What is the Industrial Relations Code, 2020? Key Features & Impact
Table of Contents
Under its labour law reforms, India has replaced three of its oldest labour laws with a single statute. The Industrial Relations Code, 2020, also called the National Industrial Relations Code (NIRC), governs trade unions, standing orders, and the settlement of industrial disputes. It is one of India’s four labour codes.
For HR and payroll teams, it changes how to handle unions, layoffs, retrenchment, and workplace discipline. This guide explains what the Code covers, the laws it replaces, its key features, the thresholds that apply, and what it means for employers and workers.
Key Takeaways
- The Industrial Relations Code, 2020, is a single law covering trade unions, standing orders, and industrial disputes.
- It merges three older laws: the Trade Unions Act 1926, the Industrial Employment (Standing Orders) Act 1946, and the Industrial Disputes Act 1947.
- It applies across India to industrial establishments, with the heaviest duties starting at 300 or more workers.
- Key thresholds are 300 workers for standing orders and layoff permission, 100 workers for a Works Committee, and 20 workers for a Grievance Redressal Committee.
- Strikes and lockouts now require 60 days’ notice at every establishment, and a union with 51% membership becomes the sole negotiating union.
- HR teams must update standing orders, contracts, committees, and payroll to stay compliant.
What is the Industrial Relations Code, 2020?
The Industrial Relations Code, 2020, is a central law that consolidates India’s rules on trade unions, conditions of employment, and industrial disputes. It merges three Acts into one: the Industrial Disputes Act 1947, the Trade Unions Act 1926, and the Industrial Employment (Standing Orders) Act 1946.
The Code has 14 chapters, 104 sections, and 3 schedules. It came into force on 21 November 2025, and the central implementing rules were notified on 8 May 2026. Most state rules are still being finalized.
Why was the Industrial Relations Code Introduced?
The government introduced the Code to simplify the existing labour laws. The Second National Commission on Labour recommended merging India’s many labour statutes into a few codes. The stated goals are simpler labour law compliance, a balance between worker rights and ease of doing business, and faster dispute resolution.
The Code and its rules reduce the industrial relations rulebook from 105 rules under the old laws to 51 in the draft rules, later finalized at 50. It also replaces multiple dispute bodies with streamlined Industrial Tribunals.
Who does the Industrial Relations Code Apply to?
The Industrial Relations Code applies across India to industrial establishments, meaning workplaces engaged in the production, supply, or distribution of goods or services for commercial or business purposes. Smaller units follow the basic rules, while the heaviest duties, such as certified standing orders and permission for layoffs, begin at 300 or more workers.
For most private companies, the state government is the governing authority, so the exact rules vary by state. Government sectors like banking, telecom, mining, and railways follow the central rules.
New Definition of a Worker
The Code widens who counts as a “worker”. It now covers working journalists and sales promotion staff by name. It also includes supervisors who earn up to ₹18,000 a month, up from the old ₹10,000 limit. Employees in managerial or administrative roles, and those earning above that limit, remain excluded.
Key Features of the Industrial Relations Code, 2020
The Code changes several core rules for employers and workers. Alongside its companion law, the Code on Social Security, 2020, it reshapes day-to-day compliance. Here are its six key features.
- Raised Thresholds: The need for government permission to lay off, retrench, or close now starts at 300 workers, up from 100. Standing order certification also shifts from 100 to 300 workers.
- Fixed-Term Employment: Employers can hire workers for a fixed period with full statutory benefits. Letting the contract lapse at its end does not count as retrenchment, so no permission or retrenchment compensation is required.
- Single Negotiating Union: A union with 51% of workers becomes the sole voice for bargaining, which simplifies negotiations for employers.
- Worker Re-Skilling Fund: Employers must contribute 15 days’ last drawn wages for every retrenched worker to fund their re-skilling.
- Stricter Strike Rules: Strikes and lockouts now need 60 days’ notice in every establishment, not just public utilities.
- Streamlined Dispute Resolution: Two-member Industrial Tribunals replace the older mix of dispute-resolution bodies, and disputes can go to the Tribunal.
Old Labour Laws vs the Industrial Relations Code, 2020
The table below shows how the Industrial Relations Code changes the old labour law and related components.
| Aspect | Old Law | IR Code, 2020 |
|---|---|---|
| Layoff, retrenchment, closure permission | Required at 100 workers | Required at 300 workers |
| Standing orders certification | Applied to 100 workers | Applies to 300 workers |
| Strike and lockout notice | Only in public utility services | Mandatory in all establishments, 60 days |
| Definition of worker | Supervisors above ₹10,000 excluded | Covers supervisors up to ₹18,000, plus journalists and sales staff |
| Fixed-term employment | Not defined in law | Defined, with pro-rata benefits and gratuity at 1 year |
| Worker re-skilling fund | Did not exist | 15 days’ wages per retrenched worker |
| Dispute bodies | Five separate single-member bodies | Two-member Industrial Tribunals |
Strikes and Lockouts under the Code
Strikes and lockouts need advance notice in every industrial establishment, not just public utility services. A strike needs a 60-day notice period before it begins, and workers are prohibited from striking within 14 days of serving such notice. Strikes and lockouts are also banned during conciliation and for 7 days after, and during tribunal or arbitration proceedings and for 60 days after.
The Code treats a concerted mass casual leave of 50% or more of the workforce as a strike. Employers must report any strike or lockout notice within five days.
Layoff, Retrenchment, and Closure Rules
Government approval to lay off, retrench, or close applies only to industrial establishments with 300 or more workers, up from 100. Below that size, employers must still give notice and pay compensation, but no prior permission is required.
Retrenchment compensation is set at 15 days’ average pay for each completed year of service. Establishments under 300 workers give one month’s notice, while those with 300 or more give three months’ notice and seek permission.
Undertaking closure requires 60 days’ notice for smaller establishments, while establishments with 300 or more workers should apply for permission at least 90 days in advance.
Fixed-Term Employment
The Code gives fixed-term employment legal recognition for the first time. A fixed-term worker must receive the same wages, hours, and benefits as a permanent worker doing similar work, on a pro-rata basis. This includes PF, ESI, and gratuity, which a fixed-term worker becomes eligible for after just one year rather than the usual five.
When a fixed-term contract simply ends on its date, it does not count as retrenchment, so no retrenchment compensation is due. This gives employers flexibility while protecting the worker’s core benefits.
Worker Re-Skilling Fund
If a worker is retrenched, the employer must pay an amount equal to 15 days’ last-drawn wages to the Worker Re-Skilling Fund. This fund applies only to retrenched workers and not to workers after their layoff. Under the rules, the employer transfers the amount within 10 days to a Labour Commissioner account, and the money reaches the worker within 45 days of retrenchment. The fund is a new feature that no earlier labour law offered.
Trade Unions and Collective Bargaining
The Code sets clear rules for which the union speaks for workers. Where several unions exist, the one with 51% or more of the workers becomes the sole negotiating union. If no union crosses 51%, a negotiating council forms from unions with at least 20% each, with one seat per 20%. Where only one union operates, it needs at least 30% membership to be recognised.
To register a union, seven or more members may apply, and the union must have at least 10% of workers or 100 workers as members, whichever is less.
Dispute Resolution Mechanism
The Code streamlines how industrial disputes are resolved. A conciliation officer first tries to settle the dispute. If that fails, either party can go directly to an Industrial Tribunal, a two-member bench of a judicial and an administrative member. Disputes of national importance go to a National Industrial Tribunal, and parties may also choose voluntary arbitration.
A Works Committee is required for 100 or more workers, and a grievance redressal committee for 20 or more workers, with up to 10 members and fair representation of women. Workers can also file disputes through the government’s Samadhan portal.
Compliance Checklist for HR Teams
Use this compliance checklist to prepare the workplace for the Industrial Relations Code.
- Certify or update standing orders when there are 300 or more workers.
- Revise employment contracts to use compliant fixed-term terms with pro-rata benefits.
- Set clear notice procedures for strikes, lockouts, and changes to service conditions.
- Form a Works Committee of 100 workers and a Grievance Redressal Committee of 20 workers.
- Plan re-skilling fund contributions of 15 days’ wages for any retrenchment.
- File returns and register establishment on the Unified Shram Suvidha Portal where required across the codes.
- Keep PF, ESI, and gratuity parity for fixed-term workers.
- Check the state’s rules, since applicability depends on the state government.
Impact on Employers and Workers
For employers, compliance is simpler under one law, and hiring is more flexible through fixed-term contracts and the higher 300-worker threshold. Fewer returns and registers also reduce the paperwork behind wage violations and other lapses.
For workers, the fixed-term staff gain benefits and gratuity access, and the re-skilling fund offers some support after retrenchment. The government projects more formal jobs, while central trade unions have opposed the codes and struck against them in 2026.
Frequently Asked Questions
What is the Industrial Relations Code, 2020, in Simple Terms?
It is a single law that combines India’s rules on trade unions, workplace discipline, and industrial disputes. It replaces three older Acts and applies to industrial establishments across India.
Which Laws does the IR Code Replace?
It merges the Trade Unions Act 1926, the Industrial Employment (Standing Orders) Act 1946, and the Industrial Disputes Act 1947 into one code.
What is the New Retrenchment and Layoff Threshold?
Prior government permission for layoff, retrenchment, and closure now applies to 300 or more workers, up from 100 under the old law.
What is the Notice Period for Strikes?
Workers must give 60 days’ notice before a strike, and cannot strike within 14 days of that notice or during conciliation and tribunal proceedings.
Do Fixed-Term Employees Get PF and Gratuity?
Yes. Fixed-term workers get PF, ESI, and other benefits on a pro-rata basis, and gratuity after one year, while permanent staff need five years.
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