The Industrial Relations Code 2020: A structural reset of India's industrial relations framework

The Industrial Relations Code, 2020 (“IR Code”) represents one of the most substantive labour law reforms in India in recent decades. At a structural level, the IR Code consolidates multiple pre-existing labour legislations into a single comprehensive framework. The IR Code subsumes and replaces three foundational statutes governing industrial relations in India, namely the Industrial Disputes Act, 1947 (“ID Act”), the Trade Unions Act, 1926 (“TU Act”), and the Industrial Employment (Standing Orders) Act, 1946 (“IESO Act”), which have been repealed, and their provisions stand consolidated into the IR Code. Concurrently, the IR Code introduces statutory recognition for new and evolving forms of work arrangements, including fixed-term employment models, and provides for enhanced operational flexibility to employers. This marks a shift from a predominantly restrictive model towards a broader, more balanced conception of industrial relations.

The stated objectives of the IR Code include promoting harmonious industrial relations, simplifying dispute resolution mechanisms, enhancing transparency in trade union recognition and providing employers with greater operational flexibility, particularly in relation to workforce management. Although enacted in September 2020, the Industrial Relations Code was formally brought into force on November 21, 2025. However, its practical implementation remains contingent on the notification of rules by the Central and State Governments, and existing labour laws continue to operate during this transitional phase.

This article examines some of the material departures from the pre-existing regime, their likely operational impact on establishments, and certain implementation challenges that remain.

The stated policy objective of the IR Code is to modernise India’s industrial relations framework and simplify compliance, while supporting the broader “Ease of Doing Business” agenda. This is reflected in a number of structural and conceptual changes, three of which are particularly noteworthy which are as follows.

Consolidation and definitional harmonisation

One of the most significant transformations brought about by the IR Code is the standardisation of key definitions that were previously fragmented across multiple statutes. Divergent interpretations of terms such as “workman”, “industry”, “industrial dispute”, “wages”, and “employer” had historically generated significant litigation and compliance uncertainty. The earlier regime was largely silent on definitional harmonisation. The IR Code, while repealing the earlier legislation, attempts to correct this gap by:

1. introducing a uniform and expansive definition of “employee,” encompassing individuals engaged in manual, technical, supervisory, managerial, administrative and clerical roles, regardless of whether employment terms are express or implied; and

2. broadening of the term “worker”, which replaces “workman”, to expressly include working journalists and sales promotion employees, thereby dismantling statutory silos that existed under the earlier regime.

Importantly, the IR Code retains a deliberate distinction between the terms “employee” and “worker.” While the definition of “employee” is expansive and includes individuals engaged in managerial, administrative, supervisory, technical and clerical roles, the term “worker” is comparatively narrower and is primarily relevant for the purposes of collective bargaining rights, retrenchment protections, lay-off provisions and industrial dispute resolution.

By broadening the category of “employee” while preserving a distinct and more limited class of “worker,” the Code continues the longstanding legislative approach of reserving certain core industrial relations protections for non-managerial categories of labour.

The aforesaid provisions would have an impact on the compliance responsibilities of employers who will need to provide for broader applicability once the relevant provisions and rules are notified.

Key substantive reforms affecting employers

1. Standing orders: raised applicability thresholds

A significant employer-friendly reform under the IR Code is the increase in the threshold for the formulation and registration of mandatory standing orders. Under the earlier regime, industrial establishments employing one hundred (100) or more workers were required to frame certified standing orders. The IR Code raises this threshold to three hundred (300) workers, with discretion given to State Governments to prescribe a lower threshold.

For small and mid-sized establishments, this change materially reduces compliance burdens and allows greater flexibility in structuring service conditions through contracts and HR policies rather than statutorily certified standing orders.

In Karnataka, IT and IT-enabled service establishments have historically been granted a conditional exemption from the requirement to frame and certify standing orders under the Industrial Employment (Standing Orders) Act, 1946. Such exemption, most recently extended until June 10, 2029, continues to operate during the transitional phase. However, upon the full operationalisation of the IR Code and the corresponding repeal of the earlier enactment, the standing orders framework under the IR Code, including the provisions relating to model standing orders, will apply, and the State-level exemption would cease to have independent operation.

2. Retrenchment, lay-off and closure: Enhanced flexibility

The IR Code increases the threshold for obtaining prior government permission for retrenchment, lay-off and closure from one hundred (100) to three hundred (300) workers. Establishments below this threshold are exempt from seeking such approval, subject to compliance with notice and compensation requirements.

3. Fixed term employment

The IR Code formally recognises “fixed term employment” as a distinct category. Fixed term employees are entitled to parity in wages, hours of work and social security benefits with permanent employees performing similar work, while allowing employers to engage workers for a defined duration without the risk of such engagements being construed as permanent employment.

This reform provides employers with legal certainty and flexibility in managing fluctuating manpower requirements, while extending statutory protections to fixed term workers.

4. Trade union recognition and negotiating unions

The IR Code introduces a structured statutory framework for recognition of trade unions as “negotiating unions” or “negotiating councils”, thereby formalising collective bargaining architecture at the establishment level. The framework operates on two principal conditions.

First, where there is only one registered trade union functioning in an establishment, or where a single trade union has the support of at least fifty-one percent (51%) of the workers, such union is to be recognised as the sole negotiating union. In such circumstances, the employer is under a statutory obligation to recognise that union as the exclusive bargaining representative. This marks a significant departure from the earlier regime, under which recognition was largely governed by voluntary codes, executive guidelines or State-specific rules, and no uniform statutory obligation of recognition existed at the Central level.

Secondly, where no single trade union commands fifty-one percent (51%) membership, the employer is required to constitute a Negotiating Council. In such a case, every registered trade union having not less than twenty percent (20%) of the workers as its members is entitled to representation on the Negotiating Council, proportionate to its membership strength. The employer is then required to engage in collective negotiations with such Council in respect of matters prescribed under the Code.

This tiered mechanism balances majority representation with plural trade unionism providing statutory clarity on bargaining counterpart and streamlining collective bargaining negotiations to reduce inter-union rivalry.

The IR Code introduces greater uniformity in the regulation of strikes and lockouts across sectors. Under Section 62 prior notice of fourteen (14) days is mandatory, for all establishments, whereas under the earlier regime, such notice was required only for essential services. Strikes or lockouts are prohibited during conciliation proceedings and for a prescribed period thereafter ensuring greater predictability and continuity of industrial operations.

By expanding the definition of “strike” to include concerted casual leave taken by fifty percent (50%) or more workers, the Code addresses informal work stoppages that previously fell outside the statutory net. For employers, these provisions enhance predictability and strengthen legal recourse in managing industrial unrest.

Notice of change

The requirement of a twenty-one (21) day prior notice for unilateral changes continues under the IR Code, but it applies only to the changes specified in Schedule III relating to service conditions. However, two notable exceptions are introduced:

1. Emergent situations requiring a change in shift or shift working, in consultation with the Grievance Redressal Committee; and

2. Changes effected pursuant to orders of the appropriate government or in implementation of a settlement or award.

These carve-outs provide limited operational flexibility while preserving the core principle of advance consultation.

The IR Code revises the penalty framework by increasing monetary fines while simultaneously introducing provisions for compounding of certain offences. First-time violations attract lower fines, whereas repeated non-compliance attracts higher penalties, reflecting a shift from a purely punitive approach toward a compliance-oriented enforcement model.

The Code also envisages greater use of technology, including electronic filings and inspections, to promote transparency and reduce discretionary enforcement.

The IR Code strengthens internal dispute resolution by mandating the constitution of a Grievance Redressal Committee for establishments employing twenty (20) workers of more. A Grievance Redressal Committee is required to consist of an equal number of representatives of the employer and the workmen. Individual worker disputes are channelled through this mechanism before escalation to formal adjudication.

1. At the Central level, the notified Central rules will determine procedural requirements, compliance formats and the operational details of mechanisms such as dispute resolution and the Worker Re-skilling Fund.

2. At the State level, variations in State rules particularly on thresholds, inspections and administrative processes will require employers with multi-State operations to adopt a location-specific compliance approach. Internally, employers should reassess workforce classifications, closely monitor headcount thresholds, align HR policies and contracts with the Code, and factor retrenchment-related costs and structured trade union engagement into their industrial relations strategy to mitigate future risk.

1. Workforce mapping: Reviewing employee classifications in light of the expanded definitions of “employee” and “worker.”

2. Policy and contract alignment: Updating employment contracts, HR policies and standing orders (where applicable) to reflect fixed term employment norms and revised thresholds.

3. Industrial relations strategy: Preparing for formal trade union recognition processes and structured collective bargaining.

4. Dispute preparedness: Strengthening internal grievance redressal mechanisms to manage the increased formal recognition of individual disputes.

The Industrial Relations Code, 2020 marks a decisive shift in India’s approach to industrial relations, seeking to balance worker protections with the operational realities of modern enterprises. By consolidating legacy statutes, rationalising dispute resolution, enhancing flexibility for smaller establishments, and formalising collective bargaining mechanisms, the Code promises a more predictable and structured industrial relations regime.

For employers, early engagement with the Code’s framework through policy review, workforce planning and compliance readiness will be critical to navigating the transition smoothly once the Code is brought into force.

About the authors: Anjali Menon is a Partner, Bilal Lateefi is a Principal Associate and Namratha M.N. is an Associate at Poovayya & Co.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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