The notification of the four national labour codes on November 21, 2025 marked the formal culmination of a process that began more than a decade earlier. Yet by the time these codes were notified, their core provisions had already been implemented in large measure at the state level. This raises a fundamental question: who still needs national labour codes when many states have already carried out the most consequential reforms?The answer lies in a profound shift in the locus of labour reform in India. While trade unions succeeded in delaying fundamental changes in labour laws at the national level from 1991 to 2025, employers – and state governments – steadily advanced them through decentralised, often informal, means.In other words, labour reform has effectively moved its location; first from the Union to the states and then, in several important respects, from the governments to firms themselves.The state-led reform trajectoryFrustrated by the slow pace of changes in regulations at the Union government level, state governments began amending labour laws well before the national codes were finalised. By 2025, the cumulative scale of these changes was substantial.Fifteen states amended Chapter V-B of the Industrial Disputes Act, 1947, raising the threshold for prior government permission for retrenchment and closure from 100 to 300 workers. Six states notified fixed-term employment under the Standing Orders Act, 1946. Fifteen states permitted women to work night shifts, subject to safeguards. During the COVID-19 period, close to a dozen states increased daily working hours.Similarly, twelve states raised the applicability threshold of the Contract Labour (Regulation and Abolition) Act, 1970 from 20 to 50 contract workers, while others raised it to 30 or 40 workers. Fourteen states revised the Factories Act, 1948 threshold from 10 to 20 workers with power.Also read: What Labouring for One Day at an MGNREGA Worksite Taught MeIn this way, by the mid-2020s, extending working hours to 10 or 12 hours a day had become an explicit reform objective of several states – and this has even been noted in the Economic Survey 2024.These developments demonstrate a clear decentralisation of reform authority, even though labour remains on the Concurrent List of the Constitution of India. States increasingly acted as competitive reformers, using labour regulation as a tool to attract domestic and foreign capital.Why not the Union?The presence of central trade unions at the national level could ensure that reforms proposed by Union government met with sustained resistance. Between 2011 and 2025, central trade unions organised at least a dozen large countrywide strikes, in which millions of workers were mobilised against provisions in the reforms.Political contestation also put the brakes on the process, as parties in Opposition have quite consistently opposed the changes being introduced in labour laws, especially the new labour codes.During both the terms in power of the United Progressive Alliance (UPA), inspection and procedural reforms, such as changes to compliance requirements, continued to be introduced. However, no major core labour reforms were undertaken.Also read: Necessary Reforms, Missed Opportunities: The Troubled Rollout of India’s Labour CodesThis is not to suggest that the UPA governments were inherently opposed to labour reform. Rather, the constraints of coalition politics significantly limited their ability to pursue politically contentious initiatives. As a result, incremental administrative changes moved forward, even as substantive reforms were repeatedly deferred.For similar reasons, although the National Democratic Alliance government came to power in 2014 with a reformist mandate, even it took nearly a decade to notify the new labour codes.Opposition party leaders in Kerala protest the new labout codes, Kozhikode. November 2025. Photo: PTIA process that formally began in April 2015, with the codification of the industrial relations laws, was then followed by the Wage Code, the Occupational Safety and Health Code and the Social Security Code. Even so, trade unions have maintained that consultations on the law were inadequate. There was persistent agitation and, combined with coalition politics in earlier periods of the codes, ensured that national reforms could not be pushed through hurriedly.Rajasthan and the demonstration effectHowever, what has often gone unnoticed is that even before the Union government could put the new labour codes into effect, Rajasthan set a precedent. It amended Chapter V-B of the Industrial Disputes Act to raise the threshold to 300 workers, revised the Factories Act thresholds and increased the applicability threshold of the Contract Labour Act to 50 workers.Of course, all of these changes were widely welcomed by employers, and they began to demand replication of the “Rajasthan model” across states.The demonstration effect proved to be powerful. Other states followed Rajasthan’s example, and they reinforced the perception that meaningful labour reform could proceed without national legislation.What did companies want?Employers have consistently argued that India’s labour laws and trade union practices interfere with the operation of market forces and reduce competitiveness. They have therefore pressed for extensive deregulation. Their principal demands can be summarised as follows:First, employers seek the deletion of Chapter V-B of the Industrial Disputes Act, 1947 or, at a minimum, an increase in its applicability threshold from 100 to 300 workers. Chapter V-B requires establishments employing 300 or more workers to obtain prior government permission for retrenchment of even a single worker and for closure of firms. Employers view this provision as a major constraint on flexibility.Second, they demand the freedom to employ contract labour in both core and non-core activities in order to respond to market fluctuations. This flexibility is currently restricted under the Contract Labour (Regulation and Abolition) Act, 1970, which limits the use of contract labour, particularly in core activities.Also read: We Need to Talk About Unpaid InternshipsThird, employers argue that the labour inspection system has resulted in excessive and avoidable harassment and has consumed significant managerial and financial resources. They contend that, much like the dismantling of the Licence Raj, the so-called “Inspector Raj” should be liberalised through reduced inspections, simplified compliance and self-certification mechanisms.Fourth, they seek higher employment thresholds under the Factories Act, 1948, proposing an increase from 10 to 20 workers in factories using power and from 20 to 40 workers in factories not using power. According to employers, such revisions would encourage small factories to expand without fear of regulatory burdens.Fifth, employers want the legalisation and wider use of fixed-term employment, arguing that it provides flexibility while retaining formal employment relationships.Members of Left organisations protest against the new labour codes in Kolkata, West Bengal. November 2025. Photo: PTIFinally, several industries, particularly garment manufacturing, have demanded an extension of the statutory eight-hour workday to 10–12 hours. Employers argue that without such reforms, India will struggle to attract foreign direct investment, which may instead flow to countries with more flexible labour regimes.Firms as reformers in stealthThis brings us to another parallel process, that occurred in the context of the firms: As political and institutional processes stalled, employers increasingly implemented reforms unilaterally. Firms relied on voluntary retirement schemes, golden handshakes and regularly announced freezes on regular recruitment.Employers also expanded use of contract labour and began to engage trainees as long-time workers under government schemes such as ‘earn while you learn’ and the National Employability Enhancement Mission, launched in 2013.Also read: Low-Paying Apprenticeships, False Promises, Convenient Narratives: The Skill India DreamAs a result, the share of contract labour rose from only 11% in 1993-94 to 42% in 2023-24, a stark shift. Non-regular employment, combining various flexible employment categories, increased sharply. Governments often tacitly permitted these practices – including in the public sector – by weakening enforcement. This phenomenon came to be known as “reforms by stealth”.Fact is, trade unions had limited capacity to respond to this situation, other than holding strikes or organising litigation, both of which rarely deliver immediate relief. On the other hand, firm managements frequently adopted a dual strategy: negotiating improvements for permanent workers while insisting that unions not interfere with flexible employment practices for all other employees.Multinational corporations, meanwhile, often took hard positions even on union recognition and registration.Political economy of decentralisationReforms in labour laws could proceed at the regional level for several reasons. Trade union mobilisation is weaker at the state level due to political fragmentation. State-level employers’ associations exercise greater lobbying influence. Regional parties often maintain close relationships with their affiliated unions, reducing confrontation. Proximity between unions, political leadership and local populations further moderates resistance. Regional pride and competition for investment also play significant roles.At the same time, party positions on labour reform remained inconsistent. With the partial exception of the Left parties, political actors have tended to support reforms when in power and oppose them when in opposition.National victory, regional defeatThe decentralisation of labour reform has reshaped India’s labour market far more decisively than national legislation alone. While national trade unions succeeded in putting central reforms at abeyance for over three decades, many major states implemented them independently. In effect, trade unions won at the national level but lost at the regional and enterprise levels.Against this backdrop, the notification of the national labour codes appears less like a transformative moment and more like a formal consolidation of changes already realised elsewhere. The central question therefore remains: when states and firms have already restructured labour regulation, who truly needs the national codes?By the time the national labour codes were finally notified on November 21, 2025, many of their key provisions were already embedded in state laws and workplace practices.