Balancing Employee Rights and Compliance Relief: How Can SMEs Prepare for Rajasthan's New Employment Code?

On August 9, 2025, Rajasthan announced a compliance relief for micro and small enterprises. Businesses employing up to 10 workers no longer need mandatory registration under the Shops and Commercial Establishments Act, 1958. At the same time, administrative approval was granted for a draft Shops & Establishments (Employment & Conditions of Service) Act, 2025, aimed at modernizing rules around leave, working hours, and entitlements. This dual move seeks to streamline compliance while reinforcing worker protections statewide.

For many rural and semi-urban entrepreneurs, the registration waiver feels like freedom from layers of bureaucracy that once impeded growth. However, employees may worry: will simplified laws mean fewer rights? This mixed message raises emotional friction between entrepreneurial optimism and worker insecurity. HR advisors and SME leaders must balance championing the relief while preserving clarity about entitlements, ensuring that the absence of registration doesn't translate into ambiguous contracts or weaker worker safety nets.

This regulatory easing tested HR balance: encouraging small business agility while safeguarding statutory entitlements. The impending 2025 Act could eventually codify rights for leave, working hours, and grievance mechanisms. HR teams should proactively audit whether employee contracts reflect basic entitlements, even if registration is waived. Employers could voluntarily adopt compliant templates, publish worker benefits, and plan for transition when the new code becomes law. Preparing early avoids compliance shocks and builds credibility in informal enterprise ecosystems.

How can SMEs voluntarily uphold employee rights—leave, hours, grievance—even when regulatory registration is waived? What proactive steps (template contracts, policy disclosures) can prepare employers for the upcoming new employment code while earning worker trust?

Small and Medium Enterprises (SMEs) can voluntarily uphold employee rights and prepare for the upcoming new employment code in several ways:

1. Adopt Compliant Templates: Even if registration is waived, SMEs can voluntarily adopt compliant contract templates that reflect basic employee entitlements such as leave, working hours, and grievance mechanisms. This ensures that employees' rights are not compromised.

2. Publish Worker Benefits: Transparency is key in building trust. SMEs should publish worker benefits and entitlements, making it clear to employees what they are entitled to, regardless of the regulatory easing.

3. Proactive Auditing: HR teams should proactively audit employee contracts to ensure they reflect basic entitlements. This will help to identify any potential issues or discrepancies early on.

4. Plan for Transition: SMEs should start planning for the transition when the new code becomes law. This could include updating contracts, policies, and procedures to align with the new code.

5. Open Communication: Maintain open lines of communication with employees to address any concerns or queries they may have about the changes. This will help to alleviate any fears or insecurities they may have.

By taking these steps, SMEs can uphold employee rights, prepare for the new employment code, and build worker trust, all while benefiting from the compliance relief.