New Labour Codes Transform India’s Work Environment: Key Changes Explained

India’s four new labour codes—on Wages, Industrial Relations, Social Security, and Occupational Safety and Working Conditions—came into effect on 21 November 2025, replacing 29 central laws to streamline and modernise the labour framework. The reforms introduce universal minimum wages, a national floor wage, and a standardised wage definition that may alter take-home pay due to higher PF and gratuity bases. Industrial relations rules now require government approval for layoffs only in larger establishments and mandate written appointment letters to improve transparency. Social security benefits have been expanded to unorganised, gig, and platform workers with improved portability. Workplace reforms allow flexible working hours, safer night shifts for women, and simplified compliance for employers. While the new system aims to boost formalisation, mobility, and economic competitiveness, challenges remain in state-level implementation, restructuring of salary systems, increased employer costs, and limited awareness among informal-sector workers.

Introduction

On 21 November 2025, the Government of India implemented four major labour codes:

• Code on Wages, 2019
• Industrial Relations Code, 2020
• Code on Social Security, 2020
• Occupational Safety, Health and Working Conditions Code, 2020

These four codes have replaced 29 existing central labour laws. The main objective of this reform is to simplify labour laws, improve employee protection, and modernise India’s labour system in line with current economic and industrial needs.

This article presents a clear overview of the major changes, their impact on employees and employers, and the possible challenges in implementation.

Key Changes

1. Universal Minimum Wages and New Wage Structure

(Code on Wages)

• Minimum wages now apply to all employees, including those in both the organised and unorganised sectors. Earlier, only about 30% of workers were covered.
• A National Floor Wage will be fixed by the Central Government. States cannot set minimum wages below this level.
• The basic salary (including dearness and retaining allowance) must be at least 50% of total remuneration (CTC). Since provident fund and gratuity are calculated on basic salary, this may impact take-home salary.
• The definition of “wages” and rules regarding bonuses and payment timelines have been standardised.

2. Industrial Relations Reforms

(Industrial Relations Code)

• Government approval for lay-offs, retrenchment and closure is now required only for establishments with 300 or more employees, instead of 100 earlier.
• Appointment letters are now mandatory, ensuring clarity in job roles and terms.
• Clear definitions of worker, employee, contractor, etc. have been provided to avoid confusion and reduce disputes.

3. Expanded Social Security

(Code on Social Security)

• Social security schemes have been extended to unorganised workers, gig workers and platform workers.
• Portability of social security benefits across different states and sectors has been introduced.
• As “wages” now include basic + dearness + retaining allowance, the base for gratuity and retirement benefits will increase.

4. Improved Safety and Working Conditions

(OSHWC Code)

• Working hours may extend up to 12 hours per day, subject to a 48-hour weekly limit, with double pay for overtime.
• Women can work night shifts, subject to safety measures.
• Free annual medical check-ups are mandatory.
• A single registration, licence and return system has been introduced to make compliance easier for employers.

Implications

For Workers

• Improved minimum wage protection and wider social security coverage.
• Increased formalisation through written appointment letters and standard definitions.
• Some employees may see a reduction in take-home salary, as more money goes towards PF and gratuity.
• While employer flexibility may create more jobs, it can also result in less job security in certain sectors.

For Employers

• Simplified compliance due to the replacement of 29 laws with 4 codes.
• Greater flexibility in workforce management.
• However, increased salary and social security costs may be a challenge, especially for small and medium enterprises.

For the Economy

• These reforms aim to bring India’s labour laws in line with global standards.
• Formal employment is expected to increase.
• Mobility of workers across states and sectors will become easier.
• However, smooth implementation will require proper coordination at the state level.

Key Challenges

• State-level rule-making is essential. Delays may impact uniform implementation across India.
• Existing salary structures and contracts will need restructuring.
• Small businesses may face difficulties in bearing increased costs.
• Awareness among workers in unorganised and gig sectors is still limited.
• Trade unions have raised concerns about job security.

Conclusion

The implementation of the four labour codes is one of the most significant labour law reforms in Indian history. It creates a simplified, modern and unified system for wages, industrial relations, social security and workplace safety.

While the intent of the law is positive, its success depends on effective implementation, strong enforcement, awareness and cooperation among all stakeholders. Both employers and employees must adapt to this new framework to ensure balanced growth.

These changes mark the beginning of a new era in India’s labour governance — and the true impact will be determined by how well these reforms are put into practice.