Industrial Relations Code 2020 Pushes Unified Labour Framework, Cuts Compliance and Expands Worker Protections

Clearer definitions, fixed-term employment, streamlined dispute resolution highlight government’s labour reforms

New Delhi, November 24: The Ministry of Labour and Employment has outlined the major reforms introduced under the Industrial Relations Code, 2020, positioning it as a consolidated framework aimed at simplifying compliance, expanding worker protections and improving the ease of doing business. The code merges three existing labour laws — the Industrial Disputes Act 1947, the Trade Unions Act 1926 and the Industrial Employment (Standing Orders) Act 1946 — into a single system designed to provide clarity and reduce procedural delays.

The ministry said in a statement on Sunday the code establishes a uniform structure for dispute settlement, social security benefits and employer obligations, while balancing pro-worker and pro-growth provisions. According to the press release, the number of rules has been reduced from 105 to 51, registers from 37 to 18 and forms from 3 to 2, significantly lowering compliance overhead for businesses.

Wider definitions for worker, wages and industry
The code expands the definition of “worker” to include more employees engaged in basic labour-related activities, covering all earning up to ₹18,000 per month. A single, consistent definition of “wages” now applies across all labour laws, with a 50 percent ceiling on exclusions to ensure statutory benefits such as gratuity and retrenchment compensation are calculated transparently. The definition of “industry” has also been broadened to align with contemporary economic activity.

Formal recognition for trade unions
Trade unions with 51 percent membership will now receive formal negotiating rights. In cases without a majority union, a negotiating council will be formed with unions holding at least 20 percent membership. The ministry said the change is intended to strengthen industrial democracy, ensure smoother grievance handling and increase job security by preventing arbitrary layoffs and unfair labour practices.

Fixed-term employment and flexibility provisions
Fixed-term employment has been introduced to allow firms to hire workers for a defined period while granting them the same statutory benefits as permanent staff, including gratuity. The government said this measure is expected to encourage flexible hiring, reduce excessive contractualisation and generate more employment opportunities.

The code also revises the definition of “strike” and mandates a 14-day notice period, aiming to minimise sudden disruptions. Rules on standing orders will now apply only to establishments with 300 or more workers, increasing the flexibility for smaller industries.

Simplified dispute resolution and compounding of offences
Minor offences previously attracting imprisonment can now be compounded with monetary penalties. Time-bound dispute resolution mechanisms have been introduced, and labour authorities can now refer disputes to tribunals directly, a move aimed at cutting delays in the settlement process.

Higher layoff threshold and gender equity measures
Industrial establishments employing up to 300 workers can now undertake layoffs, retrenchment or closure without prior government approval — an increase from the earlier threshold of 100. The ministry said the measure is designed to enhance economic agility for employers while safeguarding statutory benefits for workers. Provisions have also been strengthened to ensure better representation of women in grievance committees and to support safer workplace environments.

Digital compliance push
The code emphasises digital record-keeping, electronic communication and streamlined filings to improve transparency and reduce manual workloads for employers. The ministry said the reforms aim to modernise the labour ecosystem while promoting stability and predictability for both workers and industry.