Vishleshan for Regulatory Exams 31st October 2025: Building A 21st Century Labour Framework

All candidates eyeing exams like those of RBI, SEBI, or NABARD will have to stay updated on key economic and regulatory developments. In today’s edition of Vishleshan, we’ll discuss Building A 21st Century Labour Framework. These issues are highly relevant for all the upcoming competitive exams mentioned above. Keep reading to stay ahead with a clear understanding of today’s topic.

Building A 21^st Century Labour Framework

Context: Consolidating 29 laws into four codes is a landmark reform. This article argues the new framework creates a modern, flexible, and equitable system, boosting business competitiveness while finally offering social protection to millions of gig and platform workers.

Sources: Business Standard

The provided article, authored by the Director General of the Confederation of Indian Industry (CII), presents a strongly optimistic view of India’s four new Labour Codes. It argues that these codes are a “transformative step” that will create a modern, unified, and equitable framework for India’s 21st-century economy. The piece highlights the dual benefits: for workers, the codes promise expanded social security (especially for gig and platform workers), safer conditions, and universal minimum wages; for businesses, they offer simplified compliance and flexibility, thereby boosting the investment climate. The article concludes by urging the Centre and states to expedite implementation, framing the codes as a crucial foundation for achieving a “Viksit Bharat” built on both growth and inclusion.

The Factors of Production:

What are the Factors of Production?

The factors of production are the essential building blocks or inputs required to produce any good or service in an economy. Classically, these are divided into four categories:

1. Land: This includes not just the physical ground but all natural resources available, such as soil, water, minerals, forests, and oil.
2. Labour: This refers to the human effort—both mental and physical—expended in the production of goods and services. It is the workforce of the economy.
3. Capital: This includes man-made goods used to produce other goods and services. It is not just money (which is financial capital) but physical capital like machinery, tools, factories, computers, and infrastructure (roads, ports).
4. Entrepreneurship: This is the human skill that combines the other three factors to create a product or service. The entrepreneur takes the initiative and the risk to start a business, innovate, and make decisions.

Impact on the Economy

The quality, quantity, and efficiency of these factors determine an economy’s health.

• Good Scenario (Efficient Utilisation): When these factors are abundant, high-quality, and can be combined efficiently (e.g., skilled labour, modern capital, and clear laws for land acquisition), the economy experiences high growth, low inflation, and rising prosperity.
• Bad Scenario (Inefficient Utilisation): When the factors are constrained (e.g., archaic labour laws, high land costs, poor infrastructure), it creates supply-side bottlenecks. This chokes economic growth, raises costs (inflation), and discourages investment.

Government’s Role in Safeguarding these Factors

A government’s primary economic role is to create an environment where these factors can be used most productively.

• For Land: Implement clear land acquisition laws, create land banks, and ensure environmental regulations are balanced with development needs.
• For Labour: This is the focus of the new codes. The government’s role is to:
  • Protect Workers: Ensure fair wages, safe working conditions, and social security.
  • Provide Flexibility: Allow businesses to hire and manage their workforce efficiently to respond to market demands.
  • Enhance Skills: Invest in education and training to improve labour productivity.
• For Capital: Maintain a stable financial system, encourage savings and investment (both public and private), and build robust public infrastructure (like roads, ports, and digital networks) that boosts the productivity of all other factors.
• For Entrepreneurship: Promote “Ease of Doing Business,” simplify regulations, enforce contracts, and create a culture that encourages risk-taking and innovation (e.g., the Start-up India initiative).

New Labour Codes:

Background: The Need for Reform

For decades, India’s labour market was governed by a complex web of laws. The new codes consolidate 29 central laws, and numerous state-level amendments. This system was:

• Complex: Created a massive compliance burden, especially for MSMEs, leading to “Inspector Raj.”
• Ambiguous: Contradictory definitions (e.S., of “wages” or “worker”) across different laws led to confusion and high levels of litigation.
• Exclusionary: A vast majority of India’s workforce (over 90% in the unorganised sector) was left outside the ambit of social security and safety nets.
• Outdated: The laws were framed for a pre-liberalisation, factory-based economy and were unequipped to handle new forms of work, like gig and platform workers.

To address this, the government consolidated these 29 laws into four simplified codes. These codes are:

• Code of Wages Act 2019,
• Industrial Relations Code Bill, 2020,
• Social Security Code Bill, 2020,
• Occupational Safety, Health and Working Conditions Code Bill, 2020

Code on Wages, 2019

This code amalgamates 4 laws related to wages and remuneration.

• Key Features & Concepts:
  • Universal Right to Minimum Wage: For the first time, it guarantees a minimum wage to all workers in both the organised and unorganised sectors.
  • Statutory Floor Wage: The Centre will set a national “floor wage” based on minimum living standards. State governments must set their minimum wages above this floor.
  • Timely Payment: Mandates that wages must be paid on time to all employees.
  • Simplified Definition of ‘Wage’: Creates a single, uniform definition of “wage” to reduce litigation and ambiguity in calculating dues like provident fund (PF) and gratuity.
• Merits:
  • Creates a binding wage floor for 100% of the workforce.
  • Reduces administrative complexity for employers.
  • Aims to reduce gender-based pay discrimination.
• Demerits:
  • The criteria for calculating the national floor wage are not explicitly detailed in the code, leaving it to the government’s discretion.
  • Some trade unions fear that a national floor wage could become the benchmark, pulling down higher minimum wages set by some states.

Industrial Relations (IR) Code, 2020

This code amalgamates 3 laws governing trade unions, industrial disputes, and conditions of employment. It is the most debated of the four.

• Key Features & Concepts:
  • Fixed Term Employment (FTE): Formalises the hiring of workers for a specific duration (e.g., a one-year project). FTE employees must receive the same wages and benefits (like PF, gratuity) as permanent employees doing similar work.
  • Standing Orders: These are the “rules of conduct” for an industrial establishment. The code makes standing orders mandatory only for establishments with 300 or more workers (up from 100).
  • Hire and Fire (Retrenchment): Companies with up to 300 workers no longer need prior government permission to retrench (lay off) workers. This threshold was previously 100 workers.
  • Strike Rules: Makes it more difficult to call a strike. A strike is now illegal without a 14-day notice, and this rule applies to all establishments, not just public utilities.
• Merits:
  • Flexibility for Businesses: The new 300-worker threshold gives MSMEs more flexibility to scale operations up or down based on market demand.
  • Legitimises Contract Work: FTE provides a legal framework for project-based work, giving workers benefits they previously lacked.
  • Aims to streamline the dispute resolution process.
• Demerits:
  • Reduced Job Security: Critics argue the 300-worker threshold encourages a “hire and fire” culture and reduces job security for a large number of formal sector workers.
  • Weakened Unions: The 14-day notice rule for all strikes is seen as a significant dilution of workers’ right to protest.

Code on Social Security (SS Code), 2020

This code amalgamates 9 laws related to social security and retirement benefits.

• Key Features & Concepts:
  • Universalisation: Aims to extend social security benefits (like PF, insurance, maternity benefits) to all employees and unorganised workers.
  • Formal Definition of Gig & Platform Workers: For the first time, the law defines:
    • Gig Worker: A worker who works on-demand outside the traditional employer-employee relationship (e.g., a freelance consultant).
    • Platform Worker: A gig worker who connects with customers through a digital platform (e.g., a Zomato delivery partner or Uber driver).
  • Social Security Fund: Proposes the creation of a national fund for unorganised, gig, and platform workers, to be financed by contributions from the government and aggregators (like Uber, Zomato). The article notes this contribution can be 1-2% of the aggregator’s turnover.
• Merits:
  • Inclusion: It is a progressive and modern law that finally recognises the new-age workforce.
  • Portability: Aims to create a portable social security system, as highlighted by the e-Shram portal and Universal Account Number (UAN).
• Demerits:
  • Implementation Heavy: Its success is entirely dependent on states notifying the rules and the successful setup of the new funds.
  • Funding Uncertainty: The exact funding mechanism remains complex and contested.

Occupational Safety, Health and Working Conditions (OSH) Code, 2020

This code amalgamates 13 laws regulating health, safety, and working conditions.

• Key Features & Concepts:
  • One Registration: Consolidates multiple registrations into a single registration for an establishment.
  • Safety Norms: Aims to create a uniform set of safety, health, and welfare standards for all workers.
  • Women in Night Shifts: The code explicitly permits women to work in all establishments during the night (6 PM to 7 AM), provided their consent is obtained and the employer ensures their safety and transport.
• Merits:
  • Gender Equality: Seen as a progressive step that removes paternalistic barriers and expands economic opportunities for women.
  • Simplification: Reduces the compliance burden for employers by unifying 13 different laws.
• Demerits:
  • Thresholds: Many of the code’s safety provisions apply only to establishments with a certain number of workers (e.g., 10 or 20), leaving workers in smaller establishments unprotected.
  • Implementation Concerns: The actual safety of women working at night depends entirely on the employer’s diligence and the state’s enforcement capacity.

Decoding the Article: An Analysis

The article by the CII’s Director General is a strong endorsement of this new legal architecture.

The Core Argument: A Win-Win for All

The author frames the codes not as a “pro-business” or “pro-worker” reform, but as a “pro-growth” and “pro-clarity” reform. He argues it creates a level playing field that benefits all stakeholders by aligning India’s labour market with a 21st-century economy.

Analysis of Key Points from the Article:

• Focus on Social Security: The article’s main focus is on the Social Security Code. It celebrates the formal recognition of gig and platform workers as a landmark achievement.
  • The e-Shram Portal: The enrollment of 310 million workers is cited as a massive success. The author correctly identifies this as “India’s first national database of informal workers,” which is essential for “disaster resilience” (as seen during COVID-19) and for making benefits portable via the Universal Account Number (UAN).
  • Aggregator Contribution: The 1-2% of turnover contribution from aggregators is highlighted as a “practical way” to finance benefits for this new workforce.
• Praise for OSH Code: The provision allowing women to work night shifts is singled out as a “progressive measure” that expands opportunity while ensuring safeguards.
• The Business Case (The “Why”): The article directly links the new codes to India’s strong economic performance, arguing they are a key part of the “path-breaking reforms” that have attracted investment.
  • FDI Inflows: Robust figures of $83.6 billion (FY22) and $81 billion (FY24-25) are used as evidence that these reforms are giving confidence to foreign investors.
  • Capex: The high allocation for capex (over ₹13 trillion) is also linked to this improved business environment.
  • The core benefit for business, especially MSMEs, is simplified compliance (“fewer registers, digital filings”).

The Implementation Hurdle: “Labour is a Concurrent List Subject”

The article correctly identifies the single biggest challenge: implementation.

• The Problem: Labour is in the Concurrent List of the Constitution, meaning both the Centre and the states can legislate on it. For these central codes to work, every state must frame and notify its own rules. The article notes this pace is “uneven.”
• The Path Forward (Three Priorities): The author lays out a clear, actionable plan:
  1. Operationalise Funds: Immediately notify the contribution rates for aggregators to get the social security funds for gig workers up and running.
  2. Integrate Databases: Link e-Shram, EPFO, and ESIC to make portability a reality, so benefits “follow the worker” seamlessly.
  3. Build Capacity: The reforms are useless if people don’t understand them. This requires helpdesks for MSMEs and helplines for workers.

Conclusion

The article is a clear, industry-led perspective that champions the new labour codes as a foundational reform for Viksit Bharat. It argues that the “architecture” is built and that the final, critical step is for the Centre and states to collaborate and “implement with speed, transparency and collaboration.”