Industrial Relations Code, 2020

What Is the Industrial Relations Code, 2020?

The Industrial Relations Code, 2020 (IR Code) is the third of India’s four labour codes. It consolidates three foundational laws governing the relationship between employers and workers — trade unions, conditions of service, and dispute resolution — into a single statute. Enacted on 28 September 2020, it modernises India’s industrial-relations framework by raising employer flexibility thresholds, formalising fixed-term employment, recognising negotiating unions, and introducing a Reskilling Fund for retrenched workers. See the India labour codes implementation 2026 guide for the rollout timeline.

Acts Consolidated

The Code subsumes three central statutes:

1. The Trade Unions Act, 1926 — registration, rights, and protection of trade unions.
2. The Industrial Employment (Standing Orders) Act, 1946 — conditions of service for industrial establishments.
3. The Industrial Disputes Act, 1947 — dispute resolution, layoff, retrenchment, and closure provisions.

These three Acts stand replaced with one harmonised set of definitions, processes, and penalties, applicable to industrial establishments across India.

Implementation Status

The IR Code has been notified but operational enforcement awaits State Government rule-making under Section 84. Most major industrial States have published draft rules; Madhya Pradesh, Uttar Pradesh, Gujarat, Karnataka, Bihar, Jharkhand, Odisha, Haryana, and Uttarakhand have notified rules. The Centre is expected to bring all four codes into operational force in a coordinated manner. Until full enforcement, the underlying three Acts continue to apply.

Standing Orders: Threshold Raised to 300

Standing orders are written employment terms covering classification of workers, working hours, holidays, paydays, leave, suspension, termination, grievance, and discipline. Under the IR Code:

• Threshold raised from 100 to 300 workers (Section 28). Establishments with fewer than 300 workers no longer need certified standing orders.
• Model Standing Orders for different industries (manufacturing, mining, services) are notified by the Centre.
• Modifications require certification by the Certifying Officer.
• Standing orders must include disciplinary action for misconduct, including sexual harassment as defined under the POSH Act, 2013.

This provides significant flexibility to mid-size establishments (100–299 workers) which earlier had to maintain certified standing orders.

Layoff, Retrenchment, and Closure: Threshold Raised to 300

Chapter X of the IR Code preserves the three-tiered protections of the Industrial Disputes Act, but with a major flexibility increase:

Action	Establishments < 300 workers	Establishments ≥ 300 workers
Layoff	Permitted with statutory compensation	Prior Government permission required
Retrenchment	Permitted with notice/compensation	Prior Government permission required
Closure	Permitted with 60-day notice + compensation	Prior Government permission required

Earlier, the threshold was 100 workers under the IDA. The increase to 300 brings a much larger universe of establishments out of mandatory government-permission regimes — though states can still notify a lower threshold for their jurisdiction.

Notice and Compensation for Retrenchment

Section 70 prescribes one month’s written notice (or wages in lieu), 15 days’ average pay per completed year of continuous service as compensation, and notification to the appropriate Government in the prescribed manner. Section 72 retains the LIFO principle for ordinary retrenchment, subject to written reasons for departure.

Strikes: 60-Day Notice Universal

Section 62 extends the requirement of a 60-day strike notice to all industrial establishments, not just public utility services as under the IDA. Workers may not strike during the pendency of conciliation proceedings, arbitration, or for 60 days after issuance of an award. Illegal strikes attract penalties on workers and any person inciting them.

This significantly tightens the strike-notice regime and applies to private establishments that previously had no statutory notice requirement.

Fixed-Term Employment Recognised

Section 2(o) defines “fixed-term employment” and Section 30 mandates parity in service conditions:

• Wages, allowances, and benefits must be at par with permanent workers doing the same or similar work.
• Eligibility for gratuity on a pro-rata basis if the contract runs one year or more.
• No separate retrenchment notice / compensation when the term naturally ends.

This formalises FTE across all sectors, removing the earlier sectoral restrictions and giving employers a compliant alternative to worker misclassification.

Worker vs Employee Distinction

Section 2(zr) defines a “worker” as a person doing skilled, unskilled, manual, technical, operational, or clerical work, including working journalists and sales-promotion employees. Excluded are managerial / administrative staff and supervisors drawing more than ₹18,000/month (revisable) — clarifying who enjoys industrial protections versus those governed by contract law.

Dispute Resolution Architecture

The IR Code overhauls dispute resolution:

• Industrial Tribunals with two members (Judicial and Administrative) replace the Labour Court / Industrial Tribunal duality (Section 44).
• Negotiating Union / Council (Section 14) — sole negotiating union if 51% support; else council of unions with 20%+ support each.
• Grievance Redressal Committee mandatory in establishments with 20+ workers (Section 4) with adequate woman representation.

Reskilling Fund

A novel Section 83 introduces the Worker Re-skilling Fund, financed by employer contributions equal to 15 days’ wages of every worker retrenched (in addition to retrenchment compensation), plus other contributions notified. Disbursed within 45 days to the retrenched worker for re-skilling, the Fund signals a shift from mere severance to active labour-market support.

Penalties

The IR Code rationalises penalties: unfair labour practice up to ₹2,00,000; illegal strikes/lock-outs ₹10,000–₹50,000 plus daily fines; failure to comply with retrenchment provisions ₹1,00,000–₹10,00,000. Compounding is allowed for first-time non-imprisonable offences.

Implication for Employers

1. Revisit termination policy — under 300 employees, no government permission for layoff/retrenchment/closure (subject to State notification).
2. Issue or update Standing Orders if the workforce crosses 300; else apply Model Standing Orders.
3. Audit fixed-term contracts for wage parity and day-one gratuity provisioning.
4. Constitute Grievance Redressal Committees with adequate woman representation for 20+ worker establishments.
5. Provision Reskilling Fund contributions at 15 days’ wages per retrenched worker.
6. Update handbooks and disciplinary procedures to mirror the Code’s language and POSH integration.

How Omnivoo Helps

Omnivoo’s EOR engagement framework operates within the Industrial Relations Code, 2020 architecture: every fixed-term contract guarantees parity of wages and benefits with day-one gratuity provisioning, retrenchment workflows include automatic notice, compensation, and Reskilling Fund accounting, and termination documentation matches the Code’s notice and recordkeeping requirements. Omnivoo also issues Model-Standing-Order-aligned employment terms and runs Grievance Redressal Committee workflows for client establishments crossing the worker threshold.