The Industrial Relations Code, 2020 – A Comprehensive and Professional Overview

The Industrial Relations Code, 2020 (IR Code) is one of the four consolidated labour codes enacted by the Government of India to modernise, simplify and harmonise the country’s complex labour regulatory framework. By merging and rationalising key laws relating to trade unions, industrial disputes and employment conditions, the Code aims to bring clarity, transparency and balance to the relationship between employers and workers.

The Code replaces three important legislations:

·       The Industrial Disputes Act, 1947

·       The Trade Unions Act, 1926

·       The Industrial Employment (Standing Orders) Act, 1946

Through this consolidation, the IR Code seeks to create a predictable industrial relations climate, promote ease of doing business, and protect worker rights in a rapidly evolving economic landscape.

1. Objectives of the Industrial Relations Code, 2020

The Code aims to:

Streamline and simplify multiple labour laws

Promote industrial harmony through structured dispute-resolution mechanisms

Provide flexibility to businesses while safeguarding employee rights

Encourage formalisation and fair employment practices

Strengthen trade union governance and accountability

Foster transparency in layoffs, retrenchment and closure processes

Ultimately, the Code attempts to strike a balance between labour welfare and business competitiveness.

2. Key Definitions

2.1 Worker

A person employed on wages to perform manual, supervisory, technical or skilled work. Certain categories above prescribed wage thresholds are excluded.

2.2 Employee

A broader category that includes workers as well as managerial, administrative and supervisory staff.

2.3 Employer

Includes the owner, occupier, manager, legal representative or any authorised person responsible for supervising an establishment.

2.4 Industrial Establishment

Covers all units engaged in industry, business, trade or manufacturing, including plantations and mines.

2.5 Strike & Lockout

The Code provides uniform definitions and prescribes notice requirements for both.

3. Major Provisions of the IR Code

3.1 Trade Unions: Recognition & Regulation

Trade unions can be registered if they meet the minimum membership criteria.

The Code introduces the concept of a “Negotiating Union” (single union with 51% membership) or a “Negotiating Council” (multiple unions collectively having majority membership).

The purpose is to streamline negotiations and avoid multiplicity of unions causing disputes.

Impact:

Promotes structured collective bargaining and reduces industrial fragmentation.

3.2 Standing Orders – Wider Applicability but Simplified Compliance

Standing Orders (rules regarding conditions of employment) are mandatory for establishments with 300 or more workers (increased from earlier threshold of 100).

A model Standing Order notified by the Government can be adopted, reducing procedural burdens.

Impact:

Gives employers flexibility while ensuring employees receive clarity on service conditions.

3.3 Layoff, Retrenchment & Closure – Ease of Doing Business with Safeguards

For establishments employing 300 or more workers:

Prior permission of the appropriate Government is required for:

Layoffs

Retrenchments

Closure of establishments

The threshold has been raised from 100 to 300 workers.

Impact:

Provides businesses with greater operational flexibility.

Workers remain protected through compensation norms, notice periods, and dispute-resolution mechanisms.

3.4 Dispute Resolution Framework

The IR Code restructures dispute mechanisms to reduce litigation and encourage alternative resolution:

Works Committees, Grievance Redressal Committees, and Industrial Tribunals

Conciliation officers appointed for pre-litigation settlement

Two-member Industrial Tribunals with judicial and administrative expertise

Provision of voluntary arbitration with the consent of both parties

Impact:

Faster dispute settlement and reduced industrial unrest.

3.5 Notice Requirements for Strikes & Lockouts

A uniform 14-day notice period is mandatory before:

Strikes by workers

Lockouts by employers

Strikes and lockouts are prohibited:

During conciliation or tribunal proceedings

In establishments covered under public utility services

Impact:

Ensures industrial actions occur only after structured negotiation attempts.

3.6 Re-Skilling Fund for Retrenched Workers

The Code introduces a Re-Skilling Fund financed by employer contributions (equal to 15 days’ wages per retrenched worker).

Funds are to be used to train workers who lose employment due to retrenchment.

Impact:

Supports worker transition and employability in a modernising industry.

3.7 Fixed-Term Employment

Employers may hire workers on fixed-term contracts without restrictions on renewal.

Fixed-term employees receive:

Equal treatment as permanent workers

Pro-rata gratuity

Statutory benefits from day one of employment

Impact:

Provides flexibility to industry while ensuring labour protections.

4. Digital-First Compliance Approach

The IR Code emphasises:

Electronic maintenance of registers

Online submission of returns

Digitised approvals and certifications

This reduces paperwork and enables transparent monitoring.

5. Benefits to Employers

Reduced regulatory confusion

More predictable industrial dispute processes

Flexibility in hiring and restructuring

Higher threshold for retrenchment/closure permissions

Digital compliance reduces administrative burden

6. Benefits to Employees

Clearer rights under Standing Orders

Stronger grievance redressal mechanisms

Protection against unfair labour practices

Recognition of negotiating unions enhances collective bargaining

Re-skilling support during retrenchment

Pro-rata gratuity and benefits for fixed-term workers

Challenges & Practical Considerations

Despite its advantages, implementation challenges remain:

States must notify rules for complete operationalisation

Organised and unorganised sectors may differ in compliance capacity

Worker awareness and training on new dispute mechanisms is essential

Concerns about increased retrenchment threshold may need careful monitoring

Balancing business flexibility with long-term job security still requires vigilance

Key Takeaways

The IR Code brings three major labour laws into a single unified Act.

It provides greater clarity in industrial relations and dispute-resolution frameworks.

Workers benefit from stronger protections, union recognition, and re-skilling provisions.

Employers gain flexibility through digital compliance, fixed-term employment, and a higher threshold for permission-based retrenchment/closure.

Its long-term success hinges on State-level rule-making, effective implementation, and stakeholder awareness.

Conclusion

The Industrial Relations Code, 2020 is a pivotal step in reshaping India’s labour landscape. By modernising dispute-resolution mechanisms, establishing structured collective bargaining, digitising compliance, and balancing worker welfare with business needs, the Code paves the way for a more stable, transparent and growth-oriented industrial environment.

As India progresses toward a more dynamic labour economy, the effective implementation of the IR Code will be essential in ensuring industrial harmony, protecting worker rights, and supporting business competitiveness.