By Ananya Sarkar and Pratishtha Sharma

India’s labour law landscape has undergone a fundamental transformation with the introduction of four new Labour Codes consolidating over forty central labour legislations into a unified framework. While the main objectives of such consolidation include ease of compliance and uniformity, one important and critical area that demands close attention is the distinction between the definitions of “employee” and “worker”. It is significant for determining the eligibility for benefits like wages, social security, dispute resolution and safety norms. Although the terms are often used interchangeably, however, from the legal perspective, important distinctions affect coverage, especially with respect to managerial positions and wage thresholds along with applicability of benefits, dispute resolution mechanisms and employer obligations. Incorrect classification may expose organizations to non-compliance risks, disputes and loss of statutory protections.

Who is an “Employee”?

Under the Labour Codes, the term “employee” is defined to cover a wide range of individuals employed in different capacities. As per Section 2(k) of the Code on Wages, 2019, “employee” means any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union.

Who is a “Worker”?

The definition of “worker” is adopted primarily from the definition of “workman” in the Industrial Disputes Act, 1947. As per Section 2(zr) of the Industrial Relations Code, 2020, “worker” means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied and includes—

• working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; and
• sales promotion employees as defined in clause (d) of section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976 and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute,

but does not include any such person–

1. who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or
2. who is employed in the police service or as an officer or other employee of a prison; or
3. who is employed mainly in a managerial or administrative capacity; or
4. who is employed in a supervisory capacity drawing wage exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time.

Key Distinctions: “Employee” v. “Worker”

While the terms “employee” and “worker” overlap in the sense that both cover individuals engaged in manual, unskilled, skilled, technical, operational, clerical or supervisory work, there are major distinctions between them in terms of scope, benefits and the applicability of specific legal provisions:

• Managerial or Administrative Roles: Individuals employed mainly in managerial or administrative capacities are excluded from the definition of worker, whereas such roles are explicitly included within the definition of employee.
• Supervisory Wage Threshold: Supervisory personnel earning more than ₹18,000 per month (or such amount as notified) are excluded from the category of worker. However, there is no such wage ceiling for coverage for which supervisory employees qualify as employees under the broader definition.
• Exclusions: Both definitions exclude apprentices under the Apprentices Act, 1961 and members of the armed forces. The definition of worker additionally excludes navy and air force members, police personnel, prison staff and persons in mainly managerial or administrative capacity and certain supervisory categories, making it more restrictive.
• Contextual Use in Labour Laws: The classification of worker is mainly relevant for matters relating to industrial relations including industrial disputes, retrenchment, layoffs, standing orders and trade union rights. The term employee is used more broadly towards wage related entitlements such as timely payments of wages, minimum wages, bonus (where applicable), protection against unauthorised deductions.

Consequences for Employers

The distinction between a worker and an employee under the Labour Codes carries significant practical consequences for employers, particularly in terms of compliance, benefits and dispute management.

• Accurate Role Classification: Employers must carefully classify personnel based on the nature of their duties and wage levels to ensure compliance with applicable labour provisions.
• Compliance with Legal Obligations: Incorrect classification may lead to non-compliance with laws relating to retrenchment, dispute resolution, wages or social security benefits.
• Risk of Penalties and Disputes: Incorrectly categorizing employees and consequently denying statutory benefits to someone wrongly labelled can expose organizations to legal disputes and financial penalties.
• Policy and Contract Alignment: Employment contracts, HR policies and internal records should clearly reflect the correct classification to avoid ambiguity during inspections or labour disputes.

For organizations, understanding the distinction between a “worker” and an “employee” is essential for ensuring compliance under the new Labour Codes, as any kind of misclassification might expose the organizations to regulatory scrutiny, industrial disputes or penalties. Therefore, as the organizations continue to adapt to the changes under the new Labour Codes, it is a legal imperative for organizations to clearly and accurately categorize the workforce, review it periodically in light of applicable wage thresholds, the nature of duties performed, and the specific provisions of the relevant Labour Codes, which will help in safeguarding the rights and obligations of both the employers and the workforce.