Author(s): Raghav Agrawal and Aman Singh
Affiliation: Students, HNLU

I. Introduction

On November 21,2025, the Government of India scrapped 29 old labour laws and implemented four New Labour Codes which included The Code on Wages (2019) (“CoW, 2019”),Industrial Relations Code (2020) (“IRC, 2020”), Social Security Code (2020) (“SSC, 2020”), and Occupational Safety, Health and Working Conditions Code (2020) (“OSH, 2020”). This  marks a revolutionary reform in the Framework of labour laws while marking another step towards the “ease of doing business” reforms. Yet beneath the guise of flexible norms and regulations lies an inherent risk of exposing the Workers to the prejudices of their employers.

‌‍​‍‌​‍​‌‍The legislation brings in four major changes. Firstly, it raises the maximum limit for layoffs and secondly extends the scope of fixed, term employment. Thirdly, it permits self, certification in place of physical ones and lastly, it alters the composition of wage components. In general, the act is a major move away from state control towards more employer discretion. Government’s role is diminished from that of an active protector of labour welfare to a mere passive facilitator of an efficient market, thus, reducing the preventive capacity and further overloading the industrial tribunals, which are already crowded. Thus, this consolidation creates a regulatory vacuum where decisions about terminations, determination of wages, and workplace safety are left to the discretion of employers. By limiting the possibility for the state to intervene, such reform raises concerns about its potential inconsistency with constitutional provisions of equality, dignity, and protection of livelihood under Articles 14,19, and ​‍​‌‍​‍‌​‍​‌‍​‍‌21.

This​‍​‌‍​‍‌​‍​‌‍​‍‌ change should not be seen as a single isolated event. The overhaul, while being a major shift towards a more lenient procedure, has gone in the opposite direction with respect to substantive justice, thus changing the very nature of Indian labour law in a fast-growing economy.

The article is divided into three parts. Part I offers a critical examination of the gaps in the Constitution and laws, which are the basis of the new codes. Part II presents the authors’ recommendations taking into account top global practices from which India can pick to regain the equilibrium between economic reform and social ‍​‌‍​‍‌​‍​‌‍​‍‌justice.

II. Loopholes in the new Labour codes: A critical analysis

In IRC, 2020, Section 77 marks a significant departure from the earlier regulatory framework by raising the employee threshold from 100 to 300 and mandating government approval for layoffs, retrenchments, and closures, positioning it as a reform to promote market efficiency. However, from the labour side perspective, this shift reduces ex-ante oversight of the government over employment termination decisions. 

This new framework increases the vulnerability of industrial workers, as it allows the medium sized establishments to cut down their workforce without prior government scrutiny or approval  .

The framework further increases the reliance on ex-post dispute resolution, which is already characterised by procedural delay and limited worker access. In Workmen v. Meenakshi Mills Ltd. (“Meenakshi Mills Case”) It was ruled that retrenchment measures are placed to stop arbitrary downsizing and shield employees, even though it does not explicitly evaluate the IRC, 2020. But ruling underscores the constitutional ethos of protecting livelihoods. This creates a regulatory vacuum between employers and businesses.

1. Expansion of fixed-term employment without a strong mechanism

Although IRC, 2020 legally recognises fixed-term employment similar to Permanent workers under section 2(o). But it is constrained by weak enforcement capacity and a limited labour inspection. The Supreme Court’s reasoning in BSNL v. Bhurumal (“Bhurumal Case”) denounced contractual clauses that undermine the permanence of labour. Hence, FTE risks becoming a legalised route to avoid permanence, which ultimately leads to the decreasing trade union density and collective bargaining power while allowing businesses to rotate employees through short-term contracts.

Thus, the lack of a Robust structure for oversight and compliance gives rise to the informalization of formal labour rather than balancing flexibility with security, the existing regulatory system deviates the long-term employment commitments.

2. reclassification made easy by unified definition of “wages”

The CoW, 2019 provides a clear and Consistent definition of wages under section 2(y). Which replaces the fragmented wage definition. The definition excluded the inclusiveness of the bonus, allowances or any reimbursements. Decreases the social security privileges.

It gives a larger scope to the Employers to mould the wages according to their convenience by reclassifying the computation of statutory benefits such as bonus obligations, gratuity payments and provident fund contributions, so undermining the protective role of wage-linked social securities. The court’s Observation in Manipal Academy of Higher Education v. PF commissioner. Held impermissible the splitting of wages into multiple components with the intent to avoid statutory contributions.

3. The self-certification model’s inadequate inspection and enforcement framework

The  OSH, 2020, introduces an Online and computer-based inspection where employers upload documents and self-certify compliance, and the inspection is based on randomised as well as risk-based algorithms.Previously, inspectors physically visited factoriesand workplaces  noting the wages, safety conditions and working hours, etc. The idea is to reduce Inspector Raj, make compliance more business-friendly.

However, the issue arises regarding the wage theft, unsafe working conditions, excessive hours or coercive practices, which often require physical verification. In M.C. Mehta v. State of Tamil Nadu, emphasis is placed on the State’s active role in protecting vulnerable workers. Where  compliance must be ensured through proactive monitoring, not just passive paperwork. Thereby undermining the substantive protections that labour law seeks to secure.

III. Way Forward: Global insights for recalibrating India’s Labour Codes

While the four codes provide ease of compliance with social security, addressing workers’ protection requires a substantive review. Mere understanding of labour codes provides statutory consolidation; there needs to be substantive protection and accountable implementation. Addressing the structural gaps identified above requires a recalibration of regulatory priorities.

1. Ensuring Job Security: Modelled on European Approach

Firstly, based on the Germany’s Protection Against Unfair Dismissal Act (“Kündigungsschutzgesetz”),  which mandates justification for termination and compels for readmission where such dismissals lack “Social Justification” . Similarly, France’s Labour Code (“Code du Travail”), requires for consultations with worker councils before retrenchments preventing arbitrary termination,

Adopting the similar approach in India would mean that the relaxation given under the IRC, 2020 must be protected by the Mandatory post-retrenchment, disclosure of workforce composition and attrition trends, which helps in increasing flexibility, and discouraging arbitrary retrenchment.

2. Regulation of fixed-term Employment; Lessons from Japan and South Korea

Secondly, the regulated expansion of fixed-term employment must be operationalised by ensuring enforceable parity modelled on Labour contracts Act of Japan, where it is mandatory to offer permanent positions after five years of continuous services and labour standards act in South Korea puts a cap on the duration of temporary contracts in order to prevent perpetual contractualization.

In India similar safeguards can be ensured by a Periodic audit of provident fund, gratuity, and bonus, which are not artificially diluted. And a strict prohibition on repeated contractual roles of a permanent nature. Additionally, a centralised form of vigilance over FTE engagement can help in identifying patterns in misuse across different industries.

3. Provision for fair wages: Insights from United Kingdom and Germany

Thirdly, under CoW, 2019, similar to the Employment Rights Act of United Kingdom and Germany’s Minimum Wages Act which adopt transparent definitions as far as cost of living is concerned while ensuring strict monitoring of provident funds, the unified definition of wages should exclude the Strategic classification of allowances.

India can strengthen Cow, 2019 by pre-defining the paying components and strategically excluding bonuses and social security allowances. Further, a regulated digital platform supported by periodic scrutiny that conducts an audit and discourages the fragmentation of designed social security obligations should verify the compliance.

D. Enforcing Labour Inspections and enforcements: Learnings from Singapore

Lastly, the Workplace Safety and Health Act (2006) of Singapore mandates surprise inspections, sector specific audits, with criminal repercussions for non-compliance.

In India, the employees should be provided with more robust means to file complaints and seek redressal. This can be achieved through anonymous grievance redressal, enhancing the capacity for physical verification, and conducting on, site checking which would ensure more staunch detection of those violations that are not visible by digital filings. The information supplied by a whistleblower could be instrumental in the elimination of the fear of retaliations in the contractual workplaces.

IV. Conclusion

The four New Labour Codes although, appearing to be progressive on the front, in reality effectively removes the state from its protective role. While allowing for ease of procedures and deregulations of oversight mechanisms possess an imminent threat to the rights guaranteed under labour regime while eroding the constitutional mandates prescribed under Article 14, 19 and 21 of the Indian Constitution. The reform in the mask of efficiency makes a significant departure towards capitalistic governance, where flexibility is achieved through vulnerability. In light of such risks, inspirations can be drawn from the global models to ensure that autonomy of labour exists with accountability. Adopting similar mechanisms in Indian framework would further reinforce the constitutional mandates of equality, livelihood and dignity. Overall, reforms are still required in the new Code as without efficient oversight framework and safeguards for answerability, the reform mistakes efficiency for inequity.