The expansion of social security, covering accident risks during commuting, providing annual health check-ups, and extending ESI coverage, is laudable. But here too, the funding question arises. The burden cannot fall solely on employers, especially small businesses. Mature economies use “tripartite financing”, where workers contribute a share, employers contribute a share, and the state contributes a share. India must evolve towards such a shared-responsibility model – Dr Samir Sarkar & Prof. Pradeep Kr. Jain
India has embarked on one of the most consequential economic reforms in recent history: the notification of the Four Labour Codes on 21 November 2025. By replacing 29 fragmented and dated labour laws with a unified regulatory structure, India is attempting to modernise its labour market to meet the demands of a rapidly evolving economy. Yet, as with all systemic reforms, the crux of the issue lies not purely in what the law intends but in how it balances the aspirations of employers and the anxieties of workers.
At the heart of the reform lies the revision to retrenchment regulations allowing firms employing up to 299 workers to lay off/retrench staff without prior government permission. This seemingly technical administrative shift holds immense significance. From the employer’s standpoint, it dismantles a long-standing constraint on operational flexibility. For decades, firms consciously avoided growth in employee numbers to stay below the old 100-employee threshold, hampering their ability to scale or restructure. By removing this bureaucratic bottleneck, the codes encourage businesses to expand, invest, and pivot in response to market dynamics.
Yet workers in that 100-300 employment range confront a different reality. Many lack extended employment records, savings buffers, or mechanisms for rapid redeployment. For them, sudden job loss is more than an employment event; it represents an existential disruption. This reveals a central tension in India’s labour architecture: unlike Germany, Japan, or the Nordic economies, India lacks systemic unemployment benefits, retraining support, or income-transition mechanisms. In other words, flexibility has been granted, but cushioning has not.
Another major innovation is the formal recognition of gig and platform workers. Food-delivery personnel, taxi-app drivers, service technicians, and freelance digital workers, all contributors to India’s expanding platform economy, are finally acknowledged within a legal framework. This is an overdue recognition of a workforce that operates outside traditional employer-employee structures. But the recognition remains conceptual. The codes do not define entitlement to minimum earnings, dispute resolution, deactivation transparency, accident insurance, or social security eligibility. Nor does it clarify whether platforms are “aggregators”, “employers”, or something in between. And yet, it must also be recognised that gig work provides flexibility and autonomy; many workers prefer it to long-term hierarchical employment. Thus, the challenge before India is not to force-fit gig workers into old definitions but to create a third legal category with defined responsibilities, protections, and flexibility.
Standardising definitions of “wages” and laying the groundwork for a national floor wage represent steps towards fiscal transparency and equity. But India is not economically homogenous: labour productivity and living costs differ between Kerala and Bihar and between Gurgaon and Guwahati. Therefore, a national floor wage must continuously calibrate economic realities rather than exist as a political decree. There is a risk: if the wage floor is too high, MSMEs may suffer; if it is too low, workers lose dignity. The balance must be empirical, not emotional.
The expansion of social security, covering accident risks during commuting, providing annual health check-ups, and extending ESI coverage, is laudable. But here too, the funding question arises. The burden cannot fall solely on employers, especially small businesses. Mature economies use “tripartite financing”, where workers contribute a share, employers contribute a share, and the state contributes a share. India must evolve towards such a shared-responsibility model.
Allowing women to work night shifts is another progressive step towards gender-inclusive employment. But here, the deeper challenge is infrastructure, not legality. Employers can ensure safety within the workplace but cannot control public environments: dark streets, poor transport links, and understaffed police patrols. A systemic solution would require urban planning, police reforms, improved transportation networks, and collaborative industry-government frameworks. A safety culture cannot be corporate-isolated; it must be civic-embedded.
The implementation challenge looms large. Labour is a concurrent subject under the Indian Constitution, meaning both the centre and the states hold jurisdiction. This creates fragmentation and discrepancy. In some states, enforcement is stringent; in others, perfunctory. Historically, Indian labour enforcement has been vulnerable to inspector-raj, discretionary harassment, rent-seeking, and corruption. The solution lies in digital governance: algorithm-based compliance checks, online inspection logs, QR-coded audit trails, and objective data-driven enforcement. India must shift enforcement power from human interpretation to digital neutrality.
Global labour experiences offer instructive lessons. Germany’s Hartz reforms combined flexibility with strong transitional safety measures. The US fosters a highly flexible labour market but supports it with unemployment insurance and mobility infrastructure. Singapore allows easy hiring and firing but simultaneously invests massively in reskilling under programmes like SkillsFuture. Nordic countries protect workers strongly but invest deeply in human capital, ensuring that labour protections do not reduce productivity.
India stands in a unique position. It cannot directly emulate Nordic labour regimes; their models require high-tax fiscal structures and social-welfare machinery. It cannot copy US-style laissez-faire methods either; we lack mature financial safety nets. India must find its own balance, a hybrid model, calibrated to its economic stage, demographic realities, and developmental priorities.
Companies need flexibility to restructure. Workers need security to transition. The state must engineer both. The real benchmark for evaluating India’s labour reform is not today’s sentiment but tomorrow’s mobility. Will workers be able to retrain and move into new sectors? Will unemployment be temporary or chronic? Will the codes unleash entrepreneurship and hiring or accelerate casualisation?
India’s demographic dividend, the world’s largest young workforce, can be a catalyst for growth or a liability, depending on how labour systems evolve. If workers feel insecure and undervalued, productivity declines, social conflict emerges, and political unrest festers. If employers feel burdened and constrained, investment stalls, operations shrink, and offshoring becomes attractive. Thus, the central principle must be labour equilibrium, not ideological bias.
As India advances into a new economic era defined by automation, AI integration, manufacturing shifts, and global supply-chain reorientation, these labour codes could prove either transformative or transitional. Transformation requires more than legal reform; it requires institutional strengthening, data-driven compliance, worker upskilling, economic cushioning during transitions, and a collaborative trust between state, employer, and workforce.
Ultimately, the most honest conclusion is this: India’s labour reform is necessary, timely, and ambitious but incomplete. It sets the stage but does not yet deliver the full performance. Whether the new regime becomes a model of balanced growth or a precursor to labour anxiety will depend on how thoughtfully it is implemented in the coming years.
A robust economy is impossible without confident businesses and confident workers. The true success of India’s labour reforms will be judged not by the text of the legislation, but by lived experience across factories, offices, farms, digital platforms, and shop floors. The codes open a new chapter for India. The responsibility now lies in how India writes the pages that follow.