India Implements New Labour Codes: What Changes for Workers and Businesses

New Delhi, November 22, 2025: In a major overhaul of its decades-old employment framework, the Indian government has announced the implementation of the four consolidated Labour Codes, effective from November 21, 2025. These new codes replace 29 existing central labour laws, aiming to simplify regulations, expand the social security net, and modernise the relationship between employers and employees.

The four codes are:

1. The Code on Wages, 2019
2. The Industrial Relations Code, 2020
3. The Code on Social Security, 2020
4. The Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC)

This move, hailed by the government as the “most comprehensive and progressive reform since Independence,” is set to impact nearly all sectors, from factories and mines to the growing gig economy.

Key Takeaways for Workers

The new framework brings significant enhancements to worker rights and protections:

• Universal Minimum Wage and Timely Pay: A statutory minimum wage is guaranteed for all workers across all sectors, linked to a national floor wage. Payment of wages on time is now mandatory for everyone.
• Expanded Social Security: The biggest change is the expansion of social security coverage, including schemes for PF (Provident Fund), ESIC (Employees’ State Insurance Corporation), and gratuity, to a much wider section of the workforce.
  • Gig and Platform Workers are formally defined and covered for the first time. Aggregators (like food delivery or ride-sharing companies) must contribute 1-2% of their turnover towards a welfare fund for these workers.
  • Free Annual Health Check-ups are now mandatory for all workers above 40 years of age in specific hazardous industries and large establishments.
• Better Benefits for Fixed-Term Employees: Fixed-term employees (FTEs) will receive all statutory benefits—like leave, medical cover, and social security—equal to permanent workers. Crucially, they become eligible for gratuity after just one year of service, down from five years.
• Gender Equality: Gender discrimination in recruitment and pay is prohibited. Women are now allowed to work night shifts in all establishments (with their consent and mandatory safety safeguards provided by the employer).
• Formal Employment: All employees must receive a mandatory written appointment letter detailing their designation, wages, and social security benefits, which is a major step towards formalising the unorganised sector.

Key Changes for Businesses and Compliance

For employers, the codes aim to simplify compliance and offer greater flexibility:

• Simplified Compliance: The codes replace a web of 29 laws with four unified codes, reducing the need for multiple registrations and filings. The goal is a “One Registration, One License, One Return” system.
• Focus on Facilitation: The role of the traditional “Inspector” is replaced with an “Inspector-cum-Facilitator,” shifting the focus from punishment to guidance and advisory support for compliance.
• Overtime Rules: While the maximum working hours remain at 48 hours per week, overtime work, which requires the worker’s consent, must be compensated at double the normal wage rate.
• Increased Flexibility for Layoffs: The threshold for requiring prior government approval for lay-offs, retrenchment, or closure has been raised from 100 to 300 workers in industrial establishments, giving larger companies more flexibility in workforce management.
• Decriminalisation of Minor Offences: Many non-serious offences now face monetary fines instead of imprisonment, which is intended to make the regulatory environment less punitive.

Mixed Reactions and The Road Ahead

While the government and industry bodies have welcomed the simplification and the expansion of the social safety net, some trade unions have raised concerns, particularly regarding the increased threshold for retrenchment (300 workers) and the stringent conditions for calling a strike, calling for a nationwide protest.

As the Centre and states work to finalise the detailed rules under these codes, businesses are now preparing for a major restructuring of their payroll, compliance, and human resource policies. The implementation marks a significant turning point, promising greater protection for workers while seeking to boost the ‘Ease of Doing Business’ environment in India.