India’s New Labour Codes: Reforming Work Laws

In November 2025 the BJP government implemented four comprehensive labour codes consolidation around 29 previous codes relating to labour laws into unified laws, some of these laws were dating as back as to 1940-50’s. The new codes which are Code on Wages (2019), Industrial Relations Code (2020), Social Security Code (2020), and Occupational Safety, Health and Working Conditions OSH Code (2020) aim to modernize and unify India’s old labour framework to represent the need of current era.

Promised reforms includes lot of things like a guaranteed statutory minimum wage for all workers, mandatory timely wage payment, and extended social security net to even platform and gig workers. Government brought these laws with the promise that these laws will simplify compliance for companies and boost investment in the nation, outdated laws had created obstruction in foreign investment. But major trade unions have countered that giving firms more firing flexibility e.g. layoffs without government’s approval in a firm of up to 300 employees will undermine job security, prompting nationwide agitation against the reform.  

Code on Wages

The Wages Code merges four legacy laws the Payment of Wages, Minimum Wages, Bonus and Equal Remuneration Acts into one. Its key reforms are:

• Universal Minimum Wage: “Minimum wage is guaranteed for all workers”. Previously many sectors fell outside old laws, but now every employee has a legal minimum pay floor. The central government must set a national floor wage; states must set state minima at or above it.
• Uniform Wage Definition: A standardized definition of “wages” requires basic pay to be at least 50% of total compensation. This boosts provident fund and gratuity contributions, though it may reduce take-home pay as allowances can no longer dominate salary structure.
• Timely Payments: Employers must pay wages on strict schedules and settle final dues within 2 working days of termination. Late payment fines and claims procedures are defined, ensuring workers receive full wages on time.
• Overtime and Bonuses: Work beyond 8 hours/day 48/week must be paid at double the normal rate. Employees earning below a ceiling or working >30 days now get a statutory bonus of at least 8.33% of annual wages.
• Equal Treatment for Fixed-Term Workers: Fixed-term contract employees now get all benefits of permanent staff, including leave, insurance and even gratuity after just 1 year of service. This is a major expansion from the old rule 5-year wait for gratuity.
• Formalization: Every worker even in informal or gig jobs must receive a written appointment letter stating role, wages and entitlements. This brings transparency and job security where previously there was none.

Impact: Workers gain income security and formal rights minimum pay, overtime, bonuses and faster gratuity. Employers face higher mandatory costs bigger PF/bonus payouts and tighter payroll compliance. But businesses benefit from one unified law instead of navigating multiple old Acts.

Industrial Relations Code

The IR Code consolidates the Industrial Disputes Act; Trade Unions Act and Standing Orders Act into one framework. Key changes include:

• Expanded Definitions: The definition of “worker” is broadened to include sales promotion staff, IT employees up to a wage ceiling, journalists, and supervisors earning ≤₹18,000/month. A new separate “employee” category covers managerial staff.
• Fixed-Term Employees: Fixed-term workers are legally equal to permanent ones for all benefits wages, leave, social security. Gratuity eligibility is granted after 1 year of service, closing a long-standing gap.
• Layoff/Closure Threshold Raised: Firms up to 300 workers can now lay off, retrench or close business without prior government approval. Previously the threshold was 100 workers. This gives companies more flexibility in scaling operations.
• Retraining Fund: Employers must contribute the equivalent of 15 days’ last-drawn wages to a “re-skilling fund” for each retrenched worker, to help their transition.
• Collective Bargaining: Each workplace must have a negotiating trade union or council. Unions with ≥51% membership are recognized as sole bargaining agents for that establishment.
• Grievance Mechanisms: Establishments with ≥20 workers must set up internal grievance committees. Dispute resolution processes new 2-member tribunals are streamlined.

Impact: The IR Code gives employers easier hiring/firing especially up to 300 workers and clearer rules for contract labour. This is intended to attract manufacturing and investment by reducing “inspector-raj”. However, unions argue these provisions “weaken job security” and shift bargaining power to companies. The code still preserves core worker rights notice periods, severance pay, but industry analysts note it grants firms far greater agility in workforce management.

Social Security Code

The Social Security Code replaces many welfare laws ESI, PF, Maternity Benefits, Gratuity, etc. under one umbrella. Major features are:

• Universal Coverage: For the first time, all workers – formal, informal, self-employed and gig/platform workers – are eligible for social security schemes. New Central and State Boards will design schemes for provident fund, pension, maternity, disability and other benefits even for self-employed and informal workers.
• Gig and Platform Workers: The law explicitly defines “gig workers” delivery, ride-share, etc. and “platform workers” and brings them into the social security net. Digital aggregators like delivery apps must contribute 1–2% of their annual turnover capped at 5% of payments into a social security fund for these workers. This is a landmark shift granting legal status and possible future benefits health insurance, accident cover to over 10 million gig workers.
• Expanded Schemes: The code allows the government to notify pension, insurance and other schemes for any category including migrant or self-employed workers. In practice this could extend ESIC health insurance and PF retirement savings to a far wider base of employees. Employer contributions to these funds will rise commensurately since “wages” now include more allowances.

Impact: On paper, millions of previously unprotected workers gain access to formal social safety nets. For employers and platforms this means new compliance costs expanded PF/ESI payroll, aggregator levies. Tech industry observers caution that the details which benefits, how delivered depend on future rules, so real improvements may take time and will vary by state.

Occupational Safety, Health and Working Conditions OSH Code

The OSH Code merges 13 central laws Factories Act, Mines Act, BOCW Act, etc. into a single safety and working-conditions framework. It drastically simplifies compliance one registration and license covers an entire company instead of separate permits and raises basic protections. Key provisions include:

• Appointment Letters & Leave: All employees must receive a written contract. Paid annual leave becomes available after just 180 days of work down from 240.
• Work Hours & Overtime: Normal hours are capped at 8/day 48/week, but states may allow flexible 4- or 5-day workweeks. Overtime beyond prescribed hours must be paid at double the basic wage.
• Women at Work: Gender pay equality is explicitly upheld, and women can work night shifts with their consent in any industry, provided employers ensure safe transportation, CCTV/security, and premium pay.
• Health & Welfare: Employers must provide free annual medical check-ups for workers over 40. Migrant workers gain portability of benefits ration cards, construction-worker welfare and travel allowances.
• Safety Rule Extends to All: Even very small establishments are covered. The “one-worker” rule means even a single-person workshop must follow basic safety norms e.g. provide PPE and emergency plans. New factory-safety committees are mandated for larger workplaces.

Impact: The OSH Code elevates baseline protections across sectors. Construction, manufacturing and service-sector employers face clearer standards and digital record-keeping but also must meet stricter obligations even if only a few workers. Workers benefit from better workplace safety and health services. Overall, the code is projected to make India’s workforce regulations more uniform and less fragmented.

Collective Impact of the reform

Together, these four Codes represent a massive structural shift in India’s labour governance. The government argues that the reforms will:

• Encourage foreign and domestic investment by reducing compliance complexity,
• Help formalise the workforce,
• And extend protections to workers historically outside the legal net.

Workers gain clearer rights, better safety standards, and broader access to social security.

Yet the criticisms are equally substantial. Trade unions say the reforms weaken collective bargaining and dilute job security particularly due to easier retrenchment rules and wider employer discretion. Several states have delayed rolling out their rules, citing insufficient consultation and practical challenges.

Much will hinge on how states frame their individual rules and how consistently the Codes are implemented. India’s labour market is too diverse for a one-size-fits-all approach, and the real test will lie in execution rather than legislation.