In December 2020, the Narendra Modi-led government made some significant changes to the Indian Labor Code.

Forty of the old central laws were replaced with four major labor codes that drew attention to wages of employees, industrial relations, health and safety hazards, as well as social security. Combined, these will help modernize India’s labor laws, revolutionizing the business environment.

Below are the changes made to India’s labor code:

Fewer Restrictions on Lay Offs

The Industrial Relations Code has a couple of controversial laws that can be traced back to trade unions, industrial disputes, and employee working conditions within the workplace. Previous laws have received backlash, mainly because of how outdated they were. They were responsible for favoring employees and unions which sometimes resulted in pain for employers.

Previously, employers who had more than 100 workers had to obtain special permission to lay off workers. Moreover, if an employer wanted to shut down his business, he needed to get approval from different central governmental departments.

Now, this rule only applies to factories, mines, and plantations that employ more than 300 workers, benefitting small-scale, labor-intensive enterprises by giving them more room for growth.

Fewer Union Conflicts

During (what was known colloquially as) ‘the license raj’, unrest and industrial complications were common because trade unions had the power to bring a business to its knees for several months. India was often portrayed in popular culture as businesses with workers calling for sit-ins and political unrest unfolding as those businesses were forced to shut. Moreover, there used to be only one trade union for large industrial enterprises that had to bargain on behalf of the workers—thus creating complications.

The new laws have solved these complications. Now, any union can be recognized as long as it holds powers of negotiation. If it has the approval of 51 percent of workers, it is considered legitimate.

Minimum Wage

The central and state government have decided to base minimum wages on the skill set of the worker. This means that there is no set minimum wage law in India.

However, a national floor wage being considered. Even though this is still being worked out, the state government will have to abide by it. It must be kept in mind that for some industries located in certain areas, the concept of minimum wage is low. This mainly depends on the cost of living in each place and what that specific industry is producing.

The recent changes in India’s labor code have worked well to protect employees, as well as employers. The Indian government has worked to get rid of the outdated laws and to ensure that they fit a more modern and relevant agenda of workplaces and employers.

Learn more about Indian Labor Laws here.