##Are STARTUPS ready for the Labour Codes?

 

Are Startups Ready for the Labour Codes?

India has replaced 29 old labour laws with four major codes — the Code on Wages, 2019, Industrial Relations Code, 2020, Occupational Safety, Health and Working Conditions Code, 2020 and Code on Social Security, 2020. The purpose is to simplify labour compliance and make doing business easier. However, from a legal point of view, the real question is whether startups are practically ready to follow these changes.

The most important change is the new definition of “wages.” Earlier, many startups structured salaries in a way that reduced statutory payments like provident fund and gratuity by increasing allowances. Under the new system, the wage structure must follow a fixed formula. This means startups may have to increase their statutory contributions. Legally speaking, ignoring this restructuring could lead to future penalties and disputes.

The recognition of fixed-term employment is helpful for startups that hire employees for specific projects. But the law now requires that fixed-term employees receive benefits similar to permanent employees, including gratuity on a proportionate basis. So while flexibility is allowed, it comes with responsibility.

Another major development is the inclusion of gig and platform workers under social security laws. Startups operating through app-based or aggregator models must understand that worker classification will now attract closer legal attention. Contribution towards social security schemes may become mandatory. Misclassification of workers can lead to serious compliance issues.

The Industrial Relations Code has increased the threshold for prior government approval in cases of layoff or closure to establishments with 300 or more workers. While many startups may currently fall below this number, growing companies must plan carefully. Employment decisions are no longer just business decisions , they have legal consequences.

The government has introduced digital registration systems and online inspections to reduce unnecessary interference. However, penalties for non-compliance remain strict. From a lawyer’s perspective, labour compliance should not be treated as a secondary task. Investors today examine employment records, contracts, and statutory filings during due diligence. Any non-compliance can affect funding and valuation.

In simple terms, the labour codes are pushing startups towards better structure and transparency. They are not barriers to growth, but they require careful planning. A startup that aligns its employment practices with the new legal framework at an early stage will grow more confidently and sustainably. The key question is not whether the law will apply — it certainly will — but whether startups are preparing in time.

 

 

Work From Home Under India’s New Labour Codes

Work From Home (WFH) is now a regular practice in many companies. But from a legal perspective, an important question arises:

Does labour law still apply when an employee works from home?
 What are the legal risks for employers?

Yes. Labour law fully applies—even if the workplace shifts to the employee’s home.

 Is Work From Home Recognised Under the New Labour Codes?

WFH is mainly connected with:

• Occupational Safety, Health and Working Conditions Code, 2020
• Code on Wages, 2019
• Code on Social Security, 2020

The law does not provide a detailed chapter exclusively for WFH. However, it allows the government to frame rules for work from home or work from any place.

Legally

·       WFH is permitted.

·        But it is not outside labour regulation.

 Salary & Wage Protection

From a legal standpoint, the place of work does not affect wage rights.

Even in WFH:

• Minimum wages must be paid.
• Salary must be paid on time.
• Overtime must be paid, if applicable.
• Equal remuneration rules continue.

An employer cannot reduce salary simply because the employee is working remotely, unless lawfully structured and contractually agreed.

Working Hours – A Major Legal Risk

Labour law limits:

• Daily working hours
• Weekly working hours
• Mandatory weekly off
• Overtime compensation

In remote setups, employees often work beyond office hours without proper tracking.

If overtime is not recorded or paid:

 The employer may face claims for unpaid wages.
 There can be penalties under labour law.
 It may lead to litigation.

Legal advice: Always define working hours clearly in writing and track attendance digitally.

 

 Employer’s Responsibility for Safety

Under the Occupational Safety Code, employers must ensure safety and health of employees.

Now the practical question is:

Does this responsibility extend to the employee’s home?

The law is not very clear yet. However, from a precautionary legal approach:

• Employers should issue WFH safety guidelines.
• Provide ergonomic advice.
• Clarify responsibilities in policy documents.

Courts may interpret employer responsibility broadly in future disputes.

 Social Security Obligations Continue

Under the Social Security Code:

• PF contributions remain mandatory.
• ESI rules apply where applicable.
• Fixed-term employees are entitled to benefits.

WFH does not remove statutory benefits.

If a company stops contributions assuming “remote work is different,” it may lead to serious legal consequences.

Why a Written WFH Policy Is Legally Important

Every employer should have:

·     Clear working hours

·     Overtime rules

·      Leave integration

·      Confidentiality clause

·      Data protection clause

·      Reimbursement policy

·      Jurisdiction clause

A written policy reduces ambiguity and strengthens the employer’s legal defence.

 Other Legal Risks in WFH

• Sexual harassment complaints during virtual meetings
• Data breach liability
• Employee working from another state creating jurisdiction issues
• Misclassification of employee as consultant

These issues are becoming more common in remote work disputes.

 Legal View

Work From Home is legally valid under India’s new labour framework.

However:

 Rights of employees remain unchanged.
 Employer obligations remain intact.
 Compliance responsibilities continue fully.

WFH should not be treated as an informal arrangement. It should be treated as a structured employment model backed by clear documentation and compliance systems.

In labour law, the principle is simple:

Changing the location of work does not change the protection of law.

 

 

 

Industrial Relations Code, 2020 – Hiring & Firing Rules

India has introduced major reforms in labour laws through the Industrial Relations Code, 2020. This Code is an important step towards simplifying employment laws and improving the relationship between employers and workers.

From a legal perspective, one of the most important areas under this Code is the regulation of hiring, termination, retrenchment, layoffs, and closure of industries.

 What is the Industrial Relations Code, 2020?

The Industrial Relations Code, 2020 combines and replaces three older labour laws:

• Industrial Disputes Act, 1947
• Trade Unions Act, 1926
• Industrial Employment (Standing Orders) Act, 1946

The main objective is to:

 reduce complexity in labour laws
 promote industrial peace
 protect workers’ rights
 provide flexibility to employers

 

Who is Covered Under This Code?

The Code mainly applies to:

• factories
• mines
• plantations
• industrial establishments
• employers and “workers”

It is important to note that the Code focuses on workers, not senior managerial employees.

 

Hiring Rules Under the Code

A. Fixed-Term Employment is Recognised

One major change is that the Code allows fixed-term employment.

This means:

• Employers can hire workers for a fixed period (example: 6 months or 1 year)
• After the contract ends, the employment may end automatically

The law ensures protection.

Fixed-term workers must get:

·     same salary

·      same benefits

·      same working conditions

So, employers cannot discriminate against them.

 

B. Standing Orders Required Only for Establishments with 300+ Workers

Earlier, establishments with 100 or more workers had to prepare Standing Orders (service rules).

Now, the threshold has been increased to:

300 workers

This gives smaller establishments more flexibility, but workers may lose detailed service protections.

 Firing and Retrenchment Rules

A. Government Permission for Retrenchment Increased to 300 Workers

Under the old Industrial Disputes Act, government approval was needed for layoffs or retrenchment if an establishment employed 100 or more workers.

Now, the Code increases this limit:

Approval required only if the establishment has 300 or more workers

This means industries with less than 300 workers can retrench employees without prior government permission.

This change is seen as employer-friendly but has raised concerns about job security.

 

B. Retrenchment Compensation Still Mandatory

Even though permission rules have changed, worker compensation remains compulsory.

If a worker is retrenched, the employer must pay:

• 15 days’ wages for every completed year of service

Also, proper notice must be given.

So, termination cannot happen without financial responsibility.

 

C. Rules for Closure of Establishments

If an industrial establishment wants to close down:

• 60 days’ notice is required
• Government approval is required if 300+ workers are employed

Non-compliance may lead to legal penalties.

 

 Strike and Lockout Rules Made Stricter

The Code introduces stricter rules regarding strikes.

Workers must give:

14 days’ notice before going on strike

Strikes and lockouts are not allowed during dispute proceedings.

The intention is to ensure industrial stability, though it restricts sudden protests.

 Re-skilling Fund for Retrenched Workers

A positive feature introduced is the Worker Re-skilling Fund.

When a worker is retrenched, the employer must contribute:

• amount equal to 15 days’ wages

This fund supports workers in skill development and re-employment.

 

 Legal Impact of the Code

For Employers

       more flexibility in hiring

       easier retrenchment for smaller establishments
       fixed-term employment is legally supported

Employers must follow compensation and notice rules strictly.

 

For Workers

 fixed-term workers get equal benefits
 retrenchment compensation remains protected
 stronger safeguards in establishments with 300+ workers

But job security may reduce in medium-sized industries.

The Industrial Relations Code, 2020 is a major reform in India’s labour law system. It attempts to balance the needs of businesses with the rights of workers.

While it provides flexibility to employers, legal compliance remains essential to prevent disputes and litigation.

Both employers and workers should understand the Code clearly to protect their interests in the modern employment environment.