Summary:
India has replaced 29 old labour laws with four modern labour codes, the biggest reform since independence. The goal: simplify rules, boost business confidence, and give workers stronger protections.
What’s New:
Code on Wages: Standardised pay, National Floor Minimum Wage, on-time salaries.
Industrial Relations Code: Companies with ≤300 employees can hire/fire more flexibly; fixed-term contracts recognised.
Social Security Code: EPF, ESIC, gratuity, maternity benefits unified; gig and platform workers now included.
OSH Code: Safer workplaces, mandatory medical checkups, women allowed night shifts with safety.
Impact for Employees:
Higher PF contributions → slightly lower take-home, but stronger long-term savings.
Gratuity now higher; fixed-term workers eligible after 1 year.
Flexible work hours and overtime rules with safety protections.
Impact for Employers:
Fewer compliance hurdles, unified laws, easier multi-state operations.
Encourages investment, expansion, and hiring flexibility.
Concerns:
Short-term lower take-home pay.
Job security worries for some workers.
Implementation challenges across states and sectors.
Bottom Line:
The new labour codes aim for a fairer, clearer, and modern workforce framework. Smooth implementation will be key for both workers and businesses to thrive.
India has completely revamped its labour laws by replacing 29 old and confusing rules with four simple and modern labour codes. This is one of the biggest changes in India’s labour system since independence, and it affects both workers and employers in meaningful ways. These new codes aim to make compliance easier for businesses, attract more investment, and give workers better protection and stronger social security.
In this article, you will understand why these reforms were introduced, what each of the four labour codes includes, how the new wage structure affects your take home salary, what changes you can expect in PF and gratuity, how working hours and shifts will change, and what benefits and concerns exist for both employees and employers. By the end, you will have a clear and simple understanding of how India’s new labour codes will shape the future of work in the country.
Why These Reforms Were Needed
For many years, India’s labour system was built on 29 different laws created at different times, for different needs, and with very little coordination. As a result, the system slowly became complicated, outdated, and difficult for both workers and employers to navigate.
Businesses often struggled because they had to maintain multiple registers, follow overlapping rules, and deal with inspections that were not always transparent. This made compliance expensive and time consuming, especially for small and medium companies. At the same time, workers were not always getting the protection they deserved because the laws were confusing and enforcement was weak.
Another major problem was that the old laws did not match today’s job market. India’s workforce has changed with the rise of startups, gig platforms, delivery partners, and flexible work arrangements. But these workers had no legal recognition or access to social security under the older system.
The new labour codes were introduced to fix these gaps. They aim to simplify everything into four clear codes, reduce unnecessary paperwork, give workers better social security, create a more business friendly environment, and make India’s labour system modern and relevant again.
The Four New Labour Codes
India’s new labour framework is built around four major codes. Each one brings together several older laws and replaces them with a cleaner and more practical set of rules. Here is a simple and clear look at what each code covers and why it matters.
1. Code on Wages
This code brings all wage related laws into one place. It introduces a National Floor Minimum Wage which states cannot go below. It also ensures that wages are paid on time, usually by the seventh of every month. By standardising rules for both organised and unorganised sectors, it removes the confusion created by multiple earlier Acts.
2. Industrial Relations Code
This code deals with hiring, layoffs, and how companies and workers handle disputes. One important change is that companies with up to 300 employees can now lay off workers or close units without taking prior government permission. The code also formally recognises fixed term employment, allowing companies to hire workers for specific durations while still giving them certain benefits. It also introduces guidelines for union recognition and rules for strikes.
3. Social Security Code
This is one of the most worker friendly reforms. It brings social security laws like EPF, ESIC, maternity benefits and gratuity under a single framework. For the first time, gig workers and platform workers are recognised and made eligible for social security benefits. The code also allows benefits like PF and ESIC to be portable so employees can carry them across states and employers.
4. Occupational Safety, Health and Working Conditions Code
This code focuses on safety, working conditions and welfare. It sets uniform safety standards across factories, mines, plantations and other industries. Women are now allowed to work night shifts, provided safety and transport arrangements are made. The code also allows contractors to use a single license valid for up to five years which reduces repeated paperwork. In certain risky sectors, annual free medical checkups for workers are now mandatory.
These four codes aim to create a simpler and more transparent labour system that protects workers while giving businesses the flexibility to grow.
Impact on Salary, Take Home Pay and Benefits
One of the most talked about changes in the new labour codes is how they redefine wages. This new definition affects how companies structure salaries, how much PF is deducted, and how much employees receive as long term benefits like gratuity.
Clear Definition of Wages
Under the new rules, wages must make up at least half of an employee’s total remuneration. Wages include basic pay, dearness allowance and retaining allowance. Earlier, many companies kept the basic pay low and increased allowances to reduce their share of PF. Now, if allowances go beyond 50 percent of the total pay, the extra amount must be added back to wages. This pushes most employers to keep basic pay closer to the 50 percent mark.
Impact on Take Home Salary
Because PF contributions are calculated on wages, a higher wage component can lead to a higher PF deduction. When PF increases, the monthly take home salary naturally becomes a bit lower. Employees may notice this difference more clearly if their company previously relied heavily on allowances.
Higher Long Term Savings
The positive side of this change is long term financial security. A larger PF contribution every month, matched by the employer, slowly builds a stronger retirement fund. Over years of service, this additional saving can grow into a significant amount, especially for younger workers who will benefit from compounding.
Better Gratuity Calculation
Gratuity is also calculated on wages, not on total CTC. Since wages will now form a larger portion of the salary, the final gratuity amount received at retirement or job exit will be higher. This improves financial stability for employees when they leave a company.
Benefits for Fixed Term Employees
A major improvement is that fixed term workers will now qualify for gratuity even if they work for only one year. Earlier, employees had to complete five years of service to receive gratuity. This change is especially helpful for people working on short contracts who still deserve basic social security.
Overall, while the new wage rules may temporarily reduce what you bring home each month, they significantly strengthen long term financial security through higher PF savings and a better gratuity payout.
Working Hours, Shifts and Overtime
The new labour codes bring clearer guidelines on how long employees can work and how companies should plan shifts and overtime. The goal is to create flexibility without compromising worker safety.
Weekly Cap of 48 Hours
The overall limit of 48 working hours per week remains unchanged. Employers must stay within this weekly cap. What becomes more flexible is how these hours can be arranged across the week.
Possibility of a Longer Workday
Under the new framework, states can notify rules that allow daily shifts of up to 12 hours. This does not automatically apply everywhere and depends on state-level implementation. Even if a workplace chooses longer shifts, the weekly limit of 48 hours cannot be crossed. In such cases, some companies may consider a four-day work arrangement, but this is optional and depends entirely on the employer and state rules. It is not a guaranteed change for all workers.
Overtime Rules
Any work done beyond the scheduled shift must be counted as overtime. The new codes clearly state that overtime must be voluntary and must be paid at twice the regular wage rate. This is meant to ensure fair compensation and prevent unnecessary pressure on workers.
Rest and Safety Requirements
If longer shifts are adopted, employers are required to provide proper rest breaks, maintain safe working conditions and monitor employee wellbeing. These safeguards are included to reduce fatigue and avoid health risks.
Overall, the updated working hour rules offer more flexibility to companies while also keeping essential protections in place for employees. How these changes affect day-to-day work will depend on how responsibly employers and states use this flexibility.
Women’s Employment Provisions
The new labour codes aim to expand opportunities for women while ensuring their safety and well-being at work. These changes make workplaces more inclusive and give women access to roles that were previously limited, but their implementation depends on state notifications and compliance by employers.
Permission for Night Shifts
Women can now work night shifts in manufacturing, mining, and other industries, provided the state has issued the required notification and the employer meets all safety conditions. This widens job opportunities and allows women to take up shift-based roles similar to men. However, night-shift permission is not automatic everywhere; it applies only where local rules are officially in place.
Mandatory Safety Measures
Employers must ensure a safe working environment before assigning women to night shifts. This includes secure transportation, proper lighting inside and outside the workplace, adequate staffing so women are not placed alone in isolated areas, and strong anti-harassment mechanisms. Companies must also maintain records to show that these measures are being followed.
Written Consent is Required
A woman cannot be compelled to work at night. Her written consent is mandatory, ensuring that her decision is voluntary and that she is not pressured into shifts she is uncomfortable with.
Equal Opportunity
By shifting from blanket restrictions to safety-based conditions, the new codes encourage equal access to higher-paying jobs, supervisory roles, and industries that previously restricted female participation. This helps create a more balanced and fair work environment.
Overall
These provisions give women more control over where and when they work while placing clear responsibility on employers to maintain safety, dignity, and accountability at the workplace. The extent of these benefits will continue to depend on state-level notifications and proper implementation.
Benefits for Employers
The new labour codes are not only meant to strengthen worker protections. They are also designed to make business operations simpler, faster, and more predictable. For years, companies struggled with a maze of rules that often overlapped or contradicted each other. By replacing 29 separate laws with four modern codes, the government has tried to create a cleaner regulatory landscape that works better for employers of all sizes.
Reduced Compliance Load
Earlier, employers had to keep track of 29 different labour laws, each with its own set of registers, filings, inspections, and formats. This often led to duplication of work and unnecessary confusion, especially for businesses operating in multiple states.
The new labour codes merge all of this into four comprehensive laws. With fewer filings and standardised procedures, companies save time, reduce paperwork, and face fewer administrative complications. This is particularly helpful for small and medium enterprises that often struggled with compliance teams and legal costs.
More Flexibility in Hiring and Workforce Decisions
The Industrial Relations Code increases the threshold for “prior government approval” from 100 to 300 workers for layoffs, retrenchment, and closure. This means companies with up to 300 employees can make workforce changes without waiting for official permission.
This flexibility helps businesses respond faster to market changes, especially in industries where demand fluctuates.
The code also formally recognises fixed-term employment. Employers can now hire workers for specific projects or seasonal work while still offering them statutory benefits like PF, working hours protection, and safety standards. This gives companies more options in staffing without compromising worker rights.
Clearer and More Consistent Rules
One of the biggest headaches for employers earlier was inconsistent interpretations of labour laws across different states. The new codes introduce uniform definitions for wages, working hours, safety obligations, and social security coverage.
This consistency makes it easier for companies to plan payroll, manage employee benefits, and maintain compliance across locations. Multi-state businesses, in particular, benefit from this clarity.
Encouragement for Investment and Growth
Simplified laws and fewer procedural hurdles create a more business-friendly environment. When companies know the rules are clearer and easier to follow, their confidence to invest increases.
Domestic and foreign investors both prefer predictable regulations. With smoother hiring processes, easier restructuring, and clearer compliance standards, businesses are more likely to expand, build new facilities, or enter new markets.
Overall
The new labour codes try to balance the interests of both employers and employees. For businesses, the key advantages are simplicity, flexibility, and clarity. Once all states fully notify and implement the rules, India’s labour framework can become more efficient and supportive of long-term business growth.
Concerns and Criticism
While the new labour codes promise long term benefits, they have also raised several concerns among employees, unions and policy experts. Many of these worries come from how the changes might affect job security, income stability and workplace conditions in the short run.
Fear of Lower Take Home Pay
One of the biggest concerns is the expected reduction in monthly take home salary because the basic pay must now be at least half of the total CTC. This automatically increases PF contributions, which reduces the money employees receive every month. Although this boosts long term savings, many workers feel the immediate impact on their budgets.
Questions About Job Security
Labour unions argue that allowing companies with up to 300 employees to lay off workers or shut units without prior government approval could weaken job security. They worry that this gives employers too much flexibility and may lead to more frequent restructuring or downsizing.
Longer Working Days
Even though the total weekly limit remains 48 hours, the option of 12 hour workdays has raised concerns about fatigue and safety. Critics point out that longer shifts may increase stress and reduce overall productivity if not managed responsibly.
Implementation Challenges
India’s workforce is huge and diverse, and a large portion of it works in the informal sector. Critics question whether the new rules can be implemented smoothly across states, industries and small businesses. Many fear that without proper enforcement, the benefits of the new codes may not reach the workers who need them the most.
Uncertainty for Small Employers
Smaller businesses worry about the cost of meeting new compliance requirements, especially in areas like safety, social security and digital record keeping. While the codes simplify regulations, the transition itself could be challenging for organisations with limited resources.
In short, the reforms have a clear vision but face resistance due to practical concerns. Many of the criticisms highlight the need for careful implementation, better communication and strong enforcement to ensure that the new system benefits both workers and employers.
Overall Impact
The four labour codes aim to modernise India’s employment laws and bring them closer to current workplace realities. On paper, the reforms try to simplify compliance, give workers better social security, make hiring more flexible and create a more organised labour market. If implemented well, they can reduce confusion, cut unnecessary paperwork and help both employers and workers understand their rights and responsibilities more clearly.
At the same time, the actual impact will depend on how each state notifies and enforces the rules. Workers with higher basic pay are likely to see stronger social security in the long term but slightly lower take home pay in the short term. Employers may benefit from easier compliance and digital systems, but they will also need to adjust to higher social security contributions and stricter safety requirements.
Overall, the codes push India toward a more structured labour framework, but the transition will require careful implementation, clarity from states and cooperation between employers and employees to ensure that the intention of the reforms translates into real improvements in the workplace.
Conclusion
The four new labour codes represent one of the biggest overhauls of India’s labour laws in decades. They bring together dozens of older, scattered laws into a clearer structure that is easier to follow. The intention is straightforward: create a fairer and more organised system where workers receive better protection and employers face fewer compliance hurdles.
These reforms can improve social security, streamline processes and make workplaces safer and more flexible. But the real outcome depends on how smoothly states roll out the rules and how well employers adjust to them. Workers will need time to understand how their salaries, benefits and working conditions may change.
In simple terms, the codes have the potential to make India’s labour system stronger and more modern. With proper implementation and communication, they can create a more balanced environment where both workers and businesses can grow with confidence.
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