The New Labour Codes in India: A Shift Toward Simplification, Security and Sustainable Growth
- December 2, 2025
Ravi, a 27-year-old machine operator in a mid-sized manufacturing unit in Pune, felt trapped in a system where rules were confusing and protections were unclear. Before the new labour codes, every year, Ravi dealt with at least one problem: delayed wages, unclear overtime calculations, lack of proper safety gear, or inconsistent contract terms. There was no single point of reference to understand his rights, and every query was met with: “This falls under a different Act; we will check.”
His friend Meera, a gig worker delivering food on a platform app, had it worse. She was neither recognized as an employee nor protected under any labour law. No ESIC, no PF, no fixed working hours, no safety net during accidents.
For the employer, Mr. Verma, the situation was equally challenging. The factory needed separate registrations under different Acts, multiple inspectors could visit for compliance checks, and outdated definitions caused confusion about whether certain staff fell under “workers” or “employees.” Even minor clerical errors in compliance could lead to prosecution.
After the introduction of the new Labour Codes, Ravi could notice immediate changes. His appointment letter clearly listed wages, allowances and safety entitlements. Overtime rates became uniform and compulsory. He now received protective equipment during hazardous tasks, and annual health check-ups were mandated. Digitised records meant his queries were addressed in minutes, not months.
Meera, for the first time, was recognized under the “gig and platform worker” category. Her aggregator platform contributed to a Social Security Fund for her insurance and accident benefits. She could access social security benefits as notified by the government, such as health and accident insurance, through the dedicated Social Security Fund. For Mr. Verma, compliance became simpler—one registration, one licence, one return. Instead of multiple inspectors, a single inspector-cum-facilitator visited with a digital checklist, focusing on helping him comply rather than penalising him. The threshold for certain approvals changed, reducing shutdown risks during business fluctuations.
The result was a workplace where transparency increased, conflicts reduced, productivity improved and both workers and employers felt more secure.
This is the kind of systemic transformation the new Labour Codes aim to bring across India’s vast labour ecosystem.
Why Were the New Labour Codes Introduced?
India’s labour landscape was previously governed by 29 separate laws, many drafted decades ago. These laws often overlapped, contradicted each other, or failed to address modern workplace realities like gig work, fixed-term employment and digital compliance. Over time, the system became complex, compliance-heavy and difficult to enforce.
The new Labour Codes were introduced to:
- simplify the regulatory environment
- modernise labour laws aligned with today’s economy
- increase worker welfare, safety and dignity
- reduce compliance burden and encourage investment
- strengthen transparency and uniformity
- bring unorganised and gig workers into the social security net
Overview of the Four Labour Codes
- The Code on Wages, 2019
This code serves to consolidate four previous wage-related laws into a comprehensive framework that mandates universal minimum wages and assures timely remuneration for all employees. It establishes a national floor wage to maintain consistency across various sectors and job roles.
Major features include defined criteria for setting wages, robust provisions for gender equality extending to transgender employees, enforcement of mandatory overtime pay at double the normal rate, the introduction of an inspector-cum-facilitator system, and the compounding and decriminalization of minor wage infractions.
- The Industrial Relations Code, 2020
This code reforms employer-employee interactions by merging three labour regulations. It introduces fixed-term jobs that offer full benefits, including a one-year gratuity for full-time equivalent (FTE) workers.
Additional provisions involve a reskilling fund for workers who are retrenched, a framework to recognize trade unions, and an increased threshold for layoffs, retrenchments, and closures, now set between 100 to 300 employees. It also provides work-from-home guidelines, requires a 14-day notice for strikes, and proposes the use of two-member tribunals to expedite dispute settlements.
Moreover, it emphasizes the digitization of records and procedures.
- The Code on Social Security, 2020
One of the most transformative codes, expanding social security to unorganised, gig and platform workers. The highlights are:
- ESIC coverage across India without territorial limits
- streamlined EPF inquiries and reduced deposits for appeals dedicated social security fund for gig, platform and unorganised workers
- aggregator contributions of 1–2% of turnover
- wider definition of dependents
- uniform definition of wages for PF, gratuity and bonus commuting accidents recognised as employment- injury
- gratuity eligibility after one year for fixed-term employees
- digital records, returns and online systems
- The Occupational Safety, Health and Working Conditions Code (OSHWC), 2020
The Occupational Safety, Health and Working Conditions Code consolidates 13 earlier laws to create a unified framework for workplace safety and welfare. It introduces a single licence, registration and return for establishments, expands the definition of inter-state migrant workers and mandates an annual travel allowance for them. Employers must issue appointment letters, provide annual health check-ups, and ensure adequate safeguards for women working night shifts. The Code revises factory applicability thresholds, requires safety committees in establishments with 500 or more workers, and provides for accident compensation funded through collected penalties. It also streamlines contract labour regulations through automatic licensing and enforces an 8-hour workday and 48-hour weekly limit, with overtime paid at double wages and only with the worker’s consent.
Who Is Affected by the Labour Codes?
The codes impact nearly every stakeholder within the employment ecosystem:
- Workers and Employees:
– improved wage protection
– safer workplaces, uniform benefits
– appointment letters for clarity - Unorganised, Gig and Platform Workers:
– first-ever inclusion in social security
– insurance and accident benefits
– aggregator contributions - Employers (MSMEs, Start-ups, Large Enterprises):
– simplified compliance
– reduced cost and risk
– easier workforce planning through fixed-term roles - Women Workers:
– safer norms for night work
– non-discrimination and equal pay - Inter-State Migrant Workers:
– travel allowance
– portability of welfare benefits - Contract Labour Ecosystem:
– long-validity digital licences
– accountability for principal employer
- Workers and Employees:
Changes Brought by the Labour Codes
The new labour codes in India are expected to enhance compliance for employers by making it more cost-effective and predictable.
One of the changes in the Industrial Relations Code allows firms with up to 300 employees to lay off or close operations without government approval, a move aimed at fostering manufacturing growth and reducing employee headcount concerns. However, unions oppose this change because it undermines job security and shifts bargaining power to employers.
Very importantly, gig and platform workers are now recognized under the Social Security Code, obliging aggregators to allocate revenue to welfare funds for these workers. Yet, specifics regarding timelines and contribution mechanisms remain unclear.
Another modification involves the definition of wages: allowances can now constitute a maximum of 50% of total compensation, requiring at least half of salary to come from basic pay. This change means increased retirement fund contributions since provident fund (PF) calculations rely on basic pay; however, this change might lower monthly take-home salaries.
For instance, under the old system where the basic was about 30-40% of total cost to company (CTC), if Basic: ₹35,000, Allowances: ₹65,000, then PF (12% of basic): ₹4,200
In the New structure (under 50% rule): Basic has to be at least ₹50,000, Allowances: ₹50,000
PF (12% of basic): ₹6,000, now take-home pay is lower, because PF contribution rises.
These changes also benefit fixed-term workers, who can now claim gratuity after one year instead of five. The codes help inter-state job migration by easing the portability of benefits, crucial for seasonal workers. Women are permitted to work night shifts with necessary safety measures, and all workplaces, regardless of size, must adhere to stricter safety regulations.
Per Wage Code timelines, monthly wages must be paid before the 7th day of the following month.. However, the adjustment of minimum wages by states in response to a central government-set national floor wage could raise costs for employers in low-income areas. Increased flexibility for businesses may lead to reduced rigidity for labor, while enhanced portability for workers may introduce higher costs for employers.
Whether it is Ravi in a factory, Meera in the gig economy or Mr. Verma running an enterprise, the new Labour Codes represent a shift toward a more structured, predictable and equitable labour system.
Join Our Community Today!
Get expert insights, legal updates, and practical tips from AD-roit LinkS delivered to your inbox. No spam, just what you need to keep your workplace safe and compliant.
