The Impact of Labour Codes on Factory Hiring in UP and Bihar

India’s new labour codes are reshaping how factories hire, schedule, and manage workers — especially in industrial states like Uttar Pradesh (UP) and Bihar.
For manufacturers, HR heads, and compliance teams, understanding how these laws affect overtime, shift structures, and hiring flexibility is now critical.

This article provides a technical yet practical breakdown of what has changed and how it impacts factory operations.

Overview of the New Labor Codes

The Government of India consolidated 29 central labour laws into four labour codes:

• Code on Wages, 2019
• Industrial Relations Code, 2020
• Occupational Safety, Health and Working Conditions Code (OSHWC), 2020
• Code on Social Security, 2020

UP and Bihar are implementing these codes with state-specific rules, impacting factory-level employment practices.

Key Impacts on Factory Hiring

1. Shift Work Regulations

The OSHWC Code introduces more structured shift rules:

• Maximum 8 hours per shift
• Weekly working limit of 48 hours
• Mandatory rest intervals between shifts
• Night shifts allowed for women with consent and safety provisions

Impact on hiring:

• Factories may need to hire additional workers to cover continuous operations
• Shift planning must be more systematic and documented
• Increased need for workforce scheduling tools

2. Overtime Rules

Overtime is now more tightly regulated:

• Overtime allowed only beyond 8 hours/day or 48 hours/week
• Overtime wage must be at least twice the regular wage
• Monthly and quarterly overtime caps apply (as notified by states)

Impact on hiring:

• Overtime becomes costlier → hiring more workers may be cheaper
• Industries with seasonal spikes (textiles, FMCG, logistics) may rely more on contract labour
• Accurate attendance and wage calculation becomes mandatory

3. Fixed-Term Employment

Factories can now hire workers on fixed-term contracts:

• Fixed-term workers get same wages and benefits as permanent workers
• No retrenchment compensation required after contract ends

Impact on hiring:

• Easier scaling of workforce based on demand
• Better control over headcount without long-term liabilities
• Especially useful for export-oriented and seasonal industries

4. Compliance and Record-Keeping

Manual registers are being replaced with digital compliance:

• Electronic registers for attendance, wages, and overtime
• Mandatory audit trails
• Higher penalties for non-compliance

Impact on hiring:

• HR teams need digital systems to manage workers
• Informal labour is becoming harder to employ legally
• Vendor-managed and verified labour becomes preferred

State-Specific Effects

Uttar Pradesh

• Promoting flexible employment for industrial growth
• Encouraging fixed-term and contract labour
• Faster approvals for night shifts and overtime

Bihar

• More conservative enforcement approach
• Stronger focus on worker welfare and safety
• Higher scrutiny on overtime misuse

Benefits for Employers

• Greater flexibility in hiring models
• Predictable labour costs
• Reduced industrial disputes through clarity
• Ability to scale legally and efficiently

Challenges for Employers

• Higher wage and overtime costs
• Increased compliance burden
• Need for HR and legal expertise
• Dependence on digital workforce management systems

Frequently Asked Questions (FAQs)

1. Are factories allowed to increase overtime freely under the new codes?

No. Overtime is regulated and capped. Employers must pay double wages and stay within state-notified limits.

2. Can factories in UP and Bihar hire workers only on fixed-term contracts?

Yes, but fixed-term workers must receive the same benefits as permanent employees.

3. Are night shifts for women legally allowed?

Yes, with written consent and adequate safety, transport, and security provisions.

4. Does this reduce the need for permanent employees?

Not entirely — but it allows factories to maintain a smaller core team and a flexible peripheral workforce.

5. Is digital attendance mandatory?

Not explicitly mandatory everywhere, but strongly encouraged and practically necessary for compliance.

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