The Industrial Relations Code 2020 is a comprehensive labour legislation that consolidates and replaces three major laws—the Industrial Disputes Act, 1947; the Trade Unions Act, 1926; and the Industrial Employment (Standing Orders) Act, 1946—to create a unified framework governing industrial relations in India. It regulates key aspects such as trade union recognition, collective bargaining, strikes and lockouts, lay-offs, retrenchment, closures, dispute resolution, and employment conditions through Standing Orders. By standardising definitions, raising compliance thresholds, and modernising procedures, the Code aims to promote industrial harmony, ensure fairness, protect worker rights, and provide greater operational flexibility to employers in a modern, evolving workforce environment.
Table of Contents
- Introduction
- A Shift to Unified Governance – Consolidation of Three Key Labour Laws
- Applicability of the Industrial Relations Code, 2020
- Key Definitions and Concepts
- Framework Recognising Trade Unions or Council as Negotiating Bodies
- Legal Framework Governing Strikes and Lockouts
- Provisions on Retrenchment, Lay-Off and Closure
- Workplace Conduct and Employment Conditions
- Advancing Gender Equity at Work
- Simplified and Streamlined Dispute Resolution Process
- Ensuring Fair Practices At the Workplace
- Decriminalization and Compounding of Offences
- Penalties Under the Industrial Relations Code
- Exemptions from Applicability of the Code
- Conclusion
1. Introduction
The Industrial Relations Code, 2020, was enacted to consolidate and modernise India’s fragmented labour laws, namely the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946. The Code provides a uniform legal framework to govern employment conditions, dispute resolution, lay-offs, retrenchment, strikes, and closures, thereby promoting industrial peace and harmony.
The Ministry of Labour and Employment has notified November 21, 2025, as the effective date for the enforcement of all the provisions of the Industrial Relations Code, 2020. This article provides an overview of the key provisions of the Industrial Relations Code, 2020, and analyses how they shape industrial relations and their impact on worker welfare and employer responsibilities.
2. A Shift to Unified Governance – Consolidation of Three Key Labour Laws
The Code merges the following three major legislations into a single statute:
This consolidation provides clarity, reduces compliance complexities and ensures uniformity across industries.
3. Applicability of the Industrial Relations Code, 2020
The Code applies to industrial establishments based on specific thresholds:
- Industrial Establishments with 100 or more workers employed or have been employed on any day in the preceding 12 months (IEs must have a Works Committee, consisting of representatives of employers and workers engaged in the establishment).
- Industrial Establishments (IE) with 20 or more workers (IEs must have one or more Grievance Redressal Committees to resolve disputes arising from individual grievances).
- Any trade union having 7 or more members may register under the Code.
- Industrial establishment with 300 or more workers employed or were employed on any day of the preceding 12 months (Threshold applicable for provisions relating to Standing Orders)
The key provisions of the Industrial Relations Code are as follows:
4. Key Definitions and Concepts
The Code standardises definitions to ensure uniform interpretation across establishments. Important terms such as workers, wages, employer, employee, industrial establishment, industrial dispute, strike, lay-off, retrenchment, and closure are now codified in a single statute. The Code also defines new terms, such as fixed-term employment and negotiating union/negotiating council.
4.1 Uniform Definition of ‘Wages’ (Section 2(zq))
A single and consistent definition of wages has been applicable across all labour codes. Wages now include only basic pay, dearness allowance and retaining allowance. Other allowances, including HRA, overtime, bonus, or commissions, are excluded unless they exceed 50% of total wages, in which case the excess must be added back to compute wages.
4.2 Revised Definition of “Strike” (Section 2(zk))
The definition of ‘strike’ has been revised to include ‘concerted casual leave’ on a given day by 50% or more workers employed in an industry.
4.3 Introduction of “Fixed-Term Employment” (Section 2(o))
The concept of Fixed Term Employment (FTE) has been introduced, allowing the engagement of workers through a written contract between the employer and the employee for a fixed period. Such workers are entitled to all benefits, including working hours, wages, allowances, and statutory benefits, on par with permanent workers.
5. Framework Recognising Trade Unions or Council as Negotiating Bodies
The Industrial Relations Code, 2020, strengthens workers’ voice by recognising trade unions or councils as negotiating bodies. It provides clear rules for recognition and empowers workers to engage in structured collective bargaining, reducing ambiguity and promoting industrial harmony.
5.1 Statutory Recognition to Negotiating Unions (Section 14)
The Code provides for a negotiation union or a negotiating council in an industrial establishment with registered trade unions to negotiate with the employer.
If there is only one trade union functioning in an industrial establishment, the employer is required to recognise such trade union as the sole negotiating union of the workers.
In the case of multiple trade unions, the union representing at least 51% of the workers on the muster roll of that industrial establishment will be recognised by the employer as the sole negotiating union.
6. Legal Framework Governing Strikes and Lockouts
The provisions relating to ‘Strikes and Lockouts’ are specified in Sections 62 to 64 of the Code, which are as follows:
6.1 Mandatory 60-Day Notice Requirement (Section 62(1)(a)
No employee may go on strike, and no employer may declare a lockout without giving at least 60 days’ prior notice.
6.2 Cooling Off Period (Section 62(1)(b)
Strikes or lockouts cannot commence within 14 days of serving the notice. Flash strikes are also prohibited.
6.3 Prohibition During Ongoing Proceedings (Section 62(1))
Strikes or lockouts cannot be initiated in the following cases:
- During the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings; or
- During the pendency of proceedings before a Tribunal or a National Industrial Tribunal, and 60 days after the conclusion of such proceedings, or
- During the pendency of arbitration proceedings before an arbitrator and 60 days after the conclusion of such proceedings.
6.4 Exemption from Notice Requirement in Case of Existing Strike or Lockout (Section 62(3))
The notice of strike or lockout must not be necessary where a strike or lockout is already in existence. However, the employer must send intimation of such lock-out or strike on the day on which it is declared to such authority as may be specified by the appropriate Government.
6.5 Illegality of Strikes and Lockouts (Section 63)
A strike or lock-out must be considered illegal if it is commenced or declared in contravention of Section 62 or continued in violation of an order made under Section 42(7) of the Code.
6.6 Prohibition on Financial Support to Illegal Strikes and Lockouts (Section 64)
A person is prohibited from knowingly spending or using money to directly support or promote any illegal strike or lockout.
7. Provisions on Retrenchment, Lay-Off and Closure
The key provisions are as follows:
7.1 Increased Threshold for Lay-Off, Retrenchment and Closure (Section 77)
The Code establishes that an industrial establishment[1] (not being an establishment of a seasonal character or in which work is performed only intermittently) employing 300 or more workers must obtain prior permission from the appropriate Government for lay-offs, retrenchments, and the closure of the establishment.
This threshold has been increased from 100 to 300 workers. This reduces procedural hurdles and simplifies compliance requirements, attracting investments and supporting the expansion of industries.
7.2 Compensation for Laid-off Workers (Section 67)
A worker (other than a badli or casual worker[2]) who has completed at least one year of continuous service and is laid-off must be paid by employer for all days of lay-off, except for weekly holidays. The compensation must be equal to 50% of the basic wages and dearness allowance that would have been payable if he had not been laid off.
However, if the worker is laid off for more than 45 days in a 12-month period, the employer does not have to pay compensation beyond the first 45 days if there is an agreement to that effect between the employer and the worker.
7.3 Mandatory 3-Month Notice Before Retrenchment (Section 79)
In case of retrenchment, the employer must either give three months’ written notice to the worker, indicating the reasons for retrenchment, or pay the retrenched worker, in lieu of notice, wages for the period of notice.
7.4 Financial Aid to Retrenched Workers Via ‘Workers’ Re-Skilling Fund’ (Section 83)
The Workers’ Re-skilling Fund is a fund created to provide financial assistance to retrenched workers so that they can upgrade their skills and improve their chances of re-employment.
7.4.1 Source of Contribution
The source of contribution is as follows:
- From Employer – The employer must contribute an amount equal to 15 days’ wages last drawn by the worker immediately before retrenchment.
- From Other Sources – The contribution can be received from sources as may be prescribed by the appropriate Government[3].
7.5 Utilisation of Re-Skilling Fund
The fund must be utilised by crediting 15 days’ last drawn wages into the account of the retrenched worker within 45 days of retrenchment.
8. Workplace Conduct and Employment Conditions
‘Standing Orders’ refer to a set of rules that define employment conditions and govern the conduct of both employers and employees in Industrial establishments.
8.1 Increased Threshold for Applicability of Standing Orders (Section 28)
As per Section 1(3) of the Industrial Employment (Standing Orders) Act, 1946, the threshold for applicability of Standing Orders earlier applied to every industrial establishment employing 100 or more workmen on any day of the preceding 12 months. This Act has now been repealed.
Under the Industrial Relations Code, 2020, the threshold for the applicability of Standing Orders has been increased from 100 to 300 workers. As a result, industrial establishments employing fewer than 300 workers are no longer required to have certified standing orders under the Industrial Employment (Standing Orders) Act, 1946.
This higher threshold aims to simplify compliance for smaller businesses by providing them greater flexibility in managing service conditions without being bound by certified rules.
8.1.1 Matters to Be Provided in Standing Orders (First Schedule)
The First Schedule of the Industrial Relations Code, 2020, sets out the matters to be provided in Standing Orders. The matters cover the following:
- Classification of workers, whether permanent, temporary, apprentices, probationers, badlis or fixed-term employment.
- Manner of intimating to workers periods and hours of work, holidays, pay-days and wage rates.
- Shift working.
- Attendance and late coming.
- Conditions of, procedure in applying for, and the authority which may grant leave and holidays.
- Requirement to enter premises by certain gates, and liability to search.
- Termination of employment, and the notice thereof to be given by employer and workers.
- Suspension or dismissal for misconduct, and acts or omissions which constitute misconduct.
- Means of redress for workers against unfair treatment or wrongful exactions by the employer or his agents or servants.
9. Advancing Gender Equity at Work
The Code aims to ensure that women workers have a fair voice in workplace dispute resolution and that they feel more secure raising concerns when represented by peers.
9.1 Representation of Women in Grievance Redressal Committee (Section 4)
The Code provides for adequate representation of women workers in the Grievance Redressal Committee, ensuring that such representation is not less than their proportion in the total workforce of the industrial establishment. This promotes gender-sensitive dispute resolution, equality, and workplace safety.
10. Simplified and Streamlined Dispute Resolution Process
10.1 Voluntary Arbitration (Section 42)
The Code allows for industrial disputes to be voluntarily referred to arbitration by the employer and workers through a written agreement. After investigating the dispute, the arbitrator will submit the arbitration award to the appropriate Government.
Industrial disputes cover both disputes other than termination of an individual worker by way of discharge, dismissal, or retrenchment and disputes related to termination of an individual worker by way of discharge, dismissal, or retrenchment.
10.2 Resolution of Industrial Disputes (Section 43/44/46)
The appropriate Government may appoint conciliation officers to mediate and promote the settlement of industrial disputes. These officers will investigate the dispute and hold conciliation proceedings to arrive at a fair and amicable settlement of the dispute. If no settlement is reached, either party to the dispute may make an application to the Industrial Tribunal constituted under the Code.
The appropriate Government may constitute one or more Industrial Tribunals for the settlement of industrial disputes. The Industrial Tribunal must consist of two members appointed by the appropriate Government, one of whom must be a Judicial Member and the other must be an Administrative Member.
Similarly, the Central Government may constitute one or more National Industrial Tribunals for the settlement of industrial disputes which:
- involve questions of national importance, or
- could impact industrial establishments situated in more than one State.
The National Industrial Tribunal will also have two members each, one judicial and one administrative, with the specified qualifications.
11. Ensuring Fair Practices At the Workplace
Both the employers and workers must ensure fair practices at the workplace. Their conduct
11.1 Prohibition of Unfair Labour Practice (Section 84)
The Code prohibits employers, workers and trade unions from committing any unfair labour practices listed in a Second Schedule to the Code. These include the following:
A. On the Part of Employers and Trade Union of Employers
The unfair practices on the part of employers are as follows:
- Threatening workers with discharge or dismissal, if they join a Trade Union;
- Threatening a lock-out or closure, if a Trade Union is organised;
- To establish employer-sponsored Trade Unions of workers;
- To abolish the work of a regular nature being done by workers, and to give such work to contractors as a measure of breaking a strike.
- To show favouritism or partiality to one set of workers regardless of merit.
- To indulge in acts of force or violence.
- To refuse to bargain collectively, in good faith with the recognised Trade Unions.
- To employ workers as badli workers, casuals or temporaries and to continue them as such for years, with the object of depriving them of the status and privileges of permanent workers.
B. On the Part of Workers and Trade Union of Workers
The unfair practices on the part of workers are as follows:
- To incite or indulge in wilful damage to the employer’s property connected with the industry;
- For a recognised union to refuse to bargain collectively in good faith with the employer.
- To advise or actively support or instigate any strike deemed to be illegal under this Code.
- To indulge in coercive activities against the certification of a bargaining representative.
- To stage demonstrations at the residence of the employers or the managerial staff members.
12. Decriminalization and Compounding of Offences
Under the Industrial Relations Code, 2020, several minor offences that previously attracted imprisonment or criminal liability have been decriminalized, and certain contraventions can now be compounded in the following manner[4]:
- For An Offence Punishable With Fine Only – The offence may be compounded by payment of 50% of the maximum fine.
- For An Offence Punishable With Imprisonment for Up to One Year and With Fine – The offence may be compounded by payment of 75% of the maximum fine.
Further, once an offence is compounded, no prosecution will be instituted against the offender for that offence.
13. Penalties Under the Industrial Relations Code
The table provides a summary of penalties applicable under the Code[5]. It highlights the nature of each offence and the corresponding penalties.
|
Relevant Sections/Offence
|
Type of Offence |
Penalty for First Offence |
Penalty for Subsequent Offence
|
| Sections 78, 79, 80 (Lay-off, retrenchment & closure requiring prior permission under Chapter X) |
Contravention of prior-permission requirements |
Fine – Rs 1,00,000 – Rs 10,00,000 |
Fine – Rs 5,00,000 – Rs 20,00,000 or Imprisonment up to 6 months or both |
| Sections 67, 70, 73, 75 (Lay-off compensation, retrenchment procedure, transfer of establishment, closure notice & compensation) |
Violation of procedural or compensation requirements |
Fine – Rs 50,000 – Rs 2,00,000 |
Fine – Rs 1,00,000 – Rs 5,00,000 or Imprisonment up to 6 months or both |
| Unfair Labour Practices (Second Schedule) |
Committing any unfair labour practice |
Fine – Rs 10,000 – Rs 2,00,000 |
Fine – Rs 50,000 – Rs 5,00,000 or Imprisonment up to 3 months or both |
| Default on the part of the Registered Trade Union in giving any notice or sending any statement or other document – Sec 86(7) |
Failure to give or send statement/ notice/document |
Fine – Rs 1,000 – Rs 10,000; additional Rs 50/day for continuing default |
– |
| False entry/omission in a general statement or from a copy of the rules sent to the Registrar– Sec 86(8) |
Wilful false entry or omission |
Fine – Rs 2,000 – Rs 20,000 |
– |
| Giving to any member of a registered trade union, any document claiming to be a copy of the rules of a trade union – Sec 86(9) |
Wilfully providing incorrect rules of Trade Union |
Fine – Rs 5,000 – Rs 20,000 |
– |
| Employer fails to submit/modifies standing orders improperly – Sec 86(10) |
Non-submission or unauthorised modification of standing orders |
Fine – Rs 50,000 – Rs 2,00,000; additional Rs 2,000/day for continuing offence |
– |
| Employer acts contrary to certified standing orders – Sec 86(11) |
Contravening certified standing orders |
Fine – Rs 1,00,000 – Rs 2,00,000 |
Fine – Rs 2,00,000 – Rs 4,00,000 or Imprisonment up to 3 months or both |
| Worker participates in illegal strike – Sec 86(13) |
Participation in illegal strike |
Fine – Rs 1,000 – Rs 10,000 or Imprisonment up to 1 month or both |
– |
| Employer participates in illegal lock-out – Sec 86(14) |
Participation in illegal lock-out |
Fine – Rs 50,000 – Rs 1,00,000; or imprisonment up to 1 month or both |
– |
| Person instigates illegal strike/lock-out – Sec 86(15) |
Inciting others to strike/lock-out |
Fine – Rs 10,000 – Rs 50,000; or imprisonment up to 1 month or both |
– |
| Person finances illegal strike/lock-out – Sec 86(16) |
Spending money to support an illegal strike/lockout |
Fine – Rs 10,000 – Rs 50,000; or imprisonment up to 1 month or both |
– |
| Breach of any term of binding settlement/award – Sec 86(17) |
Violating binding settlement/award |
Fine – Rs 20,000 – Rs 2,00,000; or imprisonment up to 3 months or both |
Additional fine of Rs 1,000/day for continuing breach (Sec 86(18)) |
| Wilful disclosure of information – Sec 86(19) |
Disclosing confidential info contrary to Section 61 |
Fine – up to Rs 20,000 or imprisonment up to 1 month or both |
– |
| Contravention of any other provision/rule under the Code – Sec 86(20) |
Any other violation not covered above |
Fine – up to Rs 1,00,000 |
– |
14. Exemptions from Applicability of the Code
The Industrial Relations Code, 2020, provides that the appropriate Government may, by notification, exempt, conditionally or unconditionally, any new establishment or a class of new establishments from all or any of the provisions of the Code[6].
15. Conclusion
The Industrial Relations Code, 2020, brings India’s labour framework into a modern, unified structure that promotes clarity, fairness, and industrial stability. By raising thresholds for retrenchment, lay-offs, and standing orders, it eases compliance for smaller and medium-sized employers, allowing more operational flexibility. The Code recognises trade unions or councils as negotiating bodies, thereby strengthening structured collective bargaining. It modernises definitions such as “strike” and introduces “fixed-term employment,” ensuring clarity in employment arrangements.
Further, dispute resolution has been streamlined through conciliation officers, industrial tribunals, national tribunals, and voluntary arbitration, reducing delays and promoting fair settlements. The Code also enforces fair workplace practices, ensures gender representation in grievance committees, and provides financial support for retrenched workers via the Workers’ Re-skilling Fund. Overall, these reforms create a balanced and harmonious industrial environment, promoting both worker welfare and business efficiency.
[1] Section 77(3) of Industrial Relations Code, 2020
[2] Explanation to Section 67 of Industrial Relations Code, 2020
[3] Section 2(b) of Industrial Relations Code, 2020
[4] Section 89 of Industrial Relations Code, 2020
[5] Section 86 of Industrial Relations Code, 2020
[6] Section 96 of Industrial Relations Code, 2020
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