- Certified standing orders and prior permission for lay-off, retrenchment or closure now start at 300 workers, up from 100.
- Every industrial establishment with 20 or more workers needs a Grievance Redressal Committee.
- Supervisors earning over ₹18,000 a month, and managerial or administrative staff, fall outside “worker”.
- A strike or lockout needs 60 days’ notice, and that rule now covers every establishment, not only public utilities.
On this page
Who counts as a worker under the IR Code 2020?
Most non-managerial staff. Two groups drop out.
The IR Code text published by PRS excludes people employed in a managerial or administrative capacity, and supervisors drawing wages above ₹18,000 a month. In a typical Indian tech team, an individual engineer can be a worker while a team lead with supervisory duties may not be.
That split decides which exit rules apply. For anyone outside the definition, notice and severance come from the employment contract and the state Shops and Establishments Act.
Fixed-term contracts are now expressly lawful. A fixed-term employee must get wages and benefits no lower than a comparable permanent worker, earns gratuity after one year, and the term simply ending is not retrenchment.
How does retrenchment work under the IR Code?
A worker with one year’s continuous service gets one month’s notice or pay in lieu, plus 15 days’ average pay per completed year. Section 70 also requires notice to the appropriate government.
Then comes a newer cost. You pay 15 days’ last-drawn wages into the Worker Re-skilling Fund, which credits the worker within 45 days.
Let’s say a support engineer in Pune earns ₹26,000 a month, average pay works out to ₹1,000 a day, and service is 4 years and 8 months.
| Item | Amount |
|---|---|
| One month’s pay in lieu of notice | ₹26,000 |
| Retrenchment compensation (15 × ₹1,000 × 5 years) | ₹75,000 |
| Paid to the worker | ₹1,01,000 |
| Worker Re-skilling Fund (15 days’ last-drawn wages) | ₹15,000 |
Eight months counts as a full year. Hence 5 years, not 4.
Prior government permission is a separate hurdle. It applies only to industrial establishments, such as factories, mines and plantations, with 300 or more workers.
How does the IR Code apply when you hire through an EOR?
The EOR is the employer the Code speaks to. It runs the grievance committee once headcount reaches 20 workers, applies standing orders where they bite, and handles notice, compensation and the re-skilling contribution on any retrenchment.
Your part is the decision and the paper trail behind it. Our guide to termination of employment in India sets out the process, and the glossary entry on termination of employment defines each exit route.
How does Remunance handle exits under the IR Code for your team?
Remunance runs onboarding and offboarding as part of its EOR service, so the notice, the compensation sums and the full and final settlement all come from the legal employer. Our walkthrough of the employee offboarding process shows the sequence we follow. Before you act on a role change or a restructure, plan a compliant India exit with our team.
What else do people ask about the IR Code 2020?
Does the Industrial Relations Code apply to IT companies?
Yes. It covers establishments in every sector, though standing orders and lay-off permission bite only at 300 workers, and permission applies only to factories, mines and plantations.
What notice does a retrenched worker get?
One month’s written notice with reasons, or a month’s wages instead. Workers with under one year’s continuous service fall outside these section 70 conditions.
When did the IR Code come into force?
On 21 November 2025, alongside the other three Labour Codes. Its central rules were notified on 8 May 2026, while state rules are still being finalised.
Planning a hire in India?
Our founding team has run payroll and hiring in India for 22+ years, first as Remunance Systems, which was later acquired by ADP.