Industrial relations in HRM encompass the frameworks, laws, and practices that govern the relationship between employers, workers, and unions, aiming for productive workplaces, fair treatment, and effective dispute resolution in a rapidly evolving economy.
Industrial Relations Code 2020
The Industrial Relations Code, 2020 consolidates the Trade Unions Act 1926, Industrial Employment (Standing Orders) Act 1946, and Industrial Disputes Act 1947 to modernise union recognition, standing orders, dispute settlement, layoffs, and closures under a unified regime. Key features include 14-day strike/lockout notice across all establishments, expanded thresholds for prior government approval on retrenchment/closure to 300 workers, recognition of a negotiating union/council, Grievance Redressal Committees up to 10 members, and a reskilling fund crediting 15 days’ wages to retrenched workers. The Code also refines definitions (worker, industry), institutionalises conciliation and tribunals, and codifies unfair labour practices and standing order requirements for specified establishments, targeting predictability and faster dispute resolution.
- 14-day prior notice is mandatory for strikes and lockouts, tightening procedural discipline for industrial action.
- Retrenchment/closure approval threshold increases to 300 workers, impacting flexibility and state rule variations on implementation.
- A reskilling fund mandates employer contribution of 15 days’ last drawn wages upon retrenchment, disbursed within 45 days.
Legislation on wages
The Code on Wages, 2019 unifies minimum wages, wage payment, bonus, and equal remuneration into a single framework with a uniform definition of wages, floor wage, wider coverage, and streamlined compliance. A national floor wage anchors state minimum wages, while wage structuring is aligned via the 50% wages rule (allowances capped at 50% of total remuneration with excess counted as wages), affecting payroll design and statutory contributions. The Code extends applicability across organised and unorganised sectors, strengthens claims windows, and sets clearer rules on overtime, timely payment, and bonus eligibility, subject to central and state rule notifications.
- Floor wage ensures states cannot set minimum wages below the central baseline, reducing regional disparities.
- The 50% wage definition rule compels rebalancing of basic pay versus allowances and impacts PF and gratuity bases.
- Overtime, payment timelines, and claims periods are consolidated for consistency across employments.
Legislation on social security
The Code on Social Security, 2020 consolidates nine laws (EPF, ESI, Gratuity, Maternity Benefit, Employees’ Compensation, cine workers welfare, BOCW cess, unorganised worker social security, and Employment Exchanges provisions) to extend coverage to employees, unorganised workers, gig workers, and platform workers. It enables notified EPF/EPS/EDLI and ESI schemes, gratuity (with shorter service for fixed-term employees), maternity benefits, and a National Social Security Board for unorganised, gig, and platform workers with aggregator contributions. Phased notifications have operationalised select sections (e.g., Aadhaar-based identification) with further commencement aligned to central and state rule readiness.
- Gig and platform workers become eligible for notified social security schemes via dedicated funds and aggregator contributions.
- Fixed-term employees are entitled to pro-rata gratuity and parity of benefits with permanent staff where specified.
- Central and state schemes under EPF, ESI, and welfare cesses continue under the unified code architecture.
Legislation on employment and training
Employment and training elements are now embedded across codes, notably through Employment Exchanges (Compulsory Notification of Vacancies) integration under the Social Security Code and IR Code mechanisms for reskilling and redeployment. Mandatory vacancy notification obligations and worker registration frameworks support labour market visibility, while the IR Code’s reskilling fund operationalises transition support post-retrenchment. Future state rules and central schemes are expected to link skilling, apprenticeships, and employment services more tightly with code-led identifiers and compliance rails.
- Employment exchange notification provisions are subsumed to streamline vacancy reporting and labour market data.
- Reskilling fund credits 15 days’ wages to retrenched workers to aid transitions and employability.
- Code-based identifiers and scheme notifications aim to integrate training and placement pipelines over time.
The changing scenario
Industrial relations are shifting toward codified compliance, higher thresholds for managerial flexibility, and broader protection for diverse worker segments, including the unorganised and platform economy. Digital wage definitions, floor wages, and Aadhaar-linked social security enrollment reflect a data-driven, portability-focused architecture with implications for cost structures and HR operations. Implementation is contingent on central and state rules; organisations should conduct code readiness assessments, redesign wage structures, update standing orders and IR processes, and prepare payroll/HRIS systems for code-aligned data and reporting.
- Harmonised codes reduce fragmentation but increase emphasis on documented procedures, notices, and record-keeping.
- Coverage expansions (gig/platform, fixed-term) reshape benefits strategy and vendor/aggregator contracts.
- Transition planning should align with notified sections and state rules, with periodic reviews for compliance and workforce impact.
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