The Biggest Change
Retrenchment Threshold: 100 → 300 Workers New
- Under the old Industrial Disputes Act, establishments with 100 or more workers required prior government permission before any lay-off, retrenchment, or closure.
- The IR Code raises this threshold to 300 workers. Establishments with 50–299 workers now only need to serve prior notice — not seek permission.
- This is a significant expansion of operational flexibility for mid-size employers.
Before — Old Law
Prior government permission required for retrenchment and closure at 100+ workers. Widely seen as a barrier to workforce flexibility.
Now — IR Code
Prior permission only at 300+ workers. 50–299 workers: prior notice required but no permission needed. New operational flexibility for mid-size establishments.
Key Change
Fixed-Term Employment — Statutory Parity New
- Fixed-term employment is now a statutory concept under Indian law — not just a contractual arrangement.
- FTEs must receive the same wages, working hours, and statutory benefits as permanent employees performing equivalent work.
- FTEs are entitled to statutory retrenchment rights and adequate notice on contract expiry or early termination.
- Combined with the SS Code's one-year gratuity provision, the cost of an FTE engagement is now much closer to a permanent hire.
Workforce EconomicsThe previous cost arbitrage of using FTE over permanent employees has been substantially reduced. Organisations using FTEs for cost management must remodel their workforce economics. Audit contracts for parity now.
Worker Committees
Grievance Redressal Committee — 20+ Workers
- Every establishment with 20 or more workers must constitute one or more Grievance Redressal Committees (GRC).
- Equal employer-employee representation. Maximum 10 members. Chairperson alternates between employer and worker representatives annually.
- Women's representation must be proportionate to their share in the total workforce.
- GRC must complete proceedings within 30 days of receiving an application. Workers can approach GRC within one year of the cause of action arising.
Frequently MissedGRC at 20+ workers catches most mid-size offices and commercial establishments. This is not a factory-only obligation. Constitute it, document the process, and ensure adequate women's representation.
Trade Unions
Recognition and Negotiation Framework
- Single trade union: Must be recognised as the sole negotiating union if it meets prescribed criteria.
- Multiple trade unions: The union with support of 51% or more workers on the muster roll is recognised as the negotiating union.
- No union at 51%: Employer must constitute a Negotiating Council from all registered unions with at least 20% worker support each.
- Negotiating Council recognition valid for 3 years, extendable by mutual agreement to a maximum of 5 years.
Lay-off, Retrenchment and Closure
Compensation and Notice Requirements
- Lay-off compensation: 50% of basic wages plus DA for the period of lay-off — applies at both 50–299 and 300+ worker thresholds.
- Retrenchment compensation: 15 days' average pay for each completed year of continuous service — unchanged from old law.
- Re-Skilling Fund: Employer must contribute 15 days' wages per retrenched employee to the Workers' Re-Skilling Fund.
- Notice periods: 1 month (50–299 workers), 3 months (300+ workers) before retrenchment.
- Closure notice: 60 days (50–299 workers), 90 days (300+ workers) prior notice to appropriate government.
- On transfer of ownership, workers with at least one year of continuous service are entitled to notice and retrenchment compensation.
Standing Orders
Model Standing Orders — 300+ Workers
- Applies to establishments with 300 or more workers (raised from 100 under the old Act).
- Employers may adopt the Central Government's Model Standing Orders and simply intimate the Certifying Officer — no fresh certification needed.
- If not adopting the model, draft standing orders must be prepared within 6 months and submitted for certification within 60 days, failing which they are deemed certified.
Strikes and Lockouts
Mandatory Notice Requirements
- On receiving a strike notice, employer must report to the appropriate government and Conciliation Officer within 5 days.
- On issuing a lockout notice, employer must similarly report within 5 days.
- If a strike or lockout is already in progress, the employer must inform the Conciliation Officer on the same day it is declared.