Labour law overhaul signals higher cost, greater flexibility for logistics

Logistics faces higher manpower costs and compliance under new codes, though improved flexibility benefits organised players.

The Government of India’s recent notification of the new labour codes marks a significant step forward in long-awaited labour reforms, consolidating nearly 40 central labour laws into a more unified framework. Given that logistics, especially warehousing, transportation, and last-mile delivery, employ a substantial informal and contract workforce, these codes will have a major structural impact on the sector’s cost and efficiency. The shift is expected to drive formalisation, higher operational flexibility, and improved workplace safety across the industry.

Overview of the four codes

1. Wage Code, 2020: This code standardises wages, requiring the basic wage to be at least 50 percent of the Cost-to-Company (CTC). It explicitly pushes for uniform minimum wages and floor wages across all states, limiting regional wage arbitrage.
2. Social Security Code, 2020: A prominent provision is the extension of social security benefits to gig workers and fixed-term employees (including PF, ESIC insurance, and gratuity). It makes centralised registration of all workers mandatory for employers, replacing several existing acts.
3. Occupational Safety, Health and Working Conditions (OSH) Code, 2020: This code unifies safety, health, and working condition standards previously scattered across 13 industry-specific acts. It applies to establishments with 10+ workers and calls for stricter norms on working hours, rest intervals, and night shifts for women.
4. Industrial Relations (IR) Code, 2020: The code streamlines dispute resolution and increases the threshold for implementing standing orders from 100 to 300 workers. This reduction in regulatory burden offers greater flexibility for medium-sized employers to manage their workforce.

Structural impact on logistics & supply chain

The implementation of these codes will result in a fundamental shift in how logistics operators manage their workforce:

• Rise in manpower cost: Labour costs are universally anticipated to rise. Contract workers (in hubs and warehouses) and gig workers (in last-mile delivery) will become more expensive due to mandated social security contributions, retirement benefits, and wage structure rationalisation.
• Increased compliance and vendor scrutiny: Stricter requirements concerning worker registration, material-handling safety, and mandatory safety training will increase the compliance burden, particularly for smaller logistics players. Furthermore, logistics companies, as principal employers, must now undertake stricter due diligence during the onboarding of contractors (MHE operators, labour suppliers) to ensure statutory adherence.
• Higher formalised workforce: The centralised registration of all worker categories (gig, contract, fixed-term) will increase transparency and drive formalisation. This improved oversight, coupled with enhanced benefits, is expected to lead to better retention levels and a more consistent dataset of worker information across the ecosystem.
• Higher operational flexibility and automation: The increased threshold for standing orders grants 3PLs greater flexibility in managing their workforce to respond to seasonal or project-specific demand using fixed-term contracts. Simultaneously, the increase in labour expenditure is expected to accelerate investment in automation (MHEs, conveyor lines, automated sortation) to counter rising staff costs and boost productivity.
• Lower dispute risk: The higher standing order threshold (300) and the provision for faster dispute resolution (reduced from five layers to two) provide large warehouses and fulfilment centres with greater certainty and lower industrial relations risk, ensuring smoother operations.

Organised vs. Unorganised Players

The findings indicate that organised players are better positioned to leverage the new labour codes than their unorganised counterparts. Organised firms generally possess stronger, existing compliance systems, meaning the cost and complexity impact will be more significant for unorganised operators. While the new framework raises compliance intensity, the resulting benefits of higher operational flexibility, improved worker well-being, and stronger safety systems will support sustained productivity and foster a more mature, professional labour ecosystem overall.

SOURCE – PR