Streamlining Indian labour laws

While the government has made strides toward easing compliance burdens, a comprehensive re-evaluation of the regulatory framework is essential

- JIGNESH THAKKAR LAKSHMI RANGARAJAN

IN RECENT YEARS, the Indian government has undertaken various initiatives aimed at reducing the compliance burden on industries and commercial establishments. However, the current landscape reveals a staggering reality—companies operating across all states in India face over 20,000 compliance obligations at both central and state levels. Alarmingly, labour regulations constitute nearly 56% of this overall compliance burden.

A major overhaul of the compliance framework was anticipated with the consolidation of 29 existing laws into four comprehensive labour codes (LCs). However, as these await implementation, questions arise regarding their effectiveness in alleviating the compliance burden on employers and aligning India with international labour law standards. Current LCs face several key challenges:

Increased cost of doing business: The redefined wage structure, which caps wages at 50% of total compensation, directly impacts salary components such as performance-linked allowances and variable pay. This could lead to increased social security contributions, raising employment costs by around 5–10%. Also, the introduction of centrally defined but regionally adjustable minimum wages complicates wage management for employers with multi-state operations.