Industrial Relations Code 2020: Key Provisions & Compliance
Table of Contents
The Industrial Relations Code, 2020 is the law that now governs trade unions, strikes, standing orders, and retrenchment in India. It replaces three older labour laws. It has been in force since 21 November 2025. For HR and payroll professionals operating in India, the Code significantly alters notice periods, compliance thresholds, and liability exposure.
Key Takeaways
- Understand why the Industrial Relations Code, 2020 is already in force, not a pending reform.
- Learn which three older labour laws the Code consolidates into a single statute.
- Examine the redefined scope of ‘worker’ and ‘wages,’ as well as the updated provisions governing fixed-term employment.
- Review the new applicability thresholds for standing orders, committees, and lay-off permission.
- Review the universal notice requirements for strikes and lockouts that apply to all establishments.
- Check the Section 86 penalty structure and a ready-to-use HR compliance checklist.
What is the Industrial Relations Code, 2020?
The Industrial Relations Code, 2020 (IR Code) is an Indian labour law that consolidates rules on trade unions, employment conditions, strikes/lockouts, retrenchment, and settlement of industrial disputes. It replaced three central laws: the Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946; and Industrial Disputes Act, 1947.
As one of India’s four unified labour codes, it establishes a comprehensive statutory framework regulating relations among employers, workers, and trade unions.
Is the Industrial Relations Code, 2020 in Force Right Now?
Yes, the Industrial Relations Code, 2020 (IR Code) is currently in force. The Code came into effect on 21 November 2025, as confirmed by the Press Information Bureau. As much online documentation predates this implementation, legacy sources may inaccurately report the Code as pending.
The Industrial Relations (Central) Rules, 2026 were notified by the Ministry of Labour and Employment on 8 May 2026, specifying prescribed compliance forms, statutory timelines, and designated authorities.
However, some states are yet to finalize their rules. While the central law is in force, compliance procedures may vary by state. Consequently, HR teams must ensure compliance with the central Code while continuously monitoring state-specific gazette notifications.
Key Definitions You Need to Know
Updated statutory definitions under the Code alter the scope of employee coverage and the calculation of statutory entitlements.
Who Counts as a “Worker”
The statutory definition of a ‘worker’ includes sales promotion employees, working journalists, and supervisory employees whose monthly remuneration does not exceed ₹18,000. Employees in managerial or administrative roles above the applicable threshold, along with members of the armed forces and police, are excluded.
How “Wages” Are Defined
“Wages” include basic pay, dearness allowance, and retaining allowance. Specified components such as house rent allowance (HRA), overtime allowance, statutory bonus, and conveyance may be excluded, provided total exclusions do not exceed 50% of total remuneration. Any amount above 50% is added back when calculating statutory dues like gratuity and retrenchment compensation.
Fixed-Term Employment
Fixed-term employees are entitled to the same wages, working hours, allowances, and statutory benefits as permanent employees performing similar work. They become eligible for gratuity after one year of service, compared with the general five-year requirement for permanent employees under the Payment of Gratuity Act, 1972.
Key Provisions of the Industrial Relations Code
Trade Union Recognition
The Code provides a clear framework for trade union recognition. Seven or more workers may register a trade union. Where only one registered union operates within an establishment, the employer must recognize it as the sole negotiating union.
Where multiple unions exist, a union with 51% or more worker support is recognized as the sole negotiating union. If no single union achieves this threshold, a Negotiating Council is constituted, comprising unions with at least 20% worker support, with seats allocated proportionally to their support levels.
Works Committees and Grievance Redressal Committees
Establishments with 100 or more workers may be mandated to constitute a Works Committee to foster constructive employer-worker relations.
Every establishment with 20 or more workers must constitute one or more Grievance Redressal Committees. Each committee may comprise up to 10 members, with women represented proportionally relative to their share of the total workforce.
Standing Orders
Standing orders cover matters such as worker classification, shifts, leave, termination, and grievance handling. Under the Code, standing orders apply to establishments with 300 or more workers, an increase from the previous threshold of 100 workers.
Strikes and Lockouts
The Code extends notice requirements for strikes and lockouts to all industrial establishments, eliminating the previous distinction for public utility services.
Workers must provide 60 days’ advance notice prior to striking; further, no strike or lockout may commence within 14 days of issuing such notice. Strikes and lockouts are also restricted during conciliation and tribunal proceedings and for specified periods after they conclude.
A coordinated mass casual leave involving more than half of the workforce on a single day is also treated as a strike.
Lay-Off, Retrenchment, and Closure
Prior government permission is required for layoffs, retrenchments, or closures for non-seasonal establishments with 300 or more workers.
For retrenchment, employers must provide one month’s written notice (or wages in lieu) and compensation equivalent to 15 days’ average pay for every completed year of continuous service, provided the worker has completed at least one year of continuous service.
For lay-off, compensation is 50% of basic wages and dearness allowance for each day of lay-off, subject to a maximum of 45 days in a 12-month period. In cases of closure, employers must provide 60 days’ advance notice to the appropriate government authority.
Worker Re-Skilling Fund
Upon retrenchment, the employer must credit an amount equivalent to 15 days’ worth of the worker’s last-drawn wages to the Worker Re-Skilling Fund. This contribution must be deposited within 45 days of retrenchment to support worker re-skilling and re-employment initiatives.
Industrial Dispute Resolution
Industrial disputes generally begin with conciliation. If conciliation fails, a dispute can proceed directly to an Industrial Tribunal, without waiting for a government reference.
Each Tribunal consists of two members: a judicial member and an administrative or technical member. A National Industrial Tribunal handles disputes of national importance or disputes affecting more than one state. Voluntary arbitration remains an alternative dispute resolution mechanism that requires mutual agreement between the parties.
Applicability Thresholds at a Glance
| Provision | Threshold | Change from earlier law |
|---|---|---|
| Grievance Redressal Committee | 20 or more workers | New, uniform threshold |
| Works Committee | 100 or more workers | Unchanged |
| Standing Orders | 300 or more workers | Raised from 100 |
| Prior permission for lay-off, retrenchment, closure | 300 or more workers | Raised from 100 |
| Trade union registration | 7 or more members | Unchanged |
| Sole negotiating union | 51% or more worker support | New concept |
| Negotiating Council eligibility | 20% or more worker support per union | New concept |
What Changed from the Earlier Labour Laws
| Aspect | Earlier position | Under the Industrial Relations Code |
|---|---|---|
| Standing orders applicability | 100+ workers | 300+ workers |
| Government permission for retrenchment/closure | 100+ workers | 300+ workers |
| Strike notice requirement | Public utility services only | All industrial establishments |
| Dispute reference to tribunal | Government reference mandatory | Direct application to Tribunal following conciliation failure |
| Fixed-term employee gratuity | Not distinguished from permanent staff timelines | Eligible after 1 year |
| Trade union recognition | No statutory concept of a sole negotiating union | Formal trade union recognition through a negotiating union/council framework |
Penalties for Non-Compliance
Section 89 permits employers to compound many of these offenses, allowing them to pay a specified fine to close the matter rather than face prosecution.
| Offence | First offence | Repeat offence | Source |
|---|---|---|---|
| Lay-off, retrenchment, or closure without required permission (Sections 78-80) | Fine of ₹1 lakh to ₹10 lakh | Fine of ₹5 lakh to ₹20 lakh, or up to 6 months imprisonment, or both | Section 86 |
| Standing orders and retrenchment/closure procedure violations (Sections 67, 70, 73, 75) | Fine of ₹50,000 to ₹2 lakh | Fine of ₹1 lakh to ₹5 lakh, or up to 6 months imprisonment, or both | Section 86 |
| Unfair labour practices (Second Schedule) | Fine of ₹10,000 to ₹2 lakh | Fine of ₹50,000 to ₹5 lakh, or up to 3 months’ imprisonment, or both | Section 86 |
| Illegal strike or lockout participation (Sections 62–63) | Fine, imprisonment up to 1 month, or both | Higher fine on repeat violation | Section 86 |
These penalty amounts reflect the core provisions of Section 86 as published in statutory databases. Verify the current penalty structure against the notified Central Rules before applying them to a specific case. Subordinate rules may provide specific procedural guidelines not fully detailed in the primary Code.
A Compliance Checklist for HR and Business Owners
- Check your worker headcount against the key thresholds. Review your current headcount against the 20, 100, and 300-worker thresholds for grievance committees, works committees, standing orders, and lay-off permission.
- Prepare or update standing orders. If you have 300 or more workers, ensure your standing orders are properly drafted and certified. An employee handbook should not be treated as a substitute.
- Set up Grievance Redressal Committees. Establish a committee in every unit with 20 or more workers, ensure proportional representation of women, and clearly communicate the grievance-raising process.
- Review your wage structure. Check whether excluded allowances stay within the 50% limit, as this can affect calculations for statutory benefits such as gratuity and retrenchment compensation.
- Review fixed-term employment contracts. Ensure that fixed-term employees receive the same benefits as comparable permanent employees and account for gratuity eligibility after one year of service.
- Establish a strike and lockout notice process. Track the 60-day notice requirement, the 14-day waiting period, and restrictions during conciliation and tribunal proceedings.
- Maintain a retrenchment and lay-off process. Keep the required notice periods, compensation calculations, and Worker Re-Skilling Fund contribution ready for any workforce reduction.
- Monitor state-specific rules. The central Code is in force, but filing procedures and other compliance requirements may depend on the rules notified by your state. Review these updates regularly.
Most teams find it easier to keep this together with a statutory compliance system than with a spreadsheet. That is especially true when you consider the IR Code 2020 alongside the other labor laws in India that have been rolled out. Thresholds, notice periods, and fund contributions all move together whenever your headcount changes.
Conclusion
The Industrial Relations Code, 2020 brings together key rules on trade unions, worker grievances, standing orders, strikes, retrenchment, and industrial dispute resolution under a single framework. With the Code now in force, HR teams and business owners should review their existing policies and processes against the new requirements.
The key to compliance is not just understanding the Code, but also keeping track of worker thresholds, wage structures, statutory benefits, and state-specific rules. Regular reviews will help businesses meet their obligations and manage employee relations more effectively.
factoHR can help businesses simplify IR Code compliance by managing payroll, employee records, statutory calculations, and HR processes through a centralized platform. Schedule a demo now!
Frequently Asked Questions
Is the Industrial Relations Code, 2020 Currently in Force?
Yes. It came into effect on 21 November 2025, along with the other three labour codes. The Ministry notified the Industrial Relations (Central) Rules, 2026 on 8 May 2026. Several states are still finalizing their own rules, so check your state’s notifications before you close out any compliance paperwork.
Which Three Laws does the Industrial Relations Code Replace?
The Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947. These three laws used to govern union registration, standing orders, and dispute resolution as separate regimes, each with its own forms and authorities. The Code merges them into one statute with unified definitions and procedures.
What is the Strike Notice Period under the Code?
60 days’ advance notice, with a minimum 14-day wait before the strike or lockout can begin. It now applies to every industrial establishment, not only public utility services. That notice also lapses if the strike does not start within 60 days of service, so a union must act within that window or serve a new notice.
Which Establishments Must Now Prepare Standing Orders?
Establishments with 300 or more workers, up from the 100-worker threshold under the earlier Standing Orders Act. These standing orders need certification from the relevant authority before they take effect, and they must cover worker classification, hours, leave, and termination.
What is the Worker Re-Skilling Fund, and Who Pays into It?
The employer pays into it, not the worker. Every time an employer retrenches someone, it must contribute 15 days’ worth of that worker’s last-drawn wages to the fund within 45 days of the retrenchment. The fund exists to help the retrenched worker pick up new skills and re-enter the job market faster.
What Happens if an Employer does not Comply with the Code?
Section 86 sets out graduated penalties depending on the offense, ranging from a few thousand rupees to ₹20 lakh, with imprisonment possible for repeat violations. Section 89 allows employers to compound many of these offenses, so a fixed fine can close the matter instead of prosecution.
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