The 4 Labour Code Bill and the Unmaking of Labour Rights in India
Introduction
Under the Modi government, legislative interventions targeting different segments of working people have followed a clear pattern. There was first an amendment that undermined the interests of advocates, then three farm laws that threatened agrarian livelihoods, and now the “4 Labour Code Bill”, which constitutes a comprehensive assault on workers’ rights.
Presented in the language of rationalisation and simplification, the new framework collapses almost all existing labour laws into four codes: the Code on Wages, the Code on Industrial Relations, the Code on Occupational Safety, Health and Working Conditions, and the Code on Social Security. The central government claims that this streamlining removes legal complexity and benefits workers. In practice, workers’ organisations across the country have consistently opposed these codes and have mounted sustained protests against them.
This article situates the proposed codes in relation to the labour laws historically won through workers’ struggles in India, and argues that the “4 Labour Code Bill” amounts to a reversal of nearly a century of gradual progress in labour protection.
Legislative trajectory and political economy
In February 2021, the central government completed the process of finalising draft rules for the four codes and secured their passage in both houses of Parliament. The next step requires state governments to frame and notify rules under these central codes. Without state level rules, the framework cannot be operationalised. The draft has been circulated to state governments; thirteen have already given their approval, and the remaining governments are expected to follow suit. This expectation rests on a straightforward assessment of the political economy: parties in power, irrespective of formal ideological differences, increasingly function as representatives of domestic and foreign capital.
Once the President gives assent to the full scheme of rules notified under the codes, the “4 Labour Code Bill” will come into force as law. The clear intention of the Modi government has been to implement this regime in the period 2022 to 2023 and beyond.
To assess what is at stake for the working class, it is necessary to recall some of the key labour laws that emerged over the twentieth century. India has around forty labour laws, each with distinct scopes and protections, most of them the outcome of prolonged struggles and negotiations. The discussion below highlights how the new codes undermine or empty out these existing protections.
Trade union rights and the right to strike
The Trade Union Act of 1926 granted workers the legal right to organise themselves into unions in order to defend their interests. On this legal foundation, trade unions were formed across workplaces, periodically confronting company managements and governments, articulating demands, and organising strikes and demonstrations. The Constitution of India reinforces this right: Article 19, clause 1, sub clause (c) explicitly affirms the right to form associations and unions.
The new labour codes strike at this core. Under the revised provisions, workers can form a trade union only with the prior permission of the company administration. Individuals who are social workers or lawyers are barred from membership of trade unions, thereby severing organic links between workers’ organisations and broader democratic and legal support structures. For any strike action, unions must provide two months’ notice to the administration. To call for a strike is criminalised, with punishment through imprisonment and fine. These measures convert what was a constitutionally protected right into a tightly policed privilege that can be denied or punished at will.
Wages, social security and the erosion of transparency
The Payment of Wages Act of 1936 stipulates that workers must receive wages in rupees, on time, and without unauthorised deductions. Various subsections provide workers with additional legal tools to contest arbitrary wage practices.
The new wage related provisions under the labour codes significantly alter this framework. All allowances taken together, including dearness allowance, house rent allowance, medical reimbursement and similar components, are now capped at fifty percent of total wages. Since the provident fund contribution is calculated on the basic wage component, this restructuring reduces the in hand salary of workers even if nominal gross pay is unchanged.
Previously, 12.5 percent of an employee’s total wage was deducted and deposited in the provident fund, with the employer contributing an additional 12.5 percent. Under the new framework, the employer contribution is reduced to 10 percent. Workers therefore confront a double loss: lower take home pay and a reduction in social security contributions.
Further, the definition of wages has been changed to exclude bonus. If employers do not pay bonus, workers can no longer approach the courts to claim it as a legal entitlement. Workers and employees are also stripped of the right to inspect company balance sheets and profit and loss accounts. This withdrawal of access to essential financial information weakens both collective bargaining and the possibility of informed legal action.
Industrial disputes, job security and fixed term employment
The Industrial Disputes Act of 1947 provided a minimal check on arbitrary dismissal. A worker or employee in continuous service for more than one year could be terminated only with the prior permission of the appropriate government authority.
The labour codes replace this with a regime that normalises precarity and strongly favours employers and corporate capital. A central innovation is fixed term employment. Companies and governments can now hire workers for a specified period, after which the employment relationship ends automatically. This erodes the distinction between permanent and temporary employment and allows employers to avoid obligations related to retrenchment, bonus, provident fund and pension.
Contractors employing fewer than fifty workers are exempted from registering with the labour department. As a result, a significant share of employment relationships slips outside the practical reach of regulatory oversight. Establishments with fewer than fifty workers are permitted to terminate employees without one month of notice pay. Companies with fewer than three hundred workers no longer require government permission to undertake retrenchment.
Domestic workers and workers performing household labour, many of whom are women from marginalised communities, are now excluded from recourse to industrial dispute mechanisms. They cannot file claims under that law at all. This codifies an already existing hierarchy of labour, in which some workers are treated as effectively outside the purview of modern labour rights.
Minimum wages and the exclusion of vast categories of workers
The Minimum Wages Act of 1948 empowered central and state governments to fix wage rates based on the nature and location of work, within a band that historically ran from 143 to 1120 rupees per day. These minima, however inadequate in themselves, were nonetheless the result of hard fought struggles.
Under the new codes, vast numbers of those who actually perform labour are simply not recognised as workers. Anganwadi workers, ASHA workers, midday meal cooks, panchayat mitra, shiksha mitra and others engaged in similarly skilled and socially crucial work have been explicitly removed from the legal definition of worker. Once excluded, they lose access even to the limited legal rights associated with minimum wages.
The broader unorganised sector, which comprises around 93 percent of the total workforce and 37 percent of India’s population, faces an even more precarious situation. In the absence of clear recognition and enforceable mechanisms, their legal rights to wage and security become largely notional.
Gendered vulnerabilities and the withdrawal of protective measures
The Maternity Benefit Act of 1961, amended in 2017, guarantees pregnant women workers and employees 84 days of leave with full wages in establishments with more than ten employees. The 2013 legislation on sexual harassment at the workplace, building on the Vishakha judgement, mandates that both government and non government institutions with at least ten employees, including women, must set up an internal committee to receive complaints, conduct inquiries and submit reports to the competent authority.
By refusing to recognise large numbers of skilled workers and domestic workers as workers at all, the new codes effectively deny these groups the protections offered by maternity and sexual harassment laws. This is especially significant because women are concentrated in these categories of employment. The result is a sharpening of gendered vulnerability at precisely the moment when the law should have been strengthened in their favour.
Working time, the eight hour day and the reversal of historical gains
The issue of working time illustrates most starkly the historical direction of the new regime. In 1886, lakhs of workers in the United States launched a massive strike that involved approximately 380,000 workers in 11,000 factories. Their core demand was a reduction in the working day from ten to fifteen hours to eight hours. Many leaders of the movement were martyred in the course of this struggle. On 1 May each year, workers across the world commemorate these martyrs and renew their commitment to the struggle for rights. Under the pressure of this international movement, capitalists were compelled to accept the eight hour workday as a civilised norm.
The new labour codes attempt to reverse this historical achievement. The codes permit workdays of up to 12 hours and reorganise the working week into four working days per worker. Government agencies present this as beneficial, on the grounds that weekly hours for individual workers remain formally unchanged. However, this framing ignores the realities of human labour. For capital and the state, workers are treated as instruments for the extraction of profit rather than as human beings. The physical and mental strain of continuous 12 hour shifts in factories and companies is simply not considered.
From the perspective of capital, the longer workday opens up new avenues for intensifying exploitation. A first group of workers can be made to work 12 hours a day for four days in a week. The factory would then remain idle for three days. On those three days, another group of workers can be employed for 12 hour shifts on the same machines. In aggregate, the total labour time under the control of the employer rises from 48 hours per week to 84 hours per week. This provides the basis for a substantial increase in production and profit.
The extended work schedule also facilitates retrenchment. Because employers command many more work hours at the plant level, they can meet production targets with fewer workers. Different groups can be rotated in three day blocks, allowing management to reduce workforce size while maintaining or increasing output. Estimates suggest that once this pattern takes hold, approximately one third of existing workers could be retrenched.
Contractors, liability and the suspension of labour laws
Further provisions in the codes weaken whatever enforcement capacity older labour laws retained. By treating contractors as employers in a way that allows principal employers to evade responsibility, the new framework creates a grey zone around legal liability. Laws intended to protect life, economic security and social security at the workplace become increasingly difficult to apply to the entities that actually control capital, production and profit. Compensation for workplace accidents, for instance, can no longer be reliably enforced against those who ultimately benefit from labour.
The codes also empower governments to suspend labour laws during pandemics and similar crises, explicitly in the interests of flexibility for capital. Even before the codes have fully taken effect, several state governments have used ordinances to implement analogous suspensions. The Uttar Pradesh government under Yogi Adityanath and the government of Madhya Pradesh used the pandemic as a pretext to suspend most labour laws for a period of three years. These measures provoked protests by workers’ organisations, and the United Nations sent a letter of censure to the Prime Minister. Under this combined pressure, the ordinances were quietly withdrawn into cold storage. The new codes would provide a stronger and more permanent legal basis for such suspensions in the future.
Gratuity as a paper concession
The government presents some elements of the labour codes as pro worker reforms. The rule on gratuity is often cited in this regard. Gratuity is an additional benefit paid by employers to employees in recognition of long years of service. It is typically received at retirement, but may also be paid when a worker changes jobs or leaves employment midway, subject to certain conditions, as well as in cases of death or disability. Under the existing framework, employees become eligible for gratuity after five years of continuous service. The new codes propose to reduce this eligibility period to one year.
In isolation, this appears to be a concession. However, once the broader context of fixed term employment and contractualisation is taken into account, a very different picture emerges. A widespread practice has already developed in which employers hire workers on 11 month contracts, renew these contracts repeatedly, and thereby avoid crossing statutory thresholds related to continuity of service. Under the proposed regime, an employee may work at the same workplace for most of her life, yet her officially recognised period of service will never exceed 11 months at a stretch. In practice, therefore, the promise of gratuity after one year becomes illusory. The formal concession functions alongside a material structure that ensures most workers never qualify.
Conclusion: class struggle and the future of labour rights
Taken as a whole, the “4 Labour Code Bill” represents a comprehensive restructuring of India’s labour regime in favour of companies and corporate capital. For workers, these codes occupy a position analogous to that of the three farm laws for peasants. In the agrarian case, a strong and historically unprecedented movement forced the Modi government to retreat. The Prime Minister, previously inflexible, was compelled to apologise publicly before the people and to announce the repeal of the farm laws.
The central question now is whether workers’ organisations can generate a comparable assertion of collective strength. Can they force the withdrawal of the “4 Labour Code Bill”. Can the working class secure a victory in this moment of intensified class conflict. The outcome will determine whether the long arc of labour rights in India continues to bend backwards, or whether workers can halt and reverse this attempt to undo the gains of a century of struggle.
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