1. Introduction
November 21, 2025 will mark a watershed moment for Indian labor laws moving employment relations to a new paradigm shift.
The workforce is the single most dominant input for all kinds of businesses. India always had a labyrinth of laws applicable to blue and white-collar workforce that regulate practices, procedures and rights and obligations of employers and employees in their day-to-day relations. The philosophy behind having elaborate laws was to check exploitation and oppression and to curb unfair labor practices. Several statutes in the framework date back to the British era or shortly after independence. As Indian economy liberalized and changed, conglomerates considered the labor law regime to be both outdated and fragmented since a new economy was being governed by overlapping laws written for an old one. All of this changed last Friday.
The Government consolidated 29 central labor laws into four comprehensive codes – Code on Wages; Industrial Relations; Social Security; and Occupational Safety, Health and Working Conditions. The Codes came into effect on November 21, 2025, and bring India’s decades-old framework under one consolidated, modern system.
This newsletter is a short summary of key highlights and more detailed analysis will soon be provided for each code.
2. The Scope of Four Codes
Labor is a concurrent list subject which means both center and states can legislate on the listed subjects. In the event of a conflict between the two, the central law normally prevails. While most states have drafted rules aligned with the four Codes, yet they need to be relooked into and central-level implementation remains pending. Here are some highlights of the changes.
2.1 Code on Wages, 2019 : The gazette notification of November 21 provides most provisions of the new law are in force, except certain sections. One of the most immediate changes stems from a uniform definition of wages, across all labor laws, which will reshape how companies structure salaries, allowances, and benefits. Under this unified concept, wages now include basic pay, dearness allowance and retaining allowance for determining minimum wages and other wage linked benefits. Further, remuneration in kind, if any, up to 15% will be treated as wages.
The new framework also establishes a statutory floor (a national floor wage) to be determined by the central government that states must meet while retaining flexibility to set higher local minimum wage thereby extending minimum wage protection to workers previously outside scope. Lower wage will be permitted in limited exceptions. Hopefully, in due course, this could bring parity across states though it is somewhat premature to assume that.
Moreover, given the obligation to make payments timely, there will now bestricter rules on payment intervals and permitted deductions. There will also be a standardization of overtime pay and employees will be compensated at least twice their normal wage rate for work performed beyond standard working hours.
This means
- Organizations will need to immediately review their existing wage structures and assess the need to make changes to adapt to the new regime.
- While reviewing existing pay structures it will be necessary to determine potential cost implications arising from different situations, be it employee separation or various employee payments, including leave encashment, gratuity, statutory bonus, maternity, retrenchment compensation, etc.
- At the bare minimum, the foregoing should bring in uniformity in wage computation across sectors, improve transparency and prevent wage disputes.
2.2 Code on Social Security, 2020: Like the Code on Wages, all provisions have not been implemented. With expanded social security coverage, this code contemplates contributory schemes for pensions, medical care, insurance and provident funds for an enlarged base. It now recognizes gig and platform workers,[1] where aggregators will be required to contribute to a dedicated fund that will finance insurance, health protection, disability support and old-age benefits for them. Such contributions will be between 1-2% of the aggregator’s annual turnover, capped at 5% of total payments made to such workers during a financial year. Employees’ state insurance benefits will be available pan-India and could apply to establishments with even a single employee engaged in hazardous work. A new national database for unorganized workers will help map skills, track employment histories and ensure portability of benefits across states. Additionally, parents in laws have been added to the definition of family of a woman employee, thereby expanding coverage and ensuring inclusion.
It is noteworthy while the aim was to subsume the provident fund statute but the Ministry has not notified the clause that would repeal the Employee Provident Funds Act. This means there will be a period of overlap where that act would continue to apply.
A landmark change lowers the gratuity eligibility for fixed‑term employees, who form a huge chunk of Indian workforce, to one year, treating such workers more like permanent staff for certain terminal benefits. So, now, employees who are hired for time-bound contracts in various industries become eligible for gratuity after merely one year of service instead of five, a significant shift for different sectors. Contract and migrant workers will gain stronger protections, including health coverage. There are also provisions for a national social security fund and digital interfaces for registration and contributions to simplify enrolment and portability across employers and locations.
Clearly,
- The changes introduced reflect one of the most significant overhaul of India’s welfare system in decades.
- From an employers’ perspective, they will have to carefully evaluate calculations of gratuity payouts based on the new definition of wages since lowering the earlier 5-year requirement to one-year will increase employer’s liability.
- The revised definition of wages could increase the baseline for provident fund, and require restructuring of compensation packages.
2.3 Occupational Safety, Health and Working Conditions Code, 2020: The notification provides the code is implemented fully. This code consolidates multiple safety and welfare laws into a single statute with sector‑wise standards for working hours, leave, night‑work, hazard mitigation, welfare amenities and inspection regimes.It prescribes national safety standards across industries, welfare minimums to establishments previously uncovered and emphasizes employer obligations for training and safety infrastructure.
Perhaps the biggest relief for employers comes in the form of compliance reform. Instead of juggling dozens of registrations and returns, there will be a unified electronic registration system for establishments with 10 or more workers who will be able to obtain a single registration, one license and file one consolidated return thereby creating a centralized database.
There will be free annual health check-ups for workers above 40 years. This will expand occupational health coverage enormously, which was earlier confined to workers engaged in hazardous or notified processes. Working hours remain capped at 8 to 12 hours per day and 48 hours per week. The definition of migrant workers is widened and includes all digital and audio-visual professionals. The government can now extend safety provisions even to establishments with a single employee if the work is hazardous. Accidents during commutes, under specific conditions, will now be treated as employment related.
Apart from prohibiting gender discrimination, women will be able to work night shifts across all sectors, including mining, manufacturing, logistics and even hazardous occupations subject to their consent and so long as prescribed safety measures are in place. Clearly, this is a step in the right direction for creating an inclusive workspace and create opportunities for women that were not available previously.
There is now an additional obligation to issue mandatory written appointment letters to all employees with clear provisions on roles, wages and social security entitlements.
Establishments with 20 to 49 contract workers need to secure separate registration or licensing. Additionally, it will not be possible to engage contract labor in core activities except in limited circumstances. It will be imperative to evaluate what functions will be “core” or “non-core” and, accordingly, see if it is possible to engage contract labor within the permitted exceptions.
The perception is
- Most changes enhance compliance efficiency and support the government’s Digital India initiatives and ease of doing business agenda.
- Seemingly, the objective appears to be to reduce administrative burdens for smaller businesses while maintaining worker protection.
2.4 Industrial Relations Code, 2020: Like with OSHW Code, the notification provides this code too is implemented fully. With new thresholds and procedures for strikes, lockouts and standing orders, the code aims to formalize recognition and collective bargaining while tightening notice and procedural requirements for industrial action.There are new definitions and processes for layoffs, retrenchment and closure with clearer employer obligations and prescribed timelines for consultations and notices. Prior government approval for lay-off, retrenchment, and closure will be required in organizations which have 300 workers versus 100 earlier. Establishments with 300 or more workers will also need to obtain certified standing orders.
In addition to retrenchment compensation, there are provisions for creation of a re-skilling fund for retrenched employees which will be financed by a contribution equivalent to 15 days’ wages. This should support workforce redeployment. The definition of workman too has been replaced with “worker” which now includes supervisory employees earning up to INR 18,000 per month. This bodes well for them since now they will get access to statutory coverage which was missing previously.
There will be a requirement for a mandatory 14-day notice period for strikes and lockouts in all establishments. Hopefully, this two-week window will allow stakeholders to engage in a dialogue during which they will be able to negotiate and find an acceptable solution thereby minimizing the need for an actual strike.
Industrial establishments with at least 20 workers will have to necessarily constitute a grievance redressal committee with equal worker representatives and women too. Decisions would be made by majority, and more than half the worker representatives should agree with the decisions.
This means
- The key appears to be that establishments must manage flexibility without compromising worker protection.
- Clearly, the government intends to create a more predictable and discourse driven ecosystem.
3. The Rules: wait and watch
While the changes are overdue, there will be a transition period since the rules under all four codes need to be implemented. While they were published previously, the government will review them again, adapt as needed and release them for stakeholder consultation. Once firmed, they will release and notify final versions. So, during the transition period, existing rules and notifications issued under previous laws will remain in force. This will undoubtedly be a period of ambiguity. Given a staggered rule‑making exercise, organizations will need to carefully monitor this as well as relevant circulars and notifications. The true test will lie in implementation, once states begin issuing their final rules and adapting them to their local workforce structures.
If implemented smoothly, the codes could usher in a workplace ecosystem where protection is stronger and employers face less procedural complexity. The single registration, single license and single return system for establishments, replacement of labor inspections by an inspector-cum-facilitator ought to facilitate timely compliance changing the role from policing to facilitating.
4. Conclusion
In its press release, the Ministry of Labor & Employment stated “by modernizing the labor regulations, enhancing workers’ welfare and aligning the labor ecosystem with the evolving world of work, this landmark move lays the foundation for a future-ready workforce and stronger, resilient industries driving labor reforms for an Aatmanirbhar Bharat” or self-reliant India. The intent behind the four codes is laudable and, yes, a new dawn has arisen. But the onus will be heavy on employers as they come up to speed, review contracts, train teams to understand new compliance requirements, learn to handle inevitable issues with portals while juggling clear and transparent communication with the workforce. What lies ahead cannot be underestimated. At this juncture, it will be necessary to engage, discuss and debate with external counsel and seek advise, as necessary.
Author
[1] Gig worker has been defined broadly and cover anyone engaged in work arrangements outside the traditional employer-employee relationship. They include delivery agents, ride-hailing drivers, service-platform staff and freelancers powering the urban economy