Introduction

Background: Overview of New Labour Codes and the need for state notifications

The enactment of the New Labour Codes represents a historic consolidation of India’s labour laws, bringing together 29 central statutes into four comprehensive frameworks: the Code on Wages, Industrial Relations Code, Social Security Code, and Occupational Safety, Health & Working Conditions Code. While these Codes establish a uniform legal framework at the national level, their implementation is contingent upon state notifications.

Labour being a concurrent subject under the Constitution means that state governments must notify rules and provisions for the Codes to become operative in their jurisdiction. Without these notifications, critical provisions such as minimum wage enforcement, social security contributions, and occupational safety requirements cannot be effectively applied. This situation has led to variations in enforcement timelines and a patchwork of compliance requirements across India.

Key points to note:

• Notification specifies the effective date and applicability of each Code within a state
• State-specific rules may vary, influencing compliance burden for employers
• Delayed notifications can create uncertainty for both employers and employees, particularly in multi-state operations

Purpose of the article: Understanding reasons for delayed implementation

This article seeks to examine the factors contributing to delays in the implementation of the New Labour Codes by certain states. It aims to provide a comprehensive analysis of political, administrative, economic, and sectoral considerations, offering insights for employers, employees, and policymakers.

By unpacking the reasons behind delayed notifications, the article highlights:

• Operational challenges faced by state authorities
• Sector-specific concerns, especially in SMEs and the informal workforce
• Implications for compliance, worker protection, and labour market stability

The ultimate goal is to equip stakeholders with the knowledge required to navigate regulatory uncertainties until nationwide adoption is achieved.

Constitutional and Administrative Framework

Labour as a concurrent subject and role of states

Labour regulation falls under the Concurrent List of the Indian Constitution, granting both the central and state governments the authority to legislate. While the central government has enacted the Codes, states are responsible for operationalising them through notifications and rules.

• States determine sectoral applicability, minimum thresholds, and timelines
• Local adaptations are permitted to account for regional industrial patterns and workforce characteristics
• Without state notifications, the Codes’ provisions cannot be enforced, leaving employers and workers in legal limbo

This framework highlights the shared responsibility between the Centre and states in ensuring effective implementation.

Legal requirements for notification and rules formulation

For the Codes to be enforced at the state level, governments must:

• Issue official notifications in the state gazette specifying the effective date
• Draft state-specific rules under each Code, including wage structure, social security contributions, and safety compliance
• Set up monitoring authorities responsible for inspections, grievance redressal, and enforcement

These legal steps are crucial for translating central legislation into practical, enforceable mechanisms within the state.

Coordination challenges between central and state governments

Coordination between the Centre and states is critical, yet often complex and time-consuming:

• Differences in administrative capacity and readiness can delay notification
• States may require additional time to adapt rules for local industries or workforce conditions
• Misalignment in timelines or interpretations can lead to regulatory uncertainty, impacting employers, employees, and investors

Efficient coordination, clear communication, and capacity building are therefore essential for smoother implementation and legal certainty.

Economic and Industrial Considerations

Concerns about SME compliance and administrative burden

One of the foremost economic challenges driving delayed implementation is the capacity of small and medium enterprises (SMEs) to comply with the New Labour Codes. These enterprises often operate with limited HR and legal infrastructure, making it difficult to adapt payroll systems, social security contributions, and compliance reporting to the new statutory requirements.

• SMEs may need to revise employment contracts to align with the 50% basic pay requirement and other wage definitions
• Administrative adjustments, such as maintaining PF/ESI records and ensuring occupational safety compliance, can be resource-intensive
• Failure to comply could lead to penalties or litigation, creating hesitation among states to enforce codes without preparatory measures

This economic dimension highlights why states with a high density of SMEs or informal businesses may delay notification to allow a transitional period for adaptation.

Impact on labour-intensive industries and informal sector

Labour-intensive industries, including manufacturing, construction, and services, face heightened compliance challenges under the new Codes. Similarly, the informal sector, which constitutes a significant portion of India’s workforce, is particularly vulnerable:

• Applying uniform wage, social security, and safety provisions can increase operational costs
• Gig, contract, and fixed-term workers now fall under formal protection, requiring adjustments in payroll and HR policies
• States must balance protecting worker rights while not overburdening industries critical to employment generation

These considerations contribute to the pragmatic delays observed in several states, as authorities weigh economic realities against legislative obligations.

Balancing investment climate and worker protection

Another critical factor influencing notification timelines is the state’s economic positioning. States strive to maintain an attractive investment climate while ensuring compliance with worker protection measures:

• Overly stringent or immediate enforcement may discourage new investment or expansion of existing units
• Phased or delayed notifications provide breathing room for industries to reorganize operations
• Strategic delays allow states to align industrial policy goals with labour regulations

Thus, economic and industrial factors play a decisive role in shaping notification strategies.

Political and Governance Factors

State-level political priorities affecting notification

Political considerations often influence the pace of Code implementation. States may prioritize notifications based on electoral cycles, labour unrest, or stakeholder pressures:

• Governments may delay notifications to avoid political backlash from labour unions or employer associations
• States with upcoming elections might postpone contentious provisions to maintain industrial peace
• Political alignment with central policies can also affect coordination speed and policy communication

Political priorities thus form a significant dimension in understanding delayed implementation.

Capacity of labour departments and resource constraints

Practical governance challenges further contribute to delays:

• Labour departments in some states lack sufficient staffing, digital infrastructure, and training to enforce complex new rules
• Resource constraints may impede the drafting of state-specific rules, notifications, and inspection frameworks
• Administrative bottlenecks, including coordination with finance and payroll authorities, add to the delay

Addressing capacity issues is critical for efficient and timely notification of the Codes.

Variations in enforcement readiness and inspection mechanisms

Even post-notification, enforcement readiness varies considerably across states:

• Some states have modernized inspection and grievance redressal mechanisms, enabling smooth implementation
• Others face infrastructure gaps, delaying practical applicability of the Codes
• Discrepancies in readiness can lead to unequal worker protection and compliance obligations across states

Monitoring these variations is crucial for employers planning multi-state operations and for policymakers aiming for nationwide uniformity.

Sectoral and Workforce-related Challenges

Gig, contract, and fixed-term worker coverage

One of the most complex aspects of the New Labour Codes is the extension of statutory protections to non-permanent workers, including gig, contract, and fixed-term employees. While this aligns with the objective of inclusive labour welfare, it presents significant implementation challenges:

• States must establish mechanisms to track and register gig and contract workers for social security benefits
• Payroll systems need to distinguish between permanent and non-permanent staff, applying different contribution and wage calculations
• Non-notified states leave such workers vulnerable, creating disparities in coverage and protection

Ensuring equitable application across all workforce segments remains a key challenge for state authorities.

Industry-specific applicability and exemptions

States often have to account for industry-specific dynamics when implementing the Codes. Certain sectors, such as micro-enterprises, agriculture, and informal services, require tailored rules or phased notifications:

• Some states introduce gradual thresholds for minimum wage, social security, and OSH compliance in smaller units
• High-cost enforcement in labour-intensive sectors may impact employment and investment decisions
• Exemptions or delayed coverage are sometimes used as temporary relief measures for economically sensitive industries

These variations illustrate how sectoral considerations influence notification timing and scope.

Concerns about wage thresholds and social security contributions

The revised definition of ‘wages’ under the Codes, including the 50% minimum for basic pay, has significant implications:

• Higher basic pay affects PF, gratuity, and other statutory contributions, increasing the financial burden for employers
• States may delay notification to assess fiscal impact and industrial readiness
• Employees in non-notified states face delays in receiving enhanced social security coverage

Such financial and administrative considerations play a pivotal role in state-level decision-making.

Implications of Delayed Implementation

For employers: compliance uncertainty, payroll adjustments, multi-state operations

Delayed notifications create a complex compliance environment for businesses:

• Employers must manage parallel payroll systems for notified and non-notified states
• HR and legal teams face ambiguity regarding statutory obligations, potentially resulting in inadvertent non-compliance
• Multi-location operations require state-specific planning, increasing administrative costs and operational complexity

This uncertainty demands careful risk management and proactive planning.

For employees: uneven protection, benefits delays, rights ambiguity

Employees in non-notified states may experience inconsistent protection under the Codes:

• Access to minimum wages, social security, and occupational safety measures may be delayed or uneven
• Gig, contract, and fixed-term workers may remain outside formal coverage, affecting long-term financial security
• Ambiguity in rights can lead to frustration, distrust, and potential disputes

Monitoring state-specific notifications is critical for employee awareness and rights enforcement.

Legal risks and potential for retrospective enforcement

Delayed implementation can give rise to legal uncertainties for both employers and employees:

• States may eventually enforce provisions retrospectively, exposing employers to financial liabilities
• Non-compliance due to delayed notification may still result in penalties, fines, or litigation once codes are notified
• Employees may initiate claims for benefits accrued during the delay, creating complex legal scenarios

Employers and legal advisors must adopt a cautious, forward-looking approach to mitigate these risks.

Lessons from Early Implementing States

Observed patterns in states that have notified the Codes

States that have moved quickly to notify the New Labour Codes offer a valuable learning framework. Early adopters like Haryana, Karnataka, and Maharashtra demonstrate several patterns:

• Notification was accompanied by comprehensive guidance and detailed state-specific rules
• Proactive engagement with industry stakeholders helped smooth implementation
• States often phased the rollout of provisions, prioritizing sectors with higher compliance readiness

These observations highlight that structured planning and communication are key to successful enforcement.

Best practices for phased implementation and workforce communication

Experience from early implementing states suggests several practical best practices:

• Phased implementation allows businesses and workers to adapt gradually, minimizing disruption
• Clear workforce communication regarding changes in wages, benefits, and compliance responsibilities builds trust
• Establishing monitoring mechanisms ensures adherence while providing flexibility for minor adjustments

Adopting such strategies can reduce disputes, enhance compliance, and maintain industrial harmony.

Insights for delayed states

Delayed states can draw valuable insights from early implementers:

• Advance capacity building in labour departments reduces administrative bottlenecks
• Engaging with employers, unions, and sectoral bodies prior to notification mitigates resistance
• Adopting digital tracking and compliance systems facilitates smoother enforcement once notification occurs

These lessons underscore the importance of preparatory measures, communication, and incremental rollout in successful labour code implementation.

Conclusion

Summary of factors delaying implementation

Multiple intertwined factors contribute to the delayed implementation of the New Labour Codes:

• Economic and industrial considerations, particularly for SMEs and labour-intensive sectors
• Political and governance challenges, including administrative capacity and political priorities
• Sectoral and workforce complexities, such as coverage of gig, contract, and fixed-term employees
• Coordination challenges between Centre and state governments, and variations in enforcement readiness

Understanding these factors is critical for stakeholders navigating a staggered regulatory environment.

Recommendations for employers and employees navigating delays

• Employers should proactively monitor state notifications, maintain flexible payroll systems, and plan compliance strategies accordingly
• Employees need to stay informed about the status of notifications in their states, understand their rights, and engage with HR for clarity on benefits
• Both parties benefit from transparent communication to mitigate uncertainty and potential disputes

These proactive measures help manage risk and ensure equitable treatment during the transitional period.

Outlook for nationwide adoption

Full nationwide adoption of the New Labour Codes is expected to be gradual but inevitable. Key takeaways include:

• States will eventually notify all four Codes, providing uniform protection for workers
• Early lessons emphasize capacity building, phased implementation, and stakeholder engagement as critical success factors
• Employers and employees alike must prepare for a synchronized rollout, while remaining attentive to state-specific timelines and rules

The staggered implementation reflects a delicate balancing act between protecting worker rights, supporting economic growth, and ensuring administrative feasibility.