Setting Up of Business, Industrial and Labour Laws · The Industrial Relations Code, 2020

Worker Re-skilling Fund, Penalties and Offences under the Industrial Relations Code, 2020

Updated 11 October 2026 · Fact-checked

The worker re-skilling fund (Section 83) is set up by the appropriate Government and receives fifteen days' last-drawn wages from the employer for each retrenched worker. That amount is credited to the worker's account within forty-five days. Penalties are in Section 86, compounding is in Section 89, and Section 102 amends the Finance Act, 2017.

Understand Worker Re-skilling Fund, Penalties and Offences

When an employer retrenches a worker, the worker loses income. The Code tries to soften this through a worker re-skilling fund under Section 83. The appropriate Government sets it up by notification. The idea is simple: the employer pays, and the money is credited to the retrenched worker's account to help with re-skilling.

The fund has two sources. First, the employer of an industrial establishment contributes an amount equal to fifteen days' wages last drawn by the worker immediately before retrenchment, or such other number of days as the Central Government notifies. This is for every retrenched worker and for retrenchment only. Second, there are contributions from other sources the appropriate Government prescribes. The fund is used by crediting the fifteen days' wages to the retrenched worker's account within forty-five days of retrenchment, in the prescribed manner.

Section 86 is the penalty section. It sets fines and, for repeat offences, sometimes imprisonment. Most first offences are fine-only, with a minimum and a maximum. Repeat offences after conviction carry higher fines or imprisonment. Section 84 bars unfair labour practices by employers, workers and trade unions, whether registered or not. Section 86(5) punishes them. Section 63 says when a strike or lock-out is illegal, and Section 64 bars financial aid to illegal ones.

Section 89 allows compounding: the accused settles the offence by paying a sum, so no prosecution follows. It does not cover offences punishable with imprisonment only, or with imprisonment and also fine. Section 102 is a consequential amendment: it changes the Eighth Schedule of the Finance Act, 2017 so that the Industrial Tribunal is described as constituted under Section 44(1) of this Code, and the Industrial Disputes Act, 1947 is replaced by this Code. The Code came into force on 21 November 2025 (Section 1).

Key rules to remember

Re-skilling fund contribution (Section 83(2)(a)): Employer contribution = 15 days' wages last drawn by the worker immediately before retrenchment, per retrenched worker; Central Government may notify a different number of days. Applies to retrenchment only.
Crediting the fund (Section 83(3)): Credit of 15 days' last-drawn wages to the retrenched worker's account within 45 days of retrenchment; Done in the prescribed manner.
Compounding amount (Section 89(1)): 50% of maximum fine (fine-only offences); 75% of maximum fine (offences punishable with imprisonment up to one year or with fine); Not available for offences punishable with imprisonment only, or with imprisonment and also fine. Amount goes to the Social Security Fund.
Repeat offence bar (Section 89(2)): No compounding for an offence committed a second time or later within 3 years of a similar offence compounded or convicted; Counted from the date of commission of the earlier similar offence.
Penalty for unfair labour practice (Section 86(5), (6)): First: fine ₹10,000 to ₹2,00,000. Repeat after conviction: fine ₹50,000 to ₹5,00,000, or imprisonment up to 3 months, or both; Applies to any person committing a practice in the Second Schedule.
Penalty for Sections 78, 79, 80 (Section 86(1), (2)): First: fine ₹1,00,000 to ₹10,00,000. Repeat after conviction: fine ₹5,00,000 to ₹20,00,000, or imprisonment up to 6 months, or both; Applies to an employer.
Penalty for Sections 67, 70, 73, 75 (Section 86(3), (4)): First: fine ₹50,000 to ₹2,00,000. Repeat after conviction: fine ₹1,00,000 to ₹5,00,000, or imprisonment up to 6 months, or both; Applies to an employer.
Illegal strike or lock-out penalties (Section 86(13)-(16)): Worker in illegal strike: ₹1,000 to ₹10,000 or up to 1 month or both. Employer in illegal lock-out: ₹50,000 to ₹1,00,000 or up to 1 month or both. Instigator: ₹10,000 to ₹50,000 or up to 1 month or both. Financier: ₹10,000 to ₹50,000 or up to 1 month or both; Section 63 defines illegality; Section 64 bars financial aid.
Breach of settlement or award (Section 86(17), (18)): Fine ₹20,000 to ₹2,00,000, or imprisonment up to 3 months, or both; continuing breach: additional fine up to ₹1,000 per day after first conviction; Court may direct fine to be paid as compensation to an affected person.
Residuary penalty (Section 86(20)): Fine up to ₹1,00,000; For any other contravention not covered by Section 86(1) to (19).

How to solve Worker Re-skilling Fund, Penalties and Offences questions

Use this order for any question on the fund, penalties or compounding. It keeps your answer in the ICSI style: provision, facts, conclusion.

1Identify what the question is about: the fund, a penalty, compounding, or the Section 102 amendment.
2State the governing section in plain words, for example Section 83 for the fund or Section 86 for the penalty.
3Pick out the facts that decide the answer: retrenchment or not, first or repeat offence, who committed it, and whether imprisonment is a possible punishment.
4For fund questions, compute fifteen days' last-drawn wages and check the forty-five day credit period.
5For penalty questions, match the contravened section to the correct sub-section of Section 86 and choose the first-offence or repeat-offence range.
6For compounding questions, check three things in order: the type of punishment, the three-year repeat bar, and the percentage of maximum fine.
7Apply the rule to the facts and write a clear conclusion with the amount or the outcome.

Quickest way: Match the section, then the range

When to use it: Use this when a short-answer or case question asks for a penalty or compounding amount and time is tight.

Underline the conduct in the question and map it to a section of Section 86.
Decide first offence or repeat offence after conviction.
Write the fine range exactly, plus imprisonment only if it is a repeat offence or a listed imprisonment offence.
If compounding is asked, say yes or no first, then give 50% or 75% of the maximum fine.
Close with one line of conclusion.

Common mistakes in Worker Re-skilling Fund, Penalties and Offences

Saying the fund contribution applies to every termination of service.
Students merge retrenchment with other kinds of separation.
Fix: Section 83(2)(a) says the contribution is for every retrenched worker in case of retrenchment only.
Writing that the employer pays the re-skilling amount to the worker directly after any period.
Students forget that the fund is set up by notification and the credit is made from the fund.
Fix: Write that the amount is credited to the retrenched worker's account within forty-five days of retrenchment, in the prescribed manner.
Applying the 50% compounding rate to every offence.
Students remember only one percentage.
Fix: 50% of the maximum fine is for offences punishable with fine only. 75% is for offences punishable with imprisonment up to one year or with fine.
Allowing compounding for any offence that carries a fine.
Students overlook the exclusion in Section 89(1).
Fix: Offences punishable with imprisonment only, or with imprisonment and also fine, cannot be compounded under this section.
Mixing up the first-offence and repeat-offence ranges, for example quoting ₹5,00,000 to ₹20,00,000 for a first offence under Sections 78 to 80.
The ranges sit in adjacent sub-sections with similar wording.
Fix: First offence: sub-section (1). Repeat after conviction: sub-section (2). Make a small table in your notes and revise it.
Treating every strike during a dispute as illegal.
Students ignore Section 63(2) and (3).
Fix: A strike already in existence when the application is filed or reference made is not illegal if it was lawful at commencement. A lock-out declared because of an illegal strike, or a strike because of an illegal lock-out, is not illegal.

Worked examples

Example 1

Bharat Textiles Ltd, an industrial establishment, retrenches a worker whose last drawn wages were ₹900 per day. The Central Government has not notified any other number of days. Compute the employer's contribution to the worker re-skilling fund and state the time within which it must be credited to the worker's account.

Show the solution

Provision: Section 83(2)(a) requires the employer to contribute fifteen days' wages last drawn by the worker immediately before retrenchment, for every retrenched worker.
Facts: wage is ₹900 per day and no other number of days is notified, so fifteen days apply.
Computation: 15 × ₹900 = ₹13,500.
Under Section 83(3), the fifteen days' wages are credited to the retrenched worker's account within forty-five days of retrenchment, in the prescribed manner.

Answer: The employer contributes ₹13,500. It must be credited to the worker's account within forty-five days of the retrenchment.

Example 2

Sundaram Engineering Pvt Ltd is convicted for contravening Section 78 of the Industrial Relations Code, 2020. Two years later it is convicted again for the same offence. State the punishment for the second offence. Also state whether a worker who joins a strike that is illegal under the Code can be punished.

Show the solution

Provision: Section 86(1) punishes a first contravention of Section 78, 79 or 80 with fine of ₹1,00,000 to ₹10,00,000.
Section 86(2) applies where the employer, after conviction, commits the same offence again.
For the second or subsequent offence, the punishment is fine of not less than ₹5,00,000 and up to ₹20,00,000, or imprisonment up to six months, or both.
On the strike: Section 86(13) punishes any worker who commences, continues or acts in furtherance of a strike illegal under the Code.
The punishment is fine of ₹1,000 to ₹10,000, or imprisonment up to one month, or both.

Answer: Sundaram Engineering is liable to fine of ₹5,00,000 to ₹20,00,000, or imprisonment up to six months, or both. A worker taking part in an illegal strike is punishable with fine of ₹1,000 to ₹10,000, or imprisonment up to one month, or both.

Exam tips

Learn Section 86 as a table: section contravened, first-offence range, repeat-offence range. Examiners often ask for one range in a case question.
Always state the numbers exactly. Write both the minimum and the maximum fine.
For compounding, start with the eligibility check, then give the percentage. Mention that the amount goes to the Social Security Fund.
For short notes on Section 102, say it is a consequential amendment of the Eighth Schedule of the Finance Act, 2017, replacing the reference to the Industrial Disputes Act, 1947.
End every answer with a one-line conclusion that names the section.

Practice questions from The Industrial Relations Code, 2020

Worker Re-skilling Fund, Penalties and Offences: frequently asked questions

What is the worker re-skilling fund under the Industrial Relations Code, 2020?

It is a fund set up by the appropriate Government by notification under Section 83. It is built from the employer's contribution for each retrenched worker and from other prescribed sources. It is used to credit the retrenched worker's account.

How much does the employer contribute for a retrenched worker?

The employer contributes an amount equal to fifteen days' wages last drawn by the worker immediately before retrenchment. The Central Government may notify a different number of days. The contribution is for retrenchment only.

Which offences can be compounded under Section 89?

Offences that are not punishable with imprisonment only, or with imprisonment and also fine. Compounding is for 50% of the maximum fine for fine-only offences, and 75% for offences punishable with imprisonment up to one year or with fine. It is not allowed for a repeat offence within three years.

What does Section 102 of the Industrial Relations Code do?

It amends the Eighth Schedule of the Finance Act, 2017. The Industrial Tribunal is now described as constituted under Section 44(1) of this Code, and the Industrial Disputes Act, 1947 is replaced by the Industrial Relations Code, 2020.