New Labour Codes Implemented Across the Country

For decades, India’s workforce and industries operated under a complex and array of Central and State laws, many originating from the pre-independence and early post-independence eras. This fragmented framework, despite its welfare orientation, resulted in significant compliance challenges for employers and insufficient protection for informal workers. To address these shortcomings, the Second National Commission on Labour (2002) recommended a sweeping rationalization and comprehensive consolidation of the numerous Central enactments into a few principal codes, focusing on the functional themes of wages, industrial relations, social security, and safety/welfare.

Following this, on November 21, 2025, the Government of India, by notifications issued by the Ministry of Labour and Employment, brought into force the four Labour Codes: Code on Wages, 2019, the Code on Social Security, 2020, the Occupational Safety, Health and Working Conditions Code, 2020, and the Industrial Relations Code, 2020 with immediate effect. The Codes replace twenty-nine Central enactments with a unified and modern framework.

1. Wages Code: A Unified Approach to Pay

• The Code on Wages, 2019 (Wages Code) introduces a unified definition of “wages” to standardize the calculation of statutory dues inter alia gratuity and provident fund contributions. Under the Wages Code, where non-wage components of total remuneration exceed fifty percent of the total, the excess portion is deemed to be wages for calculation purposes.

• The Wages Code further extends protections surrounding timely payment and prohibitions against unauthorized deductions to all employees, removing the earlier threshold that limited these safeguards to those earning up to INR 24,000. Another important provision requires employers to complete the final settlement of wages within two working days of cessation of employment, whether the separation is by resignation or termination.

• A floor wage may be fixed by the Central Government based on minimum living standards across different geographies and categories of employment, below which state-set minimum wages cannot fall, the detailed rules for which are awaited.

2. SS Code: Extending the Safety Net

• The Code on Social Security, 2020 (SS Code) introduces definitions for aggregators, gig workers, and platform workers, reflecting the rise of technology-enabled work arrangements that operate outside conventional employment contracts. The SS Code envisages social security schemes that may include inter alia life and disability cover, accident insurance and health benefits. Aggregators may be required to contribute between one and two percent of annual turnover, to a dedicated social security fund.

• The SS Code expands the recognition of fixed-term employment, ensuring parity of service conditions and statutory benefits for fixed-term employees relative to permanent employees engaged in similar work. It clarifies eligibility for pro-rated gratuity for fixed-term employees who have rendered at least one year of service under their contract.

3. OSH Code: Standards for Safe Workplaces

• The Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) establishes workplace standards aimed at promoting health, safety, and welfare across a broad range of establishments. It caps the working day at eight hours and mandates that overtime may be required only with worker consent, reinforcing humane work practices and clarity in time management. The OSH Code places restrictions on the use of contract labour in the core activities of an establishment except under specified circumstances, such as intermittent work or sudden increases in workload, to discourage the sustained outsourcing of central functions that may dilute accountability for worker welfare.

• Definitions include inter-state migrant workers within the ambit of contract labour while excluding individuals regularly employed by the contractor at the contractor’s establishment, aligning coverage more closely with current contracting practices. The OSH Code provides for women to work at night and across all categories of work, subject to their consent and the implementation of appropriate safety measures.

4. IR Code: Structures for Dialogue and Discipline

• The Industrial Relations Code, 2020 (IR Code) consolidates and updates the framework governing employer-employee engagement, dispute resolution, and collective representation. It requires establishments employing twenty or more workers to constitute a Grievance Redressal Committee (GRC) for the resolution of disputes or grievances that concern conditions and terms of employment. GRC must comprise equal representation from employers and employees and include women representatives not less than the proportion of women in the total workforce, thereby embedding representation principles in day-to-day dispute handling.

• The IR Code recognizes a sole negotiating union that commands the support of at least fifty-one percent of workers in an establishment, or a negotiating council formed from multiple unions each having support of at least twenty percent of workers. The threshold for the applicability of standing orders that define service conditions including classification, working hours, leave, and disciplinary procedures, has been raised to establishments with three hundred workers.

Navigating India’s Labour Codes: Key Employer Priorities

• Transitional Context

The Labour Codes represent a major shift, but their full effect depends on the enforcement of the Central and State rules and schemes. Until these are completely notified, existing labour enactments remain in force, creating a dual compliance environment. State-specific shops and establishments laws also continue to apply.

• Immediate Operational Priorities

Employers should issue appointment letters to all employees, including those hired before the Codes, within a period of three months from the date of commencement of the rules under the Codes. Work schedules must respect the eight-hour daily cap, with overtime only upon consent and paid at statutory rates. Leave policies should grant annual leave after 180 days of work, with clear provisions for encashment. Internal inquiries for misconduct must conclude within 90 days, during which suspended employees receive 50% of wages as subsistence allowance.

• Payroll Architecture and Workforce Categorization

Payroll systems should ensure compliance with the Labour Codes and ensure timely payments. Workforce categorization must align with new definitions of worker, employee, gig worker, platform worker, and inter-state migrant worker. Individuals engaged in core activities should be directly employed, except where exceptions apply. Aggregators and platforms should prepare for registration and social security contributions once rules are notified.

• Risk and Strategic Implications

Employers with allowance-heavy pay structures may face higher statutory contributions. Businesses reliant on contract labour for core activities would need to shift to direct employment. Aggregators and platforms must budget for social security contributions for gig workers.

Conclusion

The Labour Codes consolidate India’s fragmented labour laws into four comprehensive instruments covering wages, social security, occupational safety, and industrial relations. While notification of Central and State specific rules is awaited, employers must actively track developments on floor wage methodologies, gig worker schemes, maternity benefit processes, appointment letter formats, and strike notice procedures.