New Labour Codes 2025: What Every Employer and Employee Must Know

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On 21^st November 2025, the Indian government passed the much-awaited reforms for the Indian labour laws, replacing 29 different laws with 4 Labour Codes, ensuring a streamlined approach towards labour compliance. These changes guarantee minimum wages, equal pay, gratuity, workplace safety, and social security for over 400 million Indian workers. These changes mark a significant restructuring of Indian labour reforms by balancing worker welfare with business efficiency.

These four Labour Codes are:

The Code on Wages, 2019
The Industrial Relations Code, 2020
The Code on Social Security, 2020
The Occupational Safety, Health, and Working Condition Code, 2020.

Key Changes in Indian Labour Laws

As these laws come into effect, the following are the major changes associated with them:

1. Code on Wages, 2019

Provides a standard definition of ‘wages’ to reduce disputes.
Introduces a National Floor Wage, which is applicable across states.
Ensures timely payment of wages to employees, as well as equal pay.
Assures full and final settlement within 2 working days after an employee’s last working day.

2. Industrial Relations Code, 2020

Simplifies rules for trade unions, hiring, firing, and dispute resolution.
Requires firms with 300+ workers to seek government approval before layoffs or closures.
Encourages collective bargaining and industrial peace.

3. Code on Social Security, 2020

Extends social security benefits like provident fund, insurance, and maternity benefits to gig workers, platform workers, and contract employees.
Introduces universal coverage rather than threshold-based eligibility.

4. Occupational Safety, Health and Working Conditions Code, 2020

Sets uniform standards for workplace safety and health.
Mandates appointment letters for all employees, including blue-collar workers.
Expands coverage to migrant and informal workers, ensuring better working conditions.

Also Read:

▸ 2-day Full and Final Settlement under New Labour Codes 2025

Top 10 Highlights of the New Labour Codes

Fixed-term Workers will receive equal benefits to permanent workers, including gratuity within 1 year (instead of 5), social security, medical cover, and more.
Gig and Platform workers are formally recognized, who were previously outside any protection until now.
Coverage under the Social Security Code extends to MSME employees, as well as hazardous workplaces.
Mandatory timely payments with the establishment of a standard national minimum wage.
Women can work in all categories, while their pay should be equal to their male colleagues.
Annual free health check-ups, as well as safety committees in organizations.
Contract and migrant workers will receive equal pay and access to welfare schemes.
Working hours in most sectors are capped between 8 to 12 hours per day.
Leaves will be accumulated after 180 working days annually in specific sectors.
Universal appointment letters in all industries, leading to improved transparency and compliance.

The Beginning of a New Era

The new Labour Codes indicate a philosophical and structural shift in the mindset of Indian leaders, putting India on the global roadmap towards ‘Aatmanirbhar Bharat’. With the universalization of Indian labour rights, we have moved from a selective, threshold-based coverage to a near-universal protection for staff members. Similarly, these Codes also ensure that companies adopt digital compliance systems, reducing paperwork and corruption, which keeps records secure. It also puts the informal workers into the formal economy, boosting transparency and accountability.

Impact on Employees

400 million workers will now be covered under minimum wages and social security guarantees, ensuring timely payments and reducing exploitation. Similarly, the female workers should be paid equally under the new Labour Codes, ensuring gender equality. It also emphasizes the contributions of the gig workers, such as delivery partners, ride-hailing drivers, freelancers, etc., by ensuring that they get access to social security schemes. Finally, with the introduction of Appointment letters to all workers, companies need to recognize their employment.

Impact on Employers

As the Labour Codes replace 29 different Indian labour laws, it vastly simplifies compliance for Indian employers. Universal ‘wages’ definition further simplifies compliance, while a greater responsibility is shared by the companies in ensuring their workplace safety. However, it also puts them in a difficult position, as they need to navigate both the Labour Codes and the individual state labour laws to maintain 100% Compliance.

Comparison of Indian Labour Laws: Before vs After November 2025

Aspect	Before	After
Number of Laws	29 separate, overlapping labour laws	Consolidated into 4 Labour Codes
Wages	Minimum wage varied by state, often inconsistent	National floor wage introduced; uniform definition of ‘wages’
Equal Pay	Fragmented provisions, weak enforcement	Equal pay for equal work is explicitly guaranteed
Payment of Wages	Delays are common due to multiple definitions and provisions	Timely payment mandated with simplified wage definition
Industrial Relations	Complex rules for trade unions, strikes, and layoffs	Simplified rules, such as firms with 300+ workers need approval for layoffs/closures
Social Security	Limited to formal sector workers	Extended to gig workers, platform workers, and contract employees
Provident Fund & Insurance	Threshold-based eligibility, such as being applicable to organizations with over 20 employees	Universal coverage regardless of thresholds
Occupational Safety	Different standards across industries	Uniform safety & health standards across sectors
Appointment Letters	Not mandatory in multiple sectors	Mandatory appointment letters for all employees
Migrant & Informal Workers	Often excluded from protections	Explicitly included under working condition protections
Compliance	Paper-heavy, state-specific, overlapping requirements	Digital compliance systems with simplified reporting
Worker Coverage	Mostly the formal sector (~10% of the workforce)	400 million workers covered, including informal and gig economy
Employer Burden	Multiple inspections, overlapping laws	Simplified compliance, but higher wage bills & social security contributions

Key Reforms with the New Labour Codes

1. Salary Structure Take-Home Pay

Basic Pay Rule: At least 50% of total salary must now be classified as basic pay.
Impact: While this reduces take-home salary, it increases contributions to Provident Fund (PF) and gratuity, strengthening long-term financial security for employees.
Employer Note: Payroll systems must be updated to comply with the new definition of “wages.”

2. Annual Leaves

Eligibility: Employees qualify for annual leave after 180 days of service (previously 240).
Entitlement: Workers receive 20 annual leaves, with the option to carry forward up to 30 unused leaves.
Benefit: Faster access to leave balances improves employee well-being and retention.

3. Digitalization and Compliance

Mandatory Digital Records: Employers must now maintain employee records digitally.
Inspections: Labour authorities conduct random online inspections, reducing paperwork and corruption.
Settlements: Faster settlement of wages and dues is now legally enforced.

4. Workplace Safety and Employee Protection

Uniform Standards: Occupational safety and health rules are standardized across industries.
Appointment Letters: Employers must issue formal appointment letters to all employees.
Coverage Expansion: Migrant and informal workers are now explicitly protected under the law.
Definitions: Terms like “worker,” “factory,” and “hazardous environment” have been legally clarified, reducing ambiguity.

5. Social Security for All

Universal Coverage: Social security benefits now extend to gig workers, platform workers, and contract employees.
Schemes: Employees across sectors are entitled to PF, insurance, maternity benefits, and gratuity.
Impact: Over 400 million workers are now covered, including those in the informal economy.

6. Employer Responsibilities

Simplified Compliance: Fewer overlapping laws and digitized reporting reduce administrative burden.
Higher Obligations: Employers face increased wage bills and mandatory contributions to social security schemes.

Transition: Some dual compliance may be required until state rules fully align with central codes.

Conclusion

The new Labour Codes represent a historic shift in India’s employment landscape. With the reforms, workers gain stronger protections, better social security, and clearer rights, while employers benefit from simplified compliance while adapting to higher social responsibilities. These changes bring India closer to global labour standards, ensuring fairness, transparency, and sustainability in the workplace.

Source: https://labour.gov.in/sites/default/files/pib2192463.pdf