Consequences of the New Labour Code on Workers and Employers

Consequences of the New Labour Code on Workers and Employers

As discussed in the previous article, the Lok sabha has recently passed 3 new labour law codes. These are the Code on Wages Act, the Industrial Relations Code, the Social Security Code, and the Code on Occupational Health and Safety. These codes subsumed many central and state laws to give a much more efficient framework and benefit both the workers and employers. In this article, we will understand the consequences of the said amendments on the workers and the employers and try to understand a way forward from here.

The main objective of the amendments is to give more flexibility to the labour code and do away with the protections which were provided in the past. While this has attracted disapproval from the labour unions and activists, people who favor the reforms say that the old laws were behind the times and should be gone. To understand the consequences of the reforms, we need to understand what role do labour laws play in the economy.

Role of Labour Law in the Economy

Labour laws help in Redistribution or Reallocation of Wealth. It also provides workers with economic and political freedom. This is provided by giving them employment. Employment is not just about paying the bare minimum to workers. It is about giving job security, dearness allowance, health benefits, maternity leaves, etc. Without checks and balances procedure for all this, the employers are less likely to pass on the benefits to the workers. And these checks and balances are what is provided by labour laws in any economy.

The Aftermath of The Amendments

Now let’s talk about the new “hire and fire” policy, which is a part of the current industrial relations code bill. The amendment made it easier for the workers to be easily employed and provide easier mobility to the urban areas to seek a job. Therefore, it increases the employment generation in an economy. But it also cuts down the power of the trade unions to strike, thus leaving the labor force and the unions with dissatisfaction.

Further, the Social Security Bill has extended the benefits of ESIC and EPFO to a larger population of the workforce. It has also left behind migrant workers and has not even specified the date of its enforcement. Although, for the first time, the unorganized sector has been accounted for through the social security fund. We are still far away from giving the workers of the unorganized sector the benefits that they deserve. But it’s a start nevertheless.

The reforms in the Occupational Health and Safety Bill are a very welcome change. Migrant workers are a huge part of our economy. The integration of migrant workers in the PDS system all over India will give them easier access to food and other basic requirements. A gender-inclusive law is the need of the changing times that we live in, and providing women with the freedom of working late night shifts and putting the responsibility of giving them a safe workplace on the employer does precisely that.

In the recent covid-19 times, cleanliness and sanitization and social distancing are a big problem faced by many workplaces. If this bill’s reforms are strictly applied, it will give a huge relief to the workers and safety from the ongoing pandemic.


The new Labour Law can be seen as a bane for workers desperately looking for a job and give them financial security. Many industries and economists have welcomed the law saying it will provide “ease of doing business.” This may result in a jump in the rank of India in the ease of doing business index. One of the major concerns is that the states have been given free rein to exempt laws in violation of labour rights. But the labour ministry has said that since “labour” is in the concurrent list, the states have the authority to make changes as they wish.

The way forward would be to have strict compliance with the laws. The industries and the workers both can have the benefits they have needed for a long and deserve.

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