Industrial Relations Code, 2020
The Industrial Relations Code, 2020 consolidates three major labour laws governing trade unions, standing orders, and industrial disputes. It introduces the concept of fixed-term employment, provides for negotiating unions and councils, and establishes a framework for resolution of industrial disputes through conciliation, arbitration, and adjudication.
CONSOLIDATES
Historical Context
The Industrial Disputes Act, 1947 and Trade Unions Act, 1926 formed the backbone of India's industrial relations framework for decades. The Second National Commission on Labour (2002) recommended streamlining these laws. After multiple drafts and extensive consultations with trade unions and industry bodies, the Industrial Relations Code received Presidential assent in September 2020.
Key Provisions
Fixed-Term Employment
NEWEmployment for a fixed duration with benefits at par with permanent workers.
- •Worker engaged for a fixed period based on written contract
- •Same wages and benefits as permanent workers doing similar work
- •Pro-rata gratuity becomes payable once the employee completes at least one year of service
- •The Code is silent on notice period/retrenchment compensation; general law or contract would apply
- •Contract expiry does NOT constitute retrenchment
Definition of Worker - Expanded
CHANGEDExpanded definition includes supervisory employees up to a higher wage threshold.
- •Includes persons in supervisory capacity drawing wages up to Rs. 18,000 per month (increased from Rs. 10,000)
- •Includes sales promotion employees
- •Includes working journalists
- •Excludes persons in managerial or administrative capacity
- •Excludes persons employed in police or armed forces
- •Excludes apprentices under Apprentices Act, 1961
Negotiating Union - Statutory Right
CHANGEDRecognition of trade unions for collective bargaining is now a legal right.
- •Negotiating Union: Trade union with 51% or more workers as members
- •Recognition is now statutory, not at employer's discretion
- •Negotiating Council: Where no union has 51%, unions with 20%+ form council
- •Council representation proportional to membership
- •Three-year recognition period (may be mutually extended up to five years as per Section 14(6))
- •Only negotiating union/council can collectively bargain
Standing Orders
CHANGEDRules governing conditions of employment in industrial establishments.
- •Mandatory for industrial establishments employing 300 or more workers
- •Employers must prepare draft standing orders within six months of the Code's commencement as per Section 30(1)
- •Covers classification, shift work, attendance, leave, termination
Strikes and Lock-outs - Universal Notice
CHANGED14-day notice now required for ALL establishments, not just public utilities.
- •14 days' advance notice required for strike or lock-out
- •Applies to ALL industrial establishments (major change)
- •Previously only public utility services required notice
- •Prohibition during conciliation/mediation and 7 days after conclusion
- •Prohibition during arbitration proceedings and 60 days after award
Lay-off Provisions
Conditions under which lay-off does not attract compensation.
- •Power shortage
- •Natural calamity
- •Mine-specific: Fire, flood, excess of inflammable gas, explosion
- •Government permission required for 300+ worker establishments
- •Lay-off compensation: 50% of basic wages + DA
Retrenchment and Closure
CHANGEDProvisions governing workforce reduction with higher threshold.
- •Government permission required for establishments with 300+ workers (changed from 100)
- •60 days' notice for closure of undertaking
- •Retrenchment compensation: 15 days' wages per year of service
- •Fixed-term expiry NOT retrenchment
- •Re-employment preference for retrenched workers
Re-skilling Fund
NEWFund for training retrenched workers.
- •Employer to contribute 15 days' wages per retrenched worker
- •Fund used for re-skilling retrenched workers
- •Contribution to be made within 45 days of retrenchment
- •Government to frame re-skilling utilization rules
Dispute Resolution Mechanism
CHANGEDMulti-tier system for industrial dispute resolution.
- •Works Committee: For matters of mutual interest (100+ workers)
- •Grievance Redressal Committee: Internal resolution (20+ workers)
- •Conciliation Officers: Government-appointed mediators
- •Industrial Tribunals: State-level adjudication (2-member)
- •National Industrial Tribunal: For disputes of national importance
Industrial Tribunal
CHANGEDTwo-member tribunal for adjudication of disputes.
- •Consists of Judicial Member and Administrative Member
- •Balanced composition for technical and legal expertise
- •Jurisdiction over industrial disputes
Definitions
Industry
Any systematic activity carried on by cooperation between employer and workers for production, supply or distribution of goods or services with a view to satisfy human wants.
Excludes: Institutions engaged in charitable, social or philanthropic services; Sovereign functions including defence research and atomic energy; Domestic services; Any activity of Government relatable to sovereign functions
The definition is narrower than before, explicitly excluding charitable institutions and domestic work
Worker
Any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work.
Excludes: Persons in managerial or administrative capacity; Supervisory persons drawing wages exceeding ₹18,000 per month; Persons employed mainly in managerial capacity; Persons employed in police, armed forces, prison services; Apprentices engaged under Apprentices Act, 1961
Thresholds: Supervisory wage limit: ₹18,000/month (increased from ₹10,000)
Sales promotion employees and working journalists are now explicitly included as workers
Fixed-Term Employment
Employment of a worker for a fixed period on the basis of a written contract.
Expiry of fixed-term contract does NOT constitute retrenchment - a significant change from earlier interpretation
Retrenchment
Termination of service of worker by employer for any reason other than as punishment for disciplinary action.
Excludes: Voluntary retirement; Retirement on reaching superannuation age; Non-renewal or termination of fixed-term employment contract on its expiry
Fixed-term contract expiry explicitly excluded from retrenchment definition - major change
Negotiating Union
Trade union registered under the Code and recognized by employer as sole negotiating union for collective bargaining.
Thresholds: Must have 51% or more workers of establishment as members
For the first time, recognition of trade unions is a statutory right, not employer discretion
Negotiating Council
Council formed when no single trade union has 51% membership.
Thresholds: Unions with 20% or more membership can be part of council
Representation in council is proportional to membership strength
What Changed
| Aspect | Before | After |
|---|---|---|
| Worker Wage Threshold | Supervisory employees up to ₹10,000/month covered | Supervisory employees up to ₹18,000/month covered |
| Fixed-Term Employment | Not recognized as separate category; often treated as contract labour | Explicit legal status with benefits equal to permanent workers |
| Standing Orders Applicability | Establishments with 100+ workers | Establishments with 300+ workers (can be modified by state) |
| Lay-off/Retrenchment Permission | Required for establishments with 100+ workers | Required for establishments with 300+ workers (can be modified by state) |
| Trade Union Recognition | Recognition was employer's discretion | Statutory right to recognition as negotiating union/council |
| Strike/Lock-out Notice | Only public utility services required 14-day notice | ALL industrial establishments require 14-day notice |
| Industrial Tribunal Structure | Single member tribunal | Two-member tribunal (Judicial + Administrative) |
Practical Impact
Fixed-Term Employment Management
- •Can use fixed-term workers for any role (not limited to temporary work)
- •Must provide equal wages and benefits as permanent workers
- •Pro-rata gratuity payable after completing at least one year of service
- •Code is silent on notice/retrenchment compensation on contract expiry; general law or contract applies
Trade Union Relations
- •Must recognize negotiating union with 51%+ membership
- •Must form negotiating council if no union has majority
- •Recognition valid for three years
- •Multiple unions can coexist but only one negotiates
Workforce Restructuring
- •300+ worker establishments need permission for lay-off/retrenchment
- •60-day notice required for closure
- •15-day wages per year compensation for retrenchment
- •Contribute to re-skilling fund within 45 days
Standing Orders Compliance
- •Prepare draft standing orders within 6 months of IR Code commencement
- •Cover: classification, shifts, leave, termination, discipline
Compliance Checklist
- ☐Review and update standing orders if employing 300+ workers
- ☐Implement fixed-term employment contracts with equal benefit clauses
- ☐Calculate pro-rata gratuity for fixed-term employees after completing at least one year of service
- ☐Establish mechanism for trade union recognition (51% verification)
- ☐Create negotiating council framework if multiple unions exist
- ☐Update strike/lock-out notice procedures (14-day advance notice)
- ☐Set up grievance redressal committee for establishments with 20+ workers
- ☐Establish works committee for establishments with 100+ workers
- ☐Review retrenchment compensation calculations (15 days per year)
- ☐Set up re-skilling fund contribution mechanism
- ☐Display certified standing orders (digital and physical)
- ☐Train managers on new fixed-term employment rules
- ☐Update employment contracts to reflect IR Code provisions
- ☐Establish conciliation and arbitration protocols
Penalties
Illegal strike or lock-out
Workers: Any person who knowingly funds or financially supports an illegal strike or lock‑out shall be punishable with a fine ranging from INR 10,000 to INR 50,000 or imprisonment for up to 1 month, or both.
Penalties apply to initiators and participants
Non-compliance with lay-off/retrenchment provisions
Fine ranging from INR 1,00,000 to INR 10,00,000. For repeat offence, Fine ranging from INR 5,00,000 to INR 20,00,000, or imprisonment upto 6 months or both.
Strict compliance required for 300+ establishments
Failure to file standing orders
Fine ranging from INR 50,000 to INR 2,00,000. Continuing offence-additional fine of two thousand rupees per day till the offence continues.
For establishments with 300+ workers
Frequently Asked Questions
What is fixed-term employment and what benefits does it include?
Fixed-term employment is hiring workers for a specified duration through a written contract. Workers get the same wages and benefits as permanent employees. They are entitled to pro-rata gratuity after completing at least one year of service.
What is a negotiating union vs. negotiating council?
A negotiating union is a trade union with 51% or more workers as members, giving it sole bargaining rights. A negotiating council is formed when no single union has 51% membership - unions with 20%+ members form the council with representation proportional to their membership. Recognition is valid for 3 years (extendable up to 5 years as per Section 14(6)). Recognition is now a statutory right, not employer discretion.
When are standing orders required?
Standing orders are mandatory for industrial establishments employing 300 or more workers. Employers must prepare draft standing orders within six months of the Code's commencement. They govern conditions of employment including work hours, leave, termination procedures, and disciplinary actions.
What notice is required for strikes/lockouts?
A 14-day advance notice is required before commencing any strike or lock-out. This now applies to ALL industrial establishments (previously only public utility services). Strikes and lock-outs are prohibited during pending conciliation/mediation proceedings and for 7 days after conclusion, during arbitration proceedings and for 60 days after award.
What is the re-skilling fund?
The re-skilling fund is created from employer contributions of 15 days' wages per retrenched worker, to be paid within 45 days of retrenchment. The fund is used to provide training and re-skilling opportunities to workers who have been retrenched.
How does retrenchment compensation work?
Retrenchment compensation is 15 days' average wages for each completed year of continuous service. For establishments with 300+ workers, prior government permission is required.
What changed about the worker definition?
The wage threshold for supervisory workers has increased from ₹10,000 to ₹18,000 per month. Additionally, sales promotion employees and working journalists are now explicitly included as workers. Apprentices under the Apprentices Act continue to be excluded.
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