Crossing 300 Employees: Retrenchment Approval and More
At 300 workers, the Industrial Relations Code requires prior government permission for layoff, retrenchment and closure. Here is what else applies.
At 300 employees, the newer Industrial Relations Code puts the biggest structural obligation of the growth journey in front of you: prior government permission before you can lay off, retrench, or close down.
Key facts at a glance
- The Industrial Relations Code, 2020 requires prior government permission for layoff, retrenchment or closure at establishments with 300 or more workers.
- This raises the threshold from the earlier 100-worker trigger under the Industrial Disputes Act, Chapter V-B.
- All four Labour Codes came into force nationally on 21 November 2025.
- Final Central rules were expected around April 2026, after draft rules were pre-published 30-31 December 2025.
- As of mid-2026, most states have not fully notified their own Labour Code rules, so the old or new threshold may apply depending on your state.
- Standing orders certification is also aligned to the same 300-worker threshold under the IR Code.
The headline change: permission before retrenchment
Before the Labour Codes, Chapter V-B of the Industrial Disputes Act required industrial establishments with 100 or more workmen to get prior government permission before laying off workers, retrenching them, or closing the establishment. This was one of the most consequential thresholds in Indian labour law because it meant genuinely small-to-mid-sized businesses were subject to a heavy administrative process for workforce reductions.
The Industrial Relations Code, 2020 raises this threshold to 300 or more workers. Once the Code is fully in force in your state, an establishment below 300 workers can generally carry out layoffs, retrenchment or closure without prior government permission (though notice and compensation obligations still apply), while one at 300 or more still needs it.
Why "once in force in your state" matters so much here
The Labour Codes are legally in force nationally as of 21 November 2025. But labour is a concurrent subject under the Constitution, so state governments also have to notify their own rules before the Codes are fully operational in practice within that state. As of mid-2026, most states are still working through this. That means an establishment with 250 workers could, right now, either:
- Already benefit from the higher 300-worker threshold, if its state has notified IR Code rules, or
- Still be subject to the older 100-worker Chapter V-B permission requirement, if its state hasn't transitioned yet.
Do not assume the higher threshold protects you until you've confirmed your state's specific notification status.
Other obligations that scale with 300
Alongside retrenchment permission, the IR Code aligns standing orders certification to the same 300-worker line, meaning a fully-transitioned state applies both obligations at the same headcount. Separately, employers should be aware of the worker re-skilling fund contribution - generally 15 days' wages contributed by the employer at the time of retrenchment - which is tied to the retrenchment event itself rather than to a specific headcount, so it can apply below 300 as well once retrenchment happens.
What changes, at a glance
| Obligation | Old threshold (ID Act) | New threshold (IR Code, 2020) | Status |
|---|---|---|---|
| Prior permission for layoff/retrenchment/closure | 100+ workmen | 300+ workers | Depends on state notification |
| Standing orders certification | 100+ workers | 300+ workers | Depends on state notification |
| Worker re-skilling fund contribution | Not applicable | 15 days' wages per retrenchment | Applies once IR Code is in force, regardless of headcount |
What to do this week
Confirm whether your state has notified rules under the Industrial Relations Code, 2020, since that single fact decides whether you're operating under the 100-worker or 300-worker retrenchment permission threshold today. If any workforce reduction is even a possibility in the near term, get this confirmed before you plan the process, not after.
Sources
- Ministry of Labour and Employment - labour.gov.in
- Chief Labour Commissioner (Central) - clc.gov.in
- Respective state labour department portals
If you're not sure where your business stands on this, ComplianceCheck's labour code transition assessment gives you a clear picture in a few minutes.
This guide is general information, not legal advice. Requirements vary by state, sector and headcount - confirm specifics with a compliance professional or the relevant authority.
Frequently Asked Questions
- Do we need government permission before laying off workers at 300 employees?
- Under the Industrial Relations Code, 2020, industrial establishments with 300 or more workers need prior government permission before layoff, retrenchment or closure, once that Code is in force and notified in your state.
- What was the threshold before the new Labour Codes?
- Under the earlier Industrial Disputes Act, Chapter V-B, this same prior-permission requirement applied at a lower threshold of 100 or more workmen - the Industrial Relations Code, 2020 raises it to 300.
- Is the 300-worker threshold in effect everywhere in India right now?
- Not uniformly - all four Labour Codes came into force nationally on 21 November 2025, but each state must notify its own rules, and as of mid-2026 most states have not yet fully done so, so employers should confirm their specific state's status.
- Are standing orders also tied to the 300-worker threshold?
- Yes, the Industrial Relations Code, 2020 aligns the standing orders certification requirement with the same 300-worker threshold used for layoff, retrenchment and closure permission, once that Code applies in your state.
- What is the re-skilling fund contribution?
- Under the Industrial Relations Code, an employer generally has to contribute an amount equal to 15 days' wages to a worker re-skilling fund when retrenching an employee, a provision tied to retrenchment events rather than to headcount size.
- Does crossing 300 employees trigger any factory welfare obligations too?
- Factory welfare obligations like canteen and creche are tied to their own separate headcount thresholds - typically 50 for creche and around 100 for canteen under the newer OSH Code - rather than to the 300-worker mark, though a business at 300 employees has usually already crossed those.
Check your status
Labour Code Readiness
Readiness assessment for India's 4 new Labour Codes (Wages, Social Security, OSH, Industrial Relations), with implementation cost estimates.