India has replaced 29 Central Labour codes with four. Parliament passed the laws on labour codes five years ago. Although the Union govt refrained from giving effect to them nationally by notifying them, some states implemented various provisions at their own pace
- Company threshold for freedom to fire employees without govt permission raised from 100 workers to 300
- Employers allowed to use fixed-term contracts
- Women allowed to work night shifts
- Mandatory social security provisions like PF, ESIC, insurance will be extended to gig and platform workers
- Fixed-term workers will get gratuity after just one year, not five.
India’s federal structure lets states ignore these codes without any repercussions, and Kerala has opted not to adopt them. Although states can pass their own laws despite the labour codes, the power to collect cess continues to be a disputed issue.
Many benefits will now be linked to the combination of basic salary and allowances rather than just the base pay. This change will likely please workers, but it also increases unit labor costs.
How India compares to other Asian countries
- Bangladesh, Vietnam and China, have no limits on hire and fire of contract labour and 12-hour work shifts.
- No cap on overtime. Indian overtime is capped at 125 hours per quarter, while some competitors
- Overtime pay is 125-150% of regular wages in competing countries whereas in India it is double the regular wages.
- Cost of business is a fraction of what it is in India, where bureaucracy, bribes, and local labor quotas complicate matters.
- Formal Indian workers globally uncompetitive in labour-intensive areas.