Introduction
The Constitution of India (“Constitution”) is the cornerstone of individual rights and liberties, and provides the basic framework within which all laws in India, including laws relating to labour and employment, must operate. The Constitution guaranamattees certain fundamental rights to individuals such as the right to life, privacy, equality before the law and prohibition of discrimination in public education and employment on the basis of religion, race, gender, caste, health conditions, and other legally protected status. The Constitution recognises the ‘right to livelihood’ as an integral part of the fundamental right to life.
In addition to fundamental rights, the Constitution also envisages certain ‘directive principles’ which serve as a guide to the legislature towards fulfilling social and economic goals. Given India’s history, social justice has always been at the forefront of a number of Indian legislations and reforms, specifically labour and employment laws. It is important to note that several labour laws in India have been framed from a worker emancipation perspective—including those relating to factories, mines, plantations, contract work, as well as those relating to payment of wages, regulation of trade unions, provision of social security, industrial safety and hygiene.
However, given changing economic requirements in recent times, the Indian Government has been increasingly conscious of the needs of businesses as well. In recent times, the Indian Government has already brought in certain significant changes in labour laws with the aim of improving the ease of doing business in India.
Key amongst these reforms has been the consolidation of 29 of the 44 central labour laws into 4 comprehensive labour codes: Code on Wages, 2019 (“Code on Wages”); the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”); the Industrial Relations Code, 2020 (“IR Code”); and the Code on Social Security, 2020 (“Social Security Code”) (collectively referred to as “Labour Codes”). The Labour Codes have been brought into effect from 21 November 2025.
Key Points
Labour and employment laws are listed under the Concurrent List in the Constitution, which means that the Union Parliament (federal legislature) and State Legislatures have co-equal powers to enact laws relating to all labour and employment matters in India. Typically, the Union Parliament enacts a Central law, while the States formulate the rules thereunder. Additionally, States often enact standalone legislations as well.
One of the central principles of Indian labour and employment law is that it distinguishes between ‘non-workers’ (individuals engaged primarily in managerial/supervisory/administrative roles) and ‘workers’ (typically individual contributors). The service conditions of workers are subject to far greater statutory protection under the Labour Codes. Non-workers’ service conditions are typically governed by the terms of the relevant employment contracts and internal policies of the organisation. Further, certain provisions under the Labour Codes are also applicable to non-workers (especially social security benefits). Determining whether a particular employee is a worker or not (since workers are a subset of the umbrella term ‘employee’), is an exercise that has to be undertaken on a case-by-case basis.
Indian employment laws do not recognise ‘at-will’ employment and while parties may contractually agree to terminate the employment relationship without cause, this is typically done upon provision of prior notice and complying with due process, which is governed by both Central and State-level regulations. Further, in terms of the Indian Contract Act, 1872 (“Contract Act”), which is the principal legislation governing contracts in India, agreements that restrain trade, business or one’s profession are void—this could have an impact on the enforceability of employment bonds, and on non-compete and non-solicit covenants in employment contracts. However, there are certain exceptions to it which are evaluated on a case-by-case basis.
Trade unions have typically been restricted to the more industrial forms of business, such as the automotive, manufacturing, and textiles sectors; however, in calls for unionisation in new-age businesses such as the Information Technology (IT) and Information Technology-enabled services (ITes) sector and other sectors have substantially increased as workers have become more aware of their statutory rights.
The IR Code is the key legislation that governs industrial relations in India. It provides for the processes pertaining to the registration and recognition of trade unions, and their rights and liabilities. It is pertinent to note that the definition of the term ‘worker’ has been statutorily expanded for the chapter pertaining to trade unions to include all persons employed in a trade or industry. The IR Code aims at securing industrial peace and harmony by providing the process for settlement of industrial disputes arising between workers; between employers and workers; and between unions and employers.
Regulations pertaining to the payment of equal remuneration to male and female workers who undertake similar tasks are provided under the Code on Wages, 2019. Whereas manpower supply arrangements are governed under the Occupational Safety, Health and Working Conditions Code, 2020.
Legal framework
While the enactment of the Labour Codes has simplified India’s employment law framework at the Central level, the fact that both the Parliament (federal legislature) and State legislatures have co-equal powers regarding labour and employment laws. Given this, there are several laws relating to labour and employment in India enacted at the State-level governing matters covered by a central law and vice versa. Further, judicial precedents have typically adopted a beneficial and harmonious interpretation in the event of such a conflict of laws and due to this, it is essential for employers to conduct a holistic evaluation of legal requirements.
Difference Between Workers and Non-Workers (Employees)
A ‘worker’ is defined as a person who is employed to do any manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward. The definition however excludes the following persons: (i) those who are employed mainly in a managerial or administrative capacity; (ii) those who, being employed in a supervisory capacity, draw a salary exceeding INR 18,000 (~USD 188.79) per month or (iii) those who exercise, either by the nature of the duties attached to the office or by reason of the powers vested in them, functions mainly of a managerial nature.
That said, it is important to note that the wage ceiling of INR 18,000 (~USD 188.79) mentioned above is not the only definitive criterion in respect of ascertaining whether or not a particular employee will be categorised as a worker. There have been multiple occasions when Indian Courts have held that whether an employee is a worker or not depends on their exact nature of the job responsibilities and duties and the context of their role in the organisation, as opposed to the quantum of their wages or their designation.
Determining whether a particular employee is a worker or not is a fact specific exercise, and has to be undertaken on a case-by-case basis. Various judicial precedents have laid down that in order to determine an employee’s status as a ‘worker’, the actual, substantial and predominant work they perform is decisive, rather than their remuneration/designation. Other factors useful to determine whether an employee is a worker are evaluating whether they have managerial responsibilities and/or the authority to take decisions on behalf of the employer’s organisation.
Workers have several additional rights under the IR Code—for instance, changes to their conditions of service and any termination of their employment can only be undertaken as per the specified processes guaranteed under the IR Code. Further, workers have the right to approach dispute resolution authorities/bodies to dispute any unjustified employment termination and/or unfair labour practice, on part of their employer.
The terms of service of employees (i.e. those who mainly work in a managerial or administrative capacity) are ordinarily governed by the State-specific shops and establishments legislation (“S&E Act”) read with the terms and conditions of their contracts of employment and the internal policies of an organisation. Persons occupying managerial and/or confidential positions in an organisation are exempt from the S&E Acts of certain States such as Karnataka, Andhra Pradesh, Kerala, Madhya Pradesh, Tamil Nadu and Maharashtra, among others. Employees fall outside the scope of the IR Code as all of its provisions barring those pertaining to trade unions apply only to workers.
Other Factors
Apart from the classification of employees into workers and non-workers (employees), the applicability of labour legislations in India also depends on the nature of activity that the employees are engaged in as well as the place of work—for instance, different laws apply depending on whether the place of work is a factory, plantation, mine, shop, or commercial establishment. Certain labour laws also take into account the number of employees engaged at a particular place of work; for instance, the scope and applicability of certain social security benefits varies, depending on the number of employees engaged in an establishment, the wages earned, and the position of the employees at the workplace.
Overview of Key Labour Laws
The various labour and employment laws in India can be broadly categorised into four important themes, namely: (i) wages; (ii) social security; (iii) employer-employee relations; and (iv) occupational health and safety.
The Labour Codes have subsumed erstwhile central enactments pertaining to the above subjects in the following manner:
Wage Code
It applies to ‘employees’ unlike the Wages Act which applied to only certain categories of employees, namely, those to whom the payable wages do not exceed INR 24,000 (~USD 251.65) per month, and to those employed in factories and industrial establishments.
Key features of the Wage Code are set out below:
- It provides for a uniform definition of ‘wages’—prior to this, each labour law had its own definition of ‘wages’ requiring specific analysis while computing payouts;
- Employers are required to pay ‘wages’ within 2 working days from an employee’s last working day upon their exit for any reason whatsoever;
- Transgender persons are included within the scope of equal remuneration protections for similar work;
- The concept of a floor wage has been given statutory recognition to ensure that there is a basic level of parity in minimum wages across India. State governments cannot set a minimum wage below the national floor wage; however, different floor wages can be fixed for different geographical areas;
- Employees found guilty of sexual harassment are disqualified from receiving statutory bonus; and
- The limitation period for filing claims has been increased to 3 years (earlier this varied between 6 months to 2 years based on the relevant statute).
Social Security Code
Key features of the SS Code are highlighted below:
- It provides for the calculation of statutory benefits based on the definition of ‘wages’;
- Schemes under the EPF Act will remain in force for a period of 1 year from the date of the Social Security Code’s enactment;
- Gig and platform work have been provided statutory recognition and organisations engaging such workers have specific obligations to make social security contributions;
- Fixed term employees (“FTEs”) are eligible for the same benefits as permanent employees; and
- Provisions pertaining to employees’ state insurance and provident fund respectively are only applicable to employees earning less than the notified wage ceiling.
IR Code
The IR Code repeals and subsumes: (a) The Trade Unions Act, 1926; (b) The Industrial Employment (Standing Orders) Act, 1946; and (c) the Industrial Disputes Act, 1947.
Key features of the IR Code are set out below:
- Workers are required to provide 14 days’ prior notice to affect a lockout or strike;
- Industrial establishments with 20 or more workers must constitute a Grievance Redressal Committee;
- Disciplinary proceedings are ordinarily required to be completed within 90 days from the date of a worker’s suspension;
- The requirement to maintain standing orders—formally defined conditions of employment inter alia pertaining to classification of workers, their working hours, leave periods, shift timings, transfer of employment, termination of services, and inquiry for misconduct—is now applicable to establishments with 300 or more workers;
- The creation of a ‘Worker Re-Skilling Fund’ has been mandated wherein employers must contribute an amount equal to a worker’s last drawn wages for a period of 15 days in the event their services have been terminated without cause; and
- The collective bargaining framework has been formalized as employers can recognize a sole negotiating union (where a union enjoys the support of 51% or more of its workforce) or establish a negotiating council (where no single union enjoys majority support).
OSH Code
Key features of the OSH Code are highlighted below:
- It covers establishments engaged in various activities including factories, mines, beedi and cigar production, building and construction work, plantations etc.;
- Establishments with 10 or more workers are required to register under the OSH Code;
- It requires employers to issue appointment letter to all employees mandatorily;
- Critical changes under a worker’s leave encashment related entitlements;
- Engagement of contract worker in an establishment’s core activities is prohibited with certain statutorily recognized exceptions; and
- A common license has been created for establishments that are factories and also engage contract workers.
New Developments
On 8 May 2026, the Central Government has also released the final rules under the Labour Codes, thereby gradually moving towards a clear implementation of the Labour Codes.
Additionally, to provide safe working conditions to employees and provide equal opportunity to all employees, the following legislations are also in place—Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Posh Act”); Transgender Persons (Protection of Rights) Act, 2019 (“TP Act”); Rights of Persons with Disabilities Act, 2016 (“PwD Act”) and the Human Immunodeficiency Virus and Acquired Immune Deficiency Syndrome (Prevention and Control) Act, 2017 (“HIV Act”).
Shops and Commercial Establishments Acts
The S&E Acts are State-specific—all states in India have enacted their own S&E Act. The S&E Act of a State typically regulates service conditions of employees engaged in shops and commercial establishments which includes most private companies and firms. It regulates hours of work, payment of wages, overtime, leave, holidays, and other conditions of service.
Transgender Persons (Protection of Rights) Act, 2019
The Transgender Persons (Protection of Rights) Act, 2019 (“Transgender Act”) entered into force in December 2019. The Transgender Act aims to provide for the protection of rights of transgender persons and their welfare, and for matters connected therewith. Amongst other provisions, the Transgender Act prohibits discrimination against a transgender person, including unfair treatment in relation to employment as well as discrimination in matters connected with employment (recruitment and promotion), etc. Employers are also required to designate a complaint officer, who shall be responsible for dealing with complaints with respect to violations of the Transgender Act and shall also ensure compliance with the same.
In March 2026, Parliament passed the Transgender Persons (Protection of Rights) Amendment Act, 2026 which modified the definition of ‘transgender person’ to exclude persons with different sexual orientations and self-perceived sexual identities and limit it to inter sex persons, eunuchs, and persons with certain socio-cultural identities or congenital variations in sex characteristics at birth. The recognition of a right to self-perceived gender identity was also removed by way of this amendment.
State-level Reforms pertaining to Platform Based Gig Workers
In the recent past, the State Governments of Rajasthan, Karnataka, Bihar, Jharkhand, and Telangana have enacted comprehensive laws inter alia recognizing platform-based gig workers and creating mechanisms for them to receive social security benefits. These enactments establish State-level welfare boards that collect a welfare fee in the form of a contribution from platforms engaging gig workers, require registration of platform based gig workers, and establish grievance redressal mechanisms for resolution of disputes between such workers and the engaging platform.
