Industrial Relations Code, 2020: New Rules for Employment

The Industrial Relations Code, 2020 reshapes the way India governs employment conditions, job security, dispute resolution and trade union rights. It consolidates three major laws into one comprehensive framework and creates a uniform system that applies across the country. For workers and organisations, this Code influences how disputes are raised, how employment terms are managed, how fixed term contracts operate and how industrial discipline is maintained. Many of its provisions directly affect day-to-day workplace situations.

Who Is Covered Under the Code

The Code uses modern and inclusive definitions for both “worker” and “employee.” A worker is anyone employed in an industry to perform manual, skilled, semi-skilled, technical, operational or supervisory work, except those in managerial or administrative roles or supervisory roles above a prescribed wage ceiling. An employee includes individuals engaged in skilled, semi-skilled, unskilled, operational, technical, administrative or clerical work. This broadened coverage ensures that more categories of staff fall within the protection of labour law.

The definition of “industry” has also been expanded. Any organised activity involving cooperation between employers and workers is considered an industry, irrespective of whether capital is invested or profit is intended. Only a few specific activities such as charitable institutions, domestic work and sovereign functions are excluded. This widens the reach of the law across modern service sectors and new forms of work.

Fixed Term Employment and Gratuity Eligibility

A significant reform in the Code is the formal recognition of fixed term employment. Workers engaged on fixed term contracts must receive the same wages, hours of work, allowances and statutory benefits as permanent employees performing similar tasks. They also become eligible for gratuity after completing one year of service under such a contract. This is a major shift for industries that rely heavily on project-based or seasonal roles and ensures that short-term engagement does not lead to loss of essential benefits.

Grievance Redressal Committees

Every establishment with twenty or more workers must set up a Grievance Redressal Committee. This committee must include equal representation from workers and the employer and must resolve complaints within thirty days. The Code also states that any individual dispute relating to dismissal, discharge, retrenchment or termination is automatically treated as an industrial dispute. This allows individual workers to seek redress without needing a union to raise the issue on their behalf.

If a worker is dissatisfied with the Committee’s decision, they may seek conciliation and, if necessary, approach the Tribunal within the specified timelines. These mechanisms are designed to resolve disputes early and reduce the burden of long litigation.

Works Committee and Negotiating Union

The Code allows the government to require establishments with one hundred or more workers to constitute a Works Committee to improve relations between employers and workers. It also introduces the concept of a negotiating union or negotiating council. If there is only one trade union, it becomes the recognised negotiating union. If multiple unions exist, the one with at least fifty one per cent support becomes the negotiating union. Where no union has majority support, a negotiating council is formed with proportional representation. This system ensures structured communication and collective bargaining.

Standing Orders for Larger Establishments

Establishments employing three hundred or more workers must prepare standing orders that define service conditions such as work classification, attendance rules, leave, termination procedures, misconduct and disciplinary processes. Until an establishment drafts and gets its standing orders certified, the model standing orders notified by the government automatically apply. This requirement provides transparency and predictability for both workers and employers.

Notice of Change in Service Conditions

If an employer proposes to change any service condition listed in the Third Schedule of the Code, such as wages, working hours, shift patterns, leave rules or job roles, they must provide at least twenty one days’ notice to affected workers. There are limited exceptions, such as changes required under a settlement or award or urgent shift adjustments made after consulting the Grievance Redressal Committee. This requirement ensures that changes to service conditions are not abrupt or unilateral.

Strikes, Lockouts and Restrictions

The Code sets out structured rules for strikes and lockouts. In public utility services, advance notice is mandatory. The intention is to balance the workers’ right to strike with the broader need to maintain industrial stability and avoid sudden disruptions.

Disciplinary Proceedings and Subsistence Allowance

When a worker is suspended pending inquiry into alleged misconduct, the inquiry should ordinarily be completed within ninety days. During suspension, the worker must receive subsistence allowance at fifty per cent of wages for the first ninety days and seventy five per cent thereafter if the delay is not caused by the worker. This ensures that employees are not placed under unreasonable financial hardship during disciplinary proceedings.

Why This Code Matters

The Industrial Relations Code creates a structured and transparent system for managing employment relationships in India. It strengthens the rights of individual workers, formalises fixed term employment, sets clear limits on disciplinary processes, establishes grievance mechanisms and provides a predictable framework for collective bargaining. It also brings clarity to employers by laying out consistent procedures and reducing the uncertainty that existed under the earlier patchwork of laws. In a growing and diverse economy, these reforms aim to reduce ambiguity and improve trust between employers and workers.

What Comes Next in the Series

The next article in this series will focus on the Code on Social Security, 2020. It will explain how provident fund, insurance, gratuity, maternity benefits and welfare schemes have been consolidated. It will also explore how the law recognises gig and platform workers and discusses the significant change that allows fixed term employees to receive gratuity after one year of service. The goal is to present the new framework in a clear and practical manner so both workers and employers can understand its real impact.