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.