Answer

The codification of 29 central labour laws into four Labour Codes of Wages, Industrial Relations, Social Security, and Occupational Safety aims to simplify India’s complex labour landscape. However, fragmented implementation, state-level divergence, and compliance overload continue to hinder the goal of uniform labour governance across the country.

Challenges in Implementation of Four Labour Codes

• High Compliance Burden: Over 20,000 compliance obligations exist, of which 56% relate to labour laws, causing regulatory fatigue.
• Rising Business Costs: New wage definitions capping variable pay at 50% raise employer contributions to PF and gratuity, escalating costs by 5–10%.
• Ambiguity in Legal Definitions: Differing meanings of “worker” and “employee” affect benefits and eligibility, especially in new-age sectors.
  Eg. IT firms have flagged unclear classification impacting high-skill roles under the Social Security Code, 2020.
• Dual Compliance with State Laws: Existing Shops and Establishment Acts in states continue alongside central codes, creating overlapping rules.
• Inconsistent Recordkeeping Norms: States vary in requirements for record formats, filings, and displays, creating administrative confusion.
• Fragmented Digitization: States differ in the digital interface and backend system development for compliance processing.
  Eg. While Telangana has unified labour portals, Uttar Pradesh still relies on manual filings, affecting efficiency.
• MSME Vulnerability: With over 110 million workers and contributing 30% to GDP, MSMEs struggle with legal complexity and costs.

Measures to Ensure Uniform Labour Governance

• Clarify Key Definitions: Harmonize definitions of “worker” and “employee” across sectors, aligning with ILO standards and role-based classifications.
  Eg. UK and Singapore follow function-based classifications, aiding fair benefit application and compliance clarity.
• Integrate State-Level Labour Laws: Merge local Shops and Establishments Acts with central codes for seamless governance.
• Sector-Specific Exemptions: Rationalize thresholds and exemptions tailored for industries like retail, IT, and logistics.
• Uniform Compliance Standards: Create national templates for filings and returns with state integration, minimizing duplication.
  Eg. The Shram Suvidha Portal can be expanded to mandate uniform e-returns across all states.
• Self-Certification Models: Enable eligible firms to self-certify for low-risk labour obligations to reduce inspection overload.
• Digital Infrastructure Enhancement: Invest in a unified Labour Compliance Management System (LCMS)connecting all states.
  Eg. The e-Shram portal with over 300 million registrations ( as of April 2025 ) shows the success of a central platform in reaching informal workers.
• Reduce Litigation and Delays: Enforce timelines and case-tracking mechanisms for quicker resolution of labour disputes.

Simplifying India’s labour governance through clarity, standardization, and digital integration is essential for unlocking its economic potential. Effective implementation of Labour Codes, supported by state alignment and industry-specific strategies, can significantly boost investor confidence, job creation, and the ease of doing business nationwide.

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