Sep 16,2016 | 6 min read

Labour Laws in India: All Proposed Reforms & Amendments

The current scenario

Below are some features of the present labor laws:

  • According to the Factories Act of 1948, normal working hours for adults are 9 hours per day amounting to 48 hours per week. Further, the working hours for young workers are 4.5 hours per day.
  • In case of paid vacation, the Act lays down that any worker who has worked at least 240 days in a year is entitled to a paid leave of 12 working days. However, the duration differs for adults and child workers. While an adult worker is entitled to 1 day of leave for every 20 days of service the ratio for child workers is 1:15.
  • Workers are entitled to paid days-off during public and religious festivals, including memorial ad religious holidays. The main three national public holidays recognized by the constitution are - Republic Day (January 26), Independence Day (August 15) and Gandhi Jayanti (October 2).
  • The Trade Union Act of 1926, last revised in 2012, provides for freedom to form associations or unions or co-operative societies. It also lays down the procedure for registration of such a Union guaranteeing the enjoyment of all the rights promised to them.
  • The Constitution, under the Industrial Dispute Act, guarantees the right to strike. All citizens have the right to assemble peacefully without arms. The Act lays down that members of the union must inform the employer at least six weeks prior to the proposed date of strike, who then should notify the appropriate government within five days.

For further details about all the above labor laws and more, you can refer to this article.

Problems with labor law in India

But, the labor laws in India are fraught with loopholes and are very restrictive. There is no ease of making workforce adjustments in line with changing market conditions. This hinders the smooth working of the economy. Some of the problems with these laws are given below:

  • Chapter 5B of the Industrial Disputes Acts of 1947 requires prior approval of the appropriate government before any layoff, retrenchment or closure in establishments employing 100 workers or more.
  • Section 9A of the Act mandates 21 days notice before affecting any change in established conditions of service of any employee.
  • The Contract Labor (Regulation and abolition) Act of 1970 provides for engaging contract workers for temporary, seasonal work but not for work of a perennial nature. Since regular worker are becoming less productive, more expensive, hard to put to immediate work and legally challenging to lay off in the face of falling demand, the employers find this feature of the Act very restrictive.

Proposed changes to labor laws on a Union scale

But, these and other glitches have not gone unrecognized. The government has been making efforts with of amendments in the labor acts to provide for smoother functioning. Some of the efforts made in this area by the central government are as follows:

  • The Payment of Bonus (Amendment) Bill, 2015 proposes to make more employees eligible for bonus and to double such payments. It also proposes to such statutory bonus payments from Rs. 10,000 per month under the original act of 1965 to Rs. 21,000 per month.
  • The Small Factories (Regulation of Employment and Conditions of Service) Bill, 2014 attempts to make it easier for manufacturing firms employing up to 40 workers by exempting the of six labor laws including the Factories Act, the Industrial Disputes Act of 1947, and the Shops and Establishment Acts of respective states.
  • The Labor Code on Wages Bill, 2015 aims to replace four laws pertaining to minimum wages, payment of salaries and benefits. These include the Payment of Wages Act of 1936, the Minimum Wages Act of 1948, Payment of Bonus Act of 1965 and the Equal Remuneration Act of 1976.
  • The Labor Code on Industrial Relations Bill, 2005 proposes to substitute three laws including the Trade Unions Act of 1926, the Industrial Disputes Act and the Industrial Employment (Standing Orders) Act of 1946.
  • The Child Labor (Protection and Regulation) Amendment Bill, introduced in 2012 proposes that children below the age of fourteen years may only be allowed to work in their own family enterprises.

You can read more about such reforms and their impacts here.

Proposed changes to labor laws [State scale]

The states are not far behind in recognizing the problems with these laws. Since it lies under the concurrent list, the different states have the authority to legislate over such matters. Rajasthan and Haryana have taken major steps in making such changes.

Labor law changes in Rajasthan

The Labor law amendments proposed by the government under Chief Minister Mrs. Vasundhara Raje Scindia were approved by the President. These include changes in laws under four major acts. The changes in the acts are as follows:

Amendments to the Industrial Disputes Act, 1947:

  • Industrial unit owners and employers of companies employing up to 300 employees can lay off employees or shut down units without permission of the government as against the earlier maximum limit of 100 employees;
  • In such cases, the worker may raise an objection in three months as opposed to no time limit earlier); and
  • A labor union can be formed with the approval of 30 per cent of the total membership as against the earlier 15 per cent.

Amendments to the Factories Act, 1948:

  • Factories operating without power may employ a maximum of 40 laborers (as opposed to 20 earlier) and the factories operating with power may employ a maximum of 20 laborers, as against the earlier number of 10.
  • Any employee with a grievance against his/her employer for the violation of this Act may seek a redress in any court of law.

Amendments to the Contract Labor Act, 1970:

This act is now applicable to establishments employing 50 contract workers, as against the earlier figure of 20. This increase in upper limits ensures better compliance for all.

Amendments to the Apprenticeship Act 1961:

It now includes a third party training provider and relaxed rules to add more trades.

You can read more about these changes and their impacts here.

Labor law changes in Haryana

Haryana Vidhan Sabha recently passed amendments to many acts for better functioning of the labor market. Some of these include:

Industrial Disputes (Amendment) Bill, 2016

It allows enterprises with up to 300 employees to lay off workers without the permission of the government.

Contract Labor (Regulation and Abolition) Amendment Bill, 2016

It proposes to do away with the condition of registration for industrial establishments, employing up to 50 workers, under the Contract Labor (Regulation and Abolition) Act 1970.

Payment of Wages (Amendment) Bill, 2016

This amendment provides remedy to those getting wages at higher rates to enable them to agitate their claim in case of delayed payment of wages or illegal deduction from the wages.

Factories (Amendment) Bill, 2016

It provides for factories functioning with aid of power employing 20 workers and those working without it employing 40 workers to be exempted from the factories Act of 1948.

Impact of the Amendments:

  • Companies now have the flexibility to hire employees or lay them off to adjust to the demand-supply scenario that exists in the markets at any given time.
  • Loss- making businesses can be dumped without delay or without loss of precious resources. With the reduced thresholds for labor union memberships, inter-union conflicts and multiplicity can be reduced or even completely avoided.


These changes are seen as a positive step towards encouraging employment generation and focus on production. The Confederation of Indian Industry has stated “We have been recommending these key reforms for bringing in simplification and flexibility in engagement and deployment of labor.”

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