Tech sector expects significant benefits from new labour laws

The four new Labour Codes—the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020—have now come into effect, replacing nearly 29 existing labour laws. The Government of India hopes to achieve a higher penetration of the social-security net, stronger protections and dignity of labour to boost employment, skilling and growth.  

For the Indian IT industry, under the new laws, Equal pay for equal work would address the gender pay parity gap and guarantee social security benefits for temporary workers, and mandatory appointment letters would now provide temporary workers with greater protection and benefits. IT Industry representation body Nasscom sees the move to the new framework as structured and sequenced rather than abrupt and hopes for a smooth transition. 

In a statement, Nasscom said, “For the technology industry and its workforce, the eventual full implementation of the Codes can bring greater predictability and transparency. Provisions on written appointment letters, fixed-term employment with parity of benefits, expanded coverage of social security, recognition of gig and platform work and specific attention to timely salary payments, equal pay and structured grievance mechanisms for IT and IT-enabled services are particularly relevant to a skilled and mobile talent base. These changes can support workforce mobility, strengthen trust and enhance India’s attractiveness as a hub for high-value technology and digital services.” 

With a thrust on manufacturing, the India Electronics & Semiconductor Association (IESA) sees the new laws as a move towards aligning India with global standards. “Provisions for fixed-term employment, faster dispute resolution, single licensing, and simplified compliance directly support the scaling of high-tech manufacturing clusters. At the same time, parity of benefits for FTEs and expanded social security protections ensure a balanced, worker-centric ecosystem,” said Ashok Chandak, President: IESA and SEMI India, in a statement. While in the short-term companies may see higher wage and compliance costs and a disruption period for MSMEs to adopt new norms, in the long run, the association expects creation of higher employee trust and reduced attrition, better safety culture in chemical/Surface Mount Technology processes and a greater investor confidence in India’s ESDM ecosystem.  

As the old laws stand removed, the new code now awaits state-level rules to be formed for implementation, Atul Gupta, Partner, Labour and Employment practice, points out that with no grace period for implementation, the government has clarified that existing rules will apply during the transition, given that the new provisions cannot be complied with without the accompanying Rules. “The material changes of potential immediate impact include updates like the new definition of wages (and its impact on benefits like gratuity), need for implementation of updated grievance redressal mechanisms, revised provisions associated with union recognition and bargaining, new leave provisions, a new definition of contract labour and associated compliances, and many more,” Gupta added.