For almost a decade, “new labour codes” have been that thing everyone kept hearing about…but never actually saw in action. That changed this month.

From 21 November 2025, the Government of India has brought into force the four Labour Codes, consolidating 29 older labour laws into a single, modern framework.

For businesses, HR teams and finance leaders, this is not just a legal update – it’s a fundamental reset of how wages, social security, industrial relations and workplace safety will work in India. For workers, it promises wider coverage and more predictable protections.

This article breaks down the changes in a simple, practical way for GJM & Co’s readers.

The Big Picture: Four Codes, One New Framework

The 29 existing central labour laws have now been consolidated into these four Labour Codes:

1. Code on Wages, 2019 – governs minimum wages, payment of wages, bonus, equal remuneration.
2. Industrial Relations Code, 2020 – deals with trade unions, layoffs, retrenchments, closures, and dispute resolution.
3. Code on Social Security, 2020 – merges multiple social security laws and extends coverage to unorganised, gig and platform workers.
4. Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 – consolidates laws on health, safety, working conditions, welfare and working hours.

Key features of the new regime:

• Simplification: One integrated framework instead of 29 fragmented laws.
• Standardisation: Uniform definitions (especially of “wages”) across codes, which directly impact PF, bonus, gratuity and leave calculations.
• Digitisation & disclosure: Emphasis on electronic records, online registrations, and better transparency in employment terms.
• Balanced compliance: Number of offences with jail terms cut from 87 to 22, and many made compoundable, shifting the focus to monetary penalties and compliance rather than criminalisation.

Code on Wages, 2019: One Wage Definition to Rule Them All

The Code on Wages is now operational pan-India. It merges the old Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act and Equal Remuneration Act.

What’s new and important

1. Universal Minimum Wages & Timely Payment
   • Minimum wage coverage now extends across sectors (organised and unorganised), not just scheduled employment.
   • There will be a national floor wage, and states must set minimum wages not below this floor.
   • Strict timelines for wage payment and penalties for delays.
2. Redefined “Wages” – Impact on CTC Structure
   • “Wages” are now defined in a standard manner across codes.
   • Broadly, basic pay + dearness allowance + retaining allowance are “wages”; many allowances are excluded, but only up to a cap (typically 50% of total remuneration).
   • If exclusions exceed the limit, the excess gets pulled back into “wages”.
   • Practical impact: Companies with very low basic and very high allowances may need to restructure their CTCs; PF, bonus and gratuity outgo could rise.
3. Equal Remuneration & Non-Discrimination
   • The Code formally prohibits gender-based discrimination in wages and recruitment for the same work or work of a similar nature.

Takeaway for employers

• Revisit your salary structures, offer letters and HRIS systems.
• Align definitions of basic, allowances, bonuses and variable pay with the Code’s wage definition.
• Ensure your minimum wages are at or above the notified floor wage in relevant states.

Social Security Code, 2020: Beyond PF & ESI

The Code on Social Security, 2020 merges nine social security laws, including EPF, ESI, maternity benefits, gratuity and employee compensation.

a) Gig & Platform Workers Brought In

For the first time, gig workers and platform workers (delivery partners, app-based drivers, freelance platform workers, etc.) are formally recognised and brought under the social security umbrella.

• Aggregators/platforms may be required to contribute a percentage of turnover towards social security funds for such workers.
• Schemes may cover life and disability insurance, health and maternity benefits, old-age protection, and skill upgradation.

b) Expanded Definition of “Family”

Recent updates under the Social Security framework have widened the definition of “family”, allowing more dependents (such as widowed daughters, dependent parents, potentially in-laws and siblings, depending on dependency) to access statutory benefits. This is especially relevant for women, whose natal families can now be recognised as dependents in certain situations.

c) Gratuity Rules – Big Change for Fixed-Term Workers

• Fixed-term employees can now become eligible for gratuity after just one year of service, instead of the earlier five years.
• For permanent employees, the 5-year rule remains unchanged.

Practical impact:

• Organisations relying heavily on fixed-term contracts must budget for gratuity earlier.
• HR policies should clearly distinguish between permanent and fixed-term roles and define eligibility.

Industrial Relations Code, 2020: Hiring, Firing & Flexibility

The Industrial Relations Code tries to balance flexibility for employers with protections for workers.

Some important changes (specific thresholds may vary as notifications and rules get refined):

• Fixed-Term Employment Regularised
  • Fixed-term employment is now formally recognised, with pro-rata benefits comparable to permanent staff (e.g., wages, working hours, some social security benefits).
• Higher Thresholds for Layoffs & Closures
  • Certain establishments can now employ more workers before needing government permission for layoffs, retrenchments and closures, providing more flexibility to mid-sized factories and units.
• Strikes & Lockouts
  • Stricter notice and procedural requirements for strikes and lockouts, especially in public utility services, aiming to reduce abrupt disruptions.
• Standing Orders & Internal Processes
  • Expanded requirement for standing orders (formal written rules on conditions of employment, misconduct, termination, etc.) for larger establishments.

For management: This is the time to review HR manuals, disciplinary policies, notice periods, retrenchment procedures and union engagement strategies.

OSHWC Code: Safety, Working Hours & New-Age Workplaces

The Occupational Safety, Health and Working Conditions Code compiles multiple safety and welfare laws (Factories Act, Contract Labour Act, etc.).

Key themes include:

• Unified licensing: Single registration and licence for factories, contract labour and other categories in many cases.
• Working hours & overtime: Clarified caps on daily and weekly working hours, mandatory overtime rates and record-keeping.
• Women in night shifts: Allows women to work in all types of establishments and at night, subject to stringent safety, transport and security measures.
• Inter-state migrant workers: Better record-keeping, portability of benefits and protections for migrant labour.

For industries like manufacturing, logistics, construction, warehousing, hospitality and large offices, this code will drive changes in shift design, safety protocols, canteen and crèche facilities, and contractor management.

Enforcement: Less Jail, More Accountability

A notable change – especially for promoters and directors – is the sharp reduction in criminal provisions:

• Labour offences carrying jail terms have dropped from 87 to 22, and many are now compoundable, i.e., they can be settled by paying a penalty instead of facing criminal prosecution.
• Serious offences related to safety and social security still carry stringent penalties, including possible imprisonment.

This signals a move towards an “ease of doing business with accountability” approach – regular, good-faith employers get clarity and reduced criminal risk, but will face stiff action for wilful non-compliance in core welfare areas.

It’s Not All Smooth: State-Level Resistance & Worker Concerns

Not everyone is cheering. Labour being a concurrent subject, implementation also depends on states.

• States like Kerala have publicly opposed the new labour codes and are even considering their own versions, arguing that the central framework is anti-labour and too tilted towards industry.
• Trade unions and labour advocates say the codes make hiring and firing easier for employers and may weaken collective bargaining.

What this means in practice:

• Implementation may not be uniform across states, at least initially.
• Compliance teams will have to track both central notifications and state-level rules very closely.

Action Checklist for Employers (Finance & HR Teams)

If you’re an employer in India – from a startup to a multi-location group – here’s a practical checklist to begin with:

1. Map your exposure
   • Identify which codes apply: wages, social security, industrial relations, OSHWC – for head office, branches, factories, warehouses, gig workforce, etc.
2. Revisit CTC structures & payroll
   • Align “wages” definition with the new Code on Wages.
   • Recalculate impact on PF, bonus and gratuity.
3. Update employment documentation
   • Offer letters, appointment letters, HR policies, standing orders, vendor/contractor agreements.
   • Include clear terms on fixed-term employment, leave, overtime, termination and notice.
4. Strengthen social security coverage
   • Ensure EPF, ESI, gratuity and maternity policies comply with the Social Security Code.
   • If you are a platform/aggregator, assess obligations towards gig and platform workers.
5. Review safety & working conditions
   • Audit working hours, shift rosters, overtime, safety measures, women’s night shift policy, and migrant worker records.
6. Build a compliance calendar
   • Map new returns, registers and online filings under the codes.
   • Assign owners in HR/finance/legal and monitor state-wise updates.

What This Means for You 

The implementation of the four Labour Codes is one of the biggest regulatory shifts since GST – but on the people’s side of the business.

• For employers, the opportunity is to clean up legacy structures, reduce disputes and present themselves as compliant, employee-friendly organisations.
• For employees and workers, especially in the unorganised and gig sectors, the promise is better coverage, more transparency and a clearer path to social security.

Conclusion: A New Era of Workplace Compliance – Let’s Navigate It Together

The enforcement of India’s new Labour Codes marks a historic leap, simplifying compliance, improving worker protections and paving the way for more transparent, technology-driven employment practices. But with this opportunity comes real operational change: payroll structures must be recalibrated, policies updated, and compliance tracked across state lines.

For organisations, the question is no longer if these changes will impact business, but how quickly and accurately they can adapt.

At GJM & Co., we support companies in making this transition smooth and compliant. From restructuring wage components to aligning social security contributions and digitising payroll processes, our Payroll Management Services ensure you stay ahead of regulatory requirements while focusing on what matters most, your people and your business growth.