The Industrial Relations (IR) Code, 2020: Balancing Flexibility with Discipline

Think of the Industrial Relations (IR) Code, 2020 as the new rulebook for the power dynamic between "Management" and "Unions." It retires three of the most contentious laws in Indian history: 

• The Industrial Disputes Act, 1947, 
• The Trade Unions Act, 1926, and 
• The Industrial Employment (Standing Orders) Act, 1946.

For decades, these laws often created a rigid, adversarial environment - an "Us vs. Them" battleground. The new IR Code attempts to reset this board. It proposes a grand bargain: Employers get the flexibility to resize their workforce to match market realities (without begging for government permission), while Unions face stricter discipline to prevent disruptive flash strikes. It's a shift from confrontation to negotiation. Here is how the balance has changed.

1. The "Big Ticket" Changes

A. The "300 Worker" Threshold

• The Old Way: If you had 100+ workers, you needed Government permission to lay off staff, retrench people, or close down. It was a bureaucratic nightmare.

• The New Rule: That threshold has been raised to 300+.

• Impact: If you are a mid-sized company (100–299 employees), you can now retrench staff or close units based on market realities without waiting for government approval. (Note: You still have to pay retrenchment compensation, but you don't need the permission).

B. The Death of "Flash Strikes"

• The Old Way: Mandatory strike notices mainly applied to "Public Utility Services."

• The New Rule: Employees in ALL industrial establishments must give a 14-day notice before going on strike.

• Impact: No more waking up to a "Tool-down" strike declared overnight. Those are now illegal. Participation in illegal strikes can lead to wage deductions (up to 8 days' penal deduction).

C. Sole Negotiating Union

• The New Rule: Dealing with multiple fragmented unions? The Code fixes that. If a company has multiple unions, the one with 51% membership will be recognized as the "Sole Negotiating Union." If no one has 51%, a "Negotiating Council" is formed.

2. The "Fine Print" (Small Changes, Big Impact)

• Worker Reskilling Fund (Section 83): This is a brand new line item on your expense sheet. In case of retrenchment, you must contribute 15 days of the last drawn wages to a "Worker Reskilling Fund" (which eventually goes to the worker).

• Grievance Redressal Committee: Have 20+ workers? You must have this committee. It needs equal representation of employers and workers, and the Chairperson position has to rotate annually.

• Mass Casual Leave: The Code gets smart about strikes. It defines a "Strike" to include concerted casual leave by 50% or more workers on a given day.

• Compounding of Offences: Good news for compliance managers: First-time offences that don't carry imprisonment can now be "compounded" (settled by paying a fine) without dragging you into a court trial.

3. Action Plan for Employers

Step 1: Check Your Employee Count

Action: If you fall in the 100–299 employee bracket, revisit your Separation Policy. You’ve gained significant flexibility, but you must follow the correct notice and compensation procedure to avoid disputes.

Step 2: Update Separation Costs

Update your "Severance Cost Calculator."

New Formula: Gratuity + Notice Pay + Retrenchment Compensation + 15 Days Reskilling Fund.

Step 3: Adopt Model Standing Orders

If you have <300 employees, you are technically exempt from certifying Standing Orders.

Strategy: Don't leave a void. Adopt the "Model Standing Orders" voluntarily as your internal Service Rules. This gives you legal backing for disciplinary actions (suspension, inquiry) if you ever get challenged in court.

4. Compliance Checklist

• [ ] Biometric Attendance: This is crucial for proving "Concerted Mass Leave" if you face an illegal strike.

• [ ] Committee Formation: Officially constitute the "Grievance Redressal Committee" if you have >20 staff. Don't just have it on paper; make it real.

• [ ] Union Communication: Formally notify your union leaders about the new 14-day strike notice requirement so everyone is on the same page.

Conclusion: A Strategic Shift in Labor Management

The Industrial Relations Code moves us away from the adversarial "Us vs. Them" mentality of the 1947 Act to a more structured, negotiation-based environment. By raising the retrenchment threshold, it encourages businesses to scale up without fear of bureaucratic traps. However, with the new "Reskilling Fund" and stricter grievance redressal norms, the cost of compliance has not vanished, it has simply shifted.

You’ve mastered Wages, Social Security, and Industrial Relations. Now, let’s tackle the operational side of things : safety, licenses, and working conditions in the final pillar of this series.

Next Up: The OSH Code, 2020: One License, Contract Labour & Women’s Rights

By: MIT HR Professional