India’s big labour overhaul: what the new Labour Codes mean now that they're in force
By Vijesh Nair — November 2025 |
India has entered a new chapter in its labour law history. After years of debate, draft rules and state-by-state consultations, the Union government has notified the four consolidated Labour Codes — the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health & Working Conditions (OSHWC) Code — bringing into effect a modernised framework that replaces 29 older central laws. While some details will still be worked out in state rules and implementing notifications, the core package is now in force and will reshape employer obligations, worker protections and industrial relations across sectors.
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Snapshot: what changed and when
Contrary to some earlier expectations about a November 1 start date, the central government issued the key notifications bringing the four Labour Codes into effect in November 2025 (notifications and press releases date from mid- to late-November). The formal roll-out began with central notifications on 21 November 2025 and related rules and guidance have followed from ministries, legal firms and industry bodies. This means employers, trade unions and workers must now align with the restructured lawscape while awaiting state-level rules that will operationalise many provisions.
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Why India consolidated labour law (short history)
For decades India’s labour law regime consisted of more than two dozen central enactments and a multiplicity of state laws. Policymakers argued that fragmentation made compliance complex, increased litigation and disincentivised formal hiring. The idea of four consolidated Labour Codes was first legislated between 2019–2020; the texts were notified earlier but kept in abeyance pending final rule-making and consultations. The stated goals of consolidation were simplification, wider social security coverage (including gig and platform workers), clearer wage protections and improved occupational safety standards — while also making the regulatory environment more predictable for industry.
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The four codes — one-line summary
Code on Wages (2019): Universal minimum wage framework, simplified payment and deduction rules, and clearer rules on overtime and wage components.
Industrial Relations Code (2020): New rules on trade unions, collective bargaining, dispute resolution and the thresholds for prior government permission in layoffs/closures.
Code on Social Security (2020): Unified social security architecture expanding coverage to gig, platform and unorganised workers and rationalising benefits such as gratuity, pension and insurance.
OSHWC Code (2020): Stronger employer duties on health, safety, welfare and working conditions across factories, mines and establishments.
(Each Code contains many detailed provisions; this article highlights the most consequential changes and practical implications.)
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Key changes that matter to workers
1. Broader social security and lower bar for gratuity. One of the headline shifts is an expanded social security net intended to include gig and platform workers. Reports and expert briefings also note changes such as a reduced eligibility period for gratuity in certain formulations — a move that can materially affect take-home post-employment for many employees. These adjustments are designed to extend benefits more widely but will depend on implementation norms and funding mechanisms.
2. Universal minimum wages and simplification. The Code on Wages continues the push for wage rationalisation — aiming toward universal minimum wage coverage. That means more workers should be entitled to statutory minimum protections; employers will need to review pay structures and allowances to ensure compliance.
3. Fixed-term workers and contractual clarity. Fixed-term employment has been formalised across sectors with clearer entitlements; many media analyses highlight gains for fixed-term workers who earlier had uneven access to benefits. The codes equalise some benefits between regular and fixed-term staff, subject to pay parity and tenure calculations.
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What employers must do — immediate compliance checklist
1. Audit payroll and wages: Re-map salary structures against the universal minimum wage definitions and new wage rules (including overtime calculations and definition of ‘wages’). Failure to comply may invite back-pay claims and penalties.
2. Reclassify workforce: Identify categories — regular employees, fixed-term, contract, gig workers — and confirm which social security and gratuity rules apply. Update employment contracts and appointment letters accordingly.
3. Update HR policies and handbooks: Industrial relations provisions (e.g., standing orders, dispute resolution mechanisms) may require fresh policies. Ensure internal grievance redressal, domestic rules and safety policies meet OSHWC benchmarks.
4. Register on relevant digital portals: The government is rolling out platforms for registration, returns and claims under the new codes. Employers should ensure they have authorised signatories and API/portal access ready.
5. Engage legal/consulting support: Given lingering uncertainties (state rules still to come for some areas), legal counsel can help prioritise compliance actions that reduce immediate litigation risk.
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Industrial relations: strikes, unions and layoffs
Perhaps the most politically sensitive element is the Industrial Relations Code. It recalibrates rules around trade unions, collective bargaining and standing orders. The code sets thresholds for when firms must seek government permission for layoffs, retrenchment and closure — thresholds that many unions argue weaken job security by easing employer flexibility. Trade unions across India have reacted strongly to some provisions, staging protests and demanding re-negotiation on clauses they consider anti-worker. The government’s position is that clearer rules will reduce arbitrariness, speed up dispute resolution and attract investment. Expect litigation, political mobilisation and state-level pushback in the near term.
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Safety and working conditions: higher duties on employers
The OSHWC Code places express duties on employers to ensure safe workplaces, limit working hours in hazardous sectors and provide welfare amenities. Inspectorial regimes are being modernised — with an increased emphasis on self-certification for smaller units and risk-based inspections for larger ones. Employers in manufacturing, construction, mining and chemical sectors should prioritise safety audits and worker training to meet the new statutory standards. Failure to comply may attract both penal and civil consequences under the Code.
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Social security financing — a work in progress
Extending social security to gig and platform workers is politically popular, but operationally complex. The Code on Social Security envisages contributory and provident-style mechanisms, co-contributions from employers for certain categories, and portable benefits. A major implementation challenge will be financing — defining employer contribution slabs, integrating state and central schemes, and building digital enrolment and claims infrastructure. Watch for rule-level notifications that specify contribution rates, beneficiary eligibility and grievance mechanisms. Until those rules are final, many questions on access to pension, health coverage and unemployment support remain contingent.
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Reactions: unions, industry and states
Trade unions: Several unions have condemned the roll-out, arguing the codes dilute protections and the consultation process was inadequate. Protests and demonstrations have been reported in multiple states, driven by concerns around layoffs, restrictions on strike rights and increased prevalence of fixed-term employment.
Industry groups: Business associations including state CII chapters have welcomed the implementation, calling it a watershed moment for clarity, easier compliance and attractively simple regulation for investors. Many employers say unified codes reduce multiplicity of filings and help on-boarding.
State governments: Labour is a concurrent subject in India; states will issue their own rules for certain aspects (inspection regime, local enforcement, certain welfare schemes). Expect variation in notification timelines and administrative practice across states — firms with multi-state footprints should track each state’s rules closely.
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Likely practical effects in the short term (next 6–12 months)
1. Compliance surge: HR and payroll teams will be busy — reworking contracts, ensuring correct statutory contributions and updating software to comply with new reporting formats and portals.
2. Litigation & policy petitions: Anticipate court cases challenging specific provisions, particularly those affecting collective bargaining and layoffs. Judicial interpretation will shape practical application.
3. State-level variability: Businesses in states that delay rules or frame protective measures may see different enforcement dynamics. Firms should implement the central code baseline but also be ready for stricter local measures.
4. Negotiations at worksites: Employers should proactively engage unions and worker representatives to avoid escalation — many disputes are best resolved at the bargaining table.
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What workers should watch and ask for
Confirm whether you’re classified as an employee, fixed-term employee, contract worker or gig worker — classification affects entitlements.
Ask for a written appointment letter specifying role, wages (breakdown), working hours, leave entitlements and social security contributions.
If you work on a fixed-term or through a contractor, check who is contributing to your social security and how to claim benefits.
Keep pay slips and service records — many benefits (gratuity, pension) rely on documented tenure and contributions.
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FAQs — quick answers
Q: Are the old 29 laws gone?
A: The four Labour Codes are intended to replace and rationalise the central 29 laws, but many operational details depend on subordinate rules and state notifications.
Q: When did the Codes take effect?
A: Central notifications were issued in November 2025 (key notifications around 21 November 2025) — some earlier expectations about a November 1 start did not match the official notification timeline. State-level rules may come later.
Q: Will gig workers definitely get pension and insurance?
A: The Code extends the framework to cover gig/platform workers, but specific contribution rates, eligibility rules and benefits depend on implementing regulations. Monitor official portals and scheme notifications.
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Practical tips for employers
Treat this as an opportunity to modernise HR systems: digital payslips, centralised contribution accounting and a worker-friendly grievance process will reduce long-run friction.
Engage early with unions and workers: collaborative implementation can avoid strikes and reputational damage.
Budget for transition: new contributions, back-pay risks and compliance costs require financial planning. Legal opinions and change-management are investments, not costs.
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The bigger picture
The Labour Codes mark a generational change — they attempt to balance protection with flexibility, universality with centralised clarity. Whether they deliver on promises of wider social security, fewer disputes and stronger safety standards will depend on rule-making, digital rollout, state cooperation and the political economy of labour relations. In the near term, expect a bumpy transition: compliance headaches for employers, mobilisations from unions, and a raft of advisory notes from law firms and auditors. But over the medium term, if implemented fairly and transparently, the new framework could reduce arbitrariness and make rights more portable for India’s diverse workforce.
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