap. The flexibility provided to State Governments in framing rules is seen as a double-edged sword: what is intended as decentralisation may result in inconsistent protections and discretionary enforcement.
Although the Codes were passed between 2019 and 2020, full implementation required both the Centre and states to frame rules-a challenge in India’s federal structure. With labour under the Concurrent List, the codes cannot be operational unless a majority of states notify corresponding rules. Many states sought more time; some, like West Bengal, did not advance rule-making at all. The political sensitivity of work hours, retrenchment thresholds, and union rights further slowed consensus-building. Additionally, Covid-19 delayed administrative preparedness, especially when states were preoccupied with health emergencies.
A more predictable labour regime, universal social security, and simplified compliance frameworks are central to making India competitive vis-à-vis Vietnam, Indonesia, and Taiwan – countries that attract large-scale manufacturing through flexibility and low compliance costs. The Codes move India closer to global norms by balancing worker protection with employer flexibility, an approach long recommended by international investors. States such as Gujarat, Maharashtra, Tamil Nadu, Karnataka, Haryana and Punjab dominate India’s manufacturing landscape because they offer a rare combination of strong infrastructure, skilled manpower, stable policy environments, and proactive industrial governance. These states have already aligned many of their rules with the codes over the last decade, making the transition smoother and reinforcing their position as preferred manufacturing locations.
However, India’s success as a manufacturing hub will ultimately depend on three factors: implementation consistency across states, speed of dispute resolution and ease of compliance. If states notify rules with clarity and avoid bureaucratic delays, the codes can significantly improve investor confidence. These codes can become the backbone of India’s ambition to emerge as a global manufacturing powerhouse – one where economic growth and worker welfare move together, not in conflict.
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