Labour codes are critical in an increasingly global business model since they define the relationship between an employer and employee.Fun fact — they are not the same, nor even remotely similar, in every country. It serves a much more important role than protecting workers’ rights; they also enable businesses to stay on course when operating abroad, mitigate risk, and foster an engaged and productive workplace.
The Global Essence of Labour Codes
Labour codes, which provide minimum standards for various aspects of employment and work, such as wages, hours of work, occupational safety, and dispute resolution, exist worldwide. For example, the Fair Labour Standards Act is a United States law applicable to all U.S. states. Countries within the European Union enforce lengthy employment law statutes compatible with the European Social Charter. The primary responsibility of labour laws is to create a balance between economic productivity and human dignity.
In India, the government has recently enacted four new labour codes – Code on Wages, Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code – to consolidate and simplify 29 existing labour laws. Over 90% of India’s 50 crore workers work in the unorganised sector, and these new comprehensive codes aim to extend minimum wage, social security protective schemes and other labour rights to all workers.
According to the International Labour Organisation, labour laws that are greatly enforced are important contributors to reducing inequality, improving conditions of work, and overall economic development.
Labour Codes and Business Compliance
From a business perspective, labour codes should not be considered HR checklists – they are guidelines that impact how companies function. When organisations are compliant with the codes, they experience:
- Legal protection: Minimised risk of lawsuits, fines, and employee grievances.
- Operational consistency: Predictable Work environments allow for better planning and resource allocations.
- Brand reputation: Ethical labour practices attract investors and specific employees to your company.
Labour Codes and the Indian Context
The Code on Wages, one of four important legislative reforms in India, was notified in August 2019. It consolidates four acts: the Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act, and the Equal Remuneration Act. It establishes minimum wage and timely payment obligations for all workplaces and sectors and a national floor wage that may vary across geographical space and regions. The Indian labour laws, specifically the Factories Act and the Shops & Establishments Act, legally restrict working hours in India.
While the Centre notified these four labour codes back in 2020, they cannot be implemented until each state provides its own rules, with only 12 states having published drafts. When the laws have been harmonised, these codes will strengthen India’s codes-like approach to employment standards code and improve the ease of doing business.
Economic Impact and Investment Outlook
International investors view strong labour codes as a sign of economic maturity and governance. A country with transparent and enforceable employment laws provides a better business case and encourages foreign direct investment (FDI). Relatedly, countries will realise faster economic growth, particularly if they protect workers’ rights without discouraging enterprise.
India’s codes follow this vein in that they aim to strike a balance between delivering employment outcomes and business needs. Universal social security, including for gig and platform workers, is an example of how we can expand coverage and encourage more participation from people in the formal economy.
Strategic Integration of Labour Standards
Incorporating labour codes into core business strategy is no longer a choice. Companies’ growing presence in multiple geographies requires them to align global and local employment practices. By benchmarking against global norms in the sector, like those found in the Employment Standards Code, consistency across the organisation and reduced compliance risk are possible.
Progressive companies make compliance a differentiator, highlighting fair wages, inclusive hiring, and safe workplaces as part of their commitment to ESG (Environmental, Social, and Governance) initiatives. This not only improves investor helpfulness but also creates greater consumer trust.
