In a significant shift in labour regulation, the Government of India has notified that companies with up to 299 employeescan now lay off workers or close establishments without requiring prior government approval. The reform comes into effect as part of the implementation of the Industrial Relations Code, 2020, which will be enforced from 21 November 2025 alongside the other three Labour Codes.

Previously, firms with 100 or more employees needed government permission before conducting layoffs, retrenchments, or closures. By raising the threshold to 300, the government aims to ease compliance, enhance labour-market flexibility, and boost the business environment—particularly for manufacturing, MSMEs, and emerging industries.

Supporters of the reform argue that the change will encourage companies to scale faster, hire more workers, and remain competitive globally. They also believe it will reduce bureaucratic delays and create a more efficient industrial landscape.

However, labour unions and worker groups have expressed concerns, warning that relaxed rules could lead to job insecurity and increased vulnerability for employees in smaller and mid-sized firms. They argue that government oversight has traditionally served as a safeguard against arbitrary or exploitative retrenchment practices.

The government has assured that workers’ rights—including severance, notice periods, and social security benefits—remain protected under the new Labour Codes. As India modernises its labour framework, this policy marks a major shift in balancing ease of doing business with worker protection.