Indias New Labour Codes
Overview
The Ministry of Labour and Employment has notified the new Labour Codes regime w.e.f. November 21, 2025, consolidating 29 central labour laws into 4 Labour Codes with the objective of simplifying compliance, expanding workforce coverage, improving ease of doing business, and strengthening worker protection. The Codes introduce uniform definitions, higher monetary penalties (with reduced criminalisation), and significantly broaden the scope of covered employees.
The four Labour Codes are:
1. Code on Wages, 2019
2. Code on Social Security, 2020
3. Industrial Relations Code, 2020
4. Occupational Safety, Health & Working Conditions Code, 2020 (OSH Code)
________________________________________
Key Structural Shifts
Uniform definitions: Uniform definitions have been introduced across all labour laws (especially wages, employee, worker), simplifying calculation of benefits and removing ambiguity;
Expanded coverage: Coverage has been expanded to include senior management, fixed term, gig and platform workers, applicable to industrial as well as service sector;
Focus on compliance over punishment: Decriminalisation, compounding of offences has been introduced;
Monetary penalties: Higher monetary penalties for non compliance have been introduced;
Formalisation of employment: Issuance of appointment letters, defined contracts;
Social Security: Introduction of fixed term employees, coverage of gig/platform workers, self employed and unorganised workers;
Inspector Cum Facilitator- Role of labour authorities has been extended beyond just inspection, to include facilitation of compliances.
Pending State Rules: Transitional complexity due to pending State Rules, requiring parallel reading of old rules where not inconsistent
________________________________________
1. Code on Wages, 2019
Expansion of Definition of establishment- Establishment now covers any place where any industry, trade, business, manufacture or even an occupation is carried on, and this includes all Government establishments as well;
Uniform Definition of Wages: Introduction of a uniform definition of wages with the 50% rule (if excluded components exceed 50% of total remuneration, the excess is deemed wages). Simplifying the calculation under PF, gratuity and bonus;
Universal Minimum Wage: Applies to all workers across sectors, not just scheduled employment. Further the states cannot set minimum wages below this;
Equal Pay for Equal Work- Prohibits gender discrimination;
Payment of Wages in case of cessation of employment: Mandates timely payment of wages, including settlement within 2 working days of resignation or termination;
Timely payment wages: Timely payment has been introduced for daily, weekly and fortnightly payment. In case on monthly wages, the same shall be paid before expiry of the seventh day of the succeeding month.
Overtime Payments: Overtime payments to be made at twice the ordinary rate for employees;
Remuneration in kind: If an employer provides remuneration in kind (non-cash benefits like food, housing, or clothing) instead of cash, the value of such in-kind remuneration is considered part of the wages, provided it does not exceed 15% of the total wages payable;
Records and Returns: In place of approximately 24 registers under the subsumed laws, the provision of electronic registers has been created and the no. of registers has been reduced to 2 under the new code;
Impact:
a) Benefits restructuring;
b) Increased cost base for gratuity, bonus, leave encashment, social security;
c) Penalties for non compliance and delays are now strict;
d) In few cases take home salary may reduce- however the long term benefits increase.
________________________________________
Code on Social Security, 2020
Increased Coverage: Extends social security to gig workers, platform workers, fixed term employees and unorganised workers, extension of group insurance to a larger work force;
Contribution by Aggregators: Aggregators must contribute 12% of turnover towards social security;
Digital Identity: All unorganised, gig and platform workers will register on a national portal and receive an Aadhaar based UNIQUE Identification Number (UIN) to ensure seamless portability of benefits across the country.
Gratuity eligibility: Reduces gratuity eligibility for fixed term employees to 1 year;
Employee State Insurance: ESIC now applies PAN India not just notified areas;
Accidents During Commute: Accidents occurring during travel between an employees residence and workplace can qualify as employment injury, provided there is a clear nexus with employment.
Expansion of definition of family: The definition of family now includes dependent parents, including father in law and mother in law of an employee for ESIC.
Career Centres- Through the SS Code, the role of employment exchanges under Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 (EE Act) has been extended to provide vocational guidance and counselling for self employment;
Impact:
a) New compliance and contribution obligations to cater to a larger coverage;
b) Extension of social security benefits for Fixed term employees;
________________________________________
Industrial Relations Code, 2020
Thresholds: Raises threshold for government approval for layoffs, retrenchment and closure from 100 to 300 workers;
Recognition of Fixed Term Employment: Formally recognises fixed term employment with parity of benefits;
Re Skilling Fund: Introduces worker re skilling fund funded by employers;
Standing Orders: Provision requiring certification of standing order apply to industrial establishment employing three hundred or more workers. The earlier threshold was 100 or more worker;
Union Recognition and dispute resolution: Streamlines trade union recognition, grievance redressal and dispute resolution;
Impact: Greater operational flexibility balanced with structured industrial relations and documentation
________________________________________
OSH Code, 2020
Consolidated Law: Consolidates workplace safety, health and working condition laws;
Appointment Letter: Mandates appointment letters and formal contracts;
Annual Health Check Up: Introduces annual health check ups, safety committees and unified safety standards;
Working Hours for Women: Allows women to work in all sectors and night shifts with safeguards;
Standardisation: Standardises working hours, leave and welfare facilities;
Leave encashment: Workers are entitles to encash accrued leaves in excesaa of 30 days at the end of each calander year. Upon resignation, dismissal, or retirement, payments must be made within 2 working days.
Overtime Consent: Overtime requires prior written consent and must be paid at twice the ordinary wage rate;
Registration and Closure of the Establishment The OSH Code introduces a single unified registration system where an establishment needs only one registration instead of multiple registrations under different erstwhile laws which covers all applicable provisions of the OSH Code.
Contract Labour: The threshold for contract labour provisions has been raised from 20 to 50 contract workers in the preceding 12 months. The engagement of contract workers has been prohibited in the core activities of an establishment.
Impact: Increased compliance requirements but improved workplace safety, inclusivity and formalisation
________________________________________
What Management Needs to Do
1. Workforce & Contract Review
Re classify employees under employee / worker / fixed term / gig categories
Review fixed term and consultant arrangements for misclassification risks
2. Payroll & Compensation Restructuring
Revisit salary structures to comply with the 50% wage rule
Assess impact on PF, gratuity, bonus, overtime, payment of outstanding wages (full and final settlement) to separating workers (including those resigning) within two working days of separation
3. Documentation & Formalisation
Issue appointment letters and written contracts to all employees
Update HR policies, standing orders and employment manuals
4. Compliance & Governance
Map applicable Central vs State rules for each location
Set up internal audit and compliance tracking mechanisms
Prepare for higher monetary penalties and inspection readiness
If the establishment is already registered under the existing Central or state law, ensure readiness to provide the registration details electronically to satisfy the deemed registration under the SS Code and OSH code
Provision of free annual health examination to workers above 40 years
5. Industrial Relations & Risk Management
Review retrenchment, layoff and closure strategies (300 employee threshold)
Establish or strengthen grievance redressal committees
Budget for potential re skilling fund obligations
________________________________________
One Line Takeaway
The Labour Codes require management to move from fragmented compliance to a unified, formal, and proactively governed workforce frameworkearly preparation will determine cost control and risk mitigation.
If you have any questions, please feel free to reach out to us our expert team will be happy to assist.
Email: sakshi@omnikavvach.com
Linkedin: https://www.linkedin.com/in/sakshi-agarwal-78857222/
From India, Delhi
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Overview
The Ministry of Labour and Employment has notified the new Labour Codes regime w.e.f. November 21, 2025, consolidating 29 central labour laws into 4 Labour Codes with the objective of simplifying compliance, expanding workforce coverage, improving ease of doing business, and strengthening worker protection. The Codes introduce uniform definitions, higher monetary penalties (with reduced criminalisation), and significantly broaden the scope of covered employees.
The four Labour Codes are:
1. Code on Wages, 2019
2. Code on Social Security, 2020
3. Industrial Relations Code, 2020
4. Occupational Safety, Health & Working Conditions Code, 2020 (OSH Code)
________________________________________
Key Structural Shifts
Uniform definitions: Uniform definitions have been introduced across all labour laws (especially wages, employee, worker), simplifying calculation of benefits and removing ambiguity;
Expanded coverage: Coverage has been expanded to include senior management, fixed term, gig and platform workers, applicable to industrial as well as service sector;
Focus on compliance over punishment: Decriminalisation, compounding of offences has been introduced;
Monetary penalties: Higher monetary penalties for non compliance have been introduced;
Formalisation of employment: Issuance of appointment letters, defined contracts;
Social Security: Introduction of fixed term employees, coverage of gig/platform workers, self employed and unorganised workers;
Inspector Cum Facilitator- Role of labour authorities has been extended beyond just inspection, to include facilitation of compliances.
Pending State Rules: Transitional complexity due to pending State Rules, requiring parallel reading of old rules where not inconsistent
________________________________________
1. Code on Wages, 2019
Expansion of Definition of establishment- Establishment now covers any place where any industry, trade, business, manufacture or even an occupation is carried on, and this includes all Government establishments as well;
Uniform Definition of Wages: Introduction of a uniform definition of wages with the 50% rule (if excluded components exceed 50% of total remuneration, the excess is deemed wages). Simplifying the calculation under PF, gratuity and bonus;
Universal Minimum Wage: Applies to all workers across sectors, not just scheduled employment. Further the states cannot set minimum wages below this;
Equal Pay for Equal Work- Prohibits gender discrimination;
Payment of Wages in case of cessation of employment: Mandates timely payment of wages, including settlement within 2 working days of resignation or termination;
Timely payment wages: Timely payment has been introduced for daily, weekly and fortnightly payment. In case on monthly wages, the same shall be paid before expiry of the seventh day of the succeeding month.
Overtime Payments: Overtime payments to be made at twice the ordinary rate for employees;
Remuneration in kind: If an employer provides remuneration in kind (non-cash benefits like food, housing, or clothing) instead of cash, the value of such in-kind remuneration is considered part of the wages, provided it does not exceed 15% of the total wages payable;
Records and Returns: In place of approximately 24 registers under the subsumed laws, the provision of electronic registers has been created and the no. of registers has been reduced to 2 under the new code;
Impact:
a) Benefits restructuring;
b) Increased cost base for gratuity, bonus, leave encashment, social security;
c) Penalties for non compliance and delays are now strict;
d) In few cases take home salary may reduce- however the long term benefits increase.
________________________________________
Code on Social Security, 2020
Increased Coverage: Extends social security to gig workers, platform workers, fixed term employees and unorganised workers, extension of group insurance to a larger work force;
Contribution by Aggregators: Aggregators must contribute 12% of turnover towards social security;
Digital Identity: All unorganised, gig and platform workers will register on a national portal and receive an Aadhaar based UNIQUE Identification Number (UIN) to ensure seamless portability of benefits across the country.
Gratuity eligibility: Reduces gratuity eligibility for fixed term employees to 1 year;
Employee State Insurance: ESIC now applies PAN India not just notified areas;
Accidents During Commute: Accidents occurring during travel between an employees residence and workplace can qualify as employment injury, provided there is a clear nexus with employment.
Expansion of definition of family: The definition of family now includes dependent parents, including father in law and mother in law of an employee for ESIC.
Career Centres- Through the SS Code, the role of employment exchanges under Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 (EE Act) has been extended to provide vocational guidance and counselling for self employment;
Impact:
a) New compliance and contribution obligations to cater to a larger coverage;
b) Extension of social security benefits for Fixed term employees;
________________________________________
Industrial Relations Code, 2020
Thresholds: Raises threshold for government approval for layoffs, retrenchment and closure from 100 to 300 workers;
Recognition of Fixed Term Employment: Formally recognises fixed term employment with parity of benefits;
Re Skilling Fund: Introduces worker re skilling fund funded by employers;
Standing Orders: Provision requiring certification of standing order apply to industrial establishment employing three hundred or more workers. The earlier threshold was 100 or more worker;
Union Recognition and dispute resolution: Streamlines trade union recognition, grievance redressal and dispute resolution;
Impact: Greater operational flexibility balanced with structured industrial relations and documentation
________________________________________
OSH Code, 2020
Consolidated Law: Consolidates workplace safety, health and working condition laws;
Appointment Letter: Mandates appointment letters and formal contracts;
Annual Health Check Up: Introduces annual health check ups, safety committees and unified safety standards;
Working Hours for Women: Allows women to work in all sectors and night shifts with safeguards;
Standardisation: Standardises working hours, leave and welfare facilities;
Leave encashment: Workers are entitles to encash accrued leaves in excesaa of 30 days at the end of each calander year. Upon resignation, dismissal, or retirement, payments must be made within 2 working days.
Overtime Consent: Overtime requires prior written consent and must be paid at twice the ordinary wage rate;
Registration and Closure of the Establishment The OSH Code introduces a single unified registration system where an establishment needs only one registration instead of multiple registrations under different erstwhile laws which covers all applicable provisions of the OSH Code.
Contract Labour: The threshold for contract labour provisions has been raised from 20 to 50 contract workers in the preceding 12 months. The engagement of contract workers has been prohibited in the core activities of an establishment.
Impact: Increased compliance requirements but improved workplace safety, inclusivity and formalisation
________________________________________
What Management Needs to Do
1. Workforce & Contract Review
Re classify employees under employee / worker / fixed term / gig categories
Review fixed term and consultant arrangements for misclassification risks
2. Payroll & Compensation Restructuring
Revisit salary structures to comply with the 50% wage rule
Assess impact on PF, gratuity, bonus, overtime, payment of outstanding wages (full and final settlement) to separating workers (including those resigning) within two working days of separation
3. Documentation & Formalisation
Issue appointment letters and written contracts to all employees
Update HR policies, standing orders and employment manuals
4. Compliance & Governance
Map applicable Central vs State rules for each location
Set up internal audit and compliance tracking mechanisms
Prepare for higher monetary penalties and inspection readiness
If the establishment is already registered under the existing Central or state law, ensure readiness to provide the registration details electronically to satisfy the deemed registration under the SS Code and OSH code
Provision of free annual health examination to workers above 40 years
5. Industrial Relations & Risk Management
Review retrenchment, layoff and closure strategies (300 employee threshold)
Establish or strengthen grievance redressal committees
Budget for potential re skilling fund obligations
________________________________________
One Line Takeaway
The Labour Codes require management to move from fragmented compliance to a unified, formal, and proactively governed workforce frameworkearly preparation will determine cost control and risk mitigation.
If you have any questions, please feel free to reach out to us our expert team will be happy to assist.
Email: sakshi@omnikavvach.com
Linkedin: https://www.linkedin.com/in/sakshi-agarwal-78857222/
From India, Delhi
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In definition of Wages there is 50 percent rule to which in exclusion list (a) to (i) there are variable items like production incentive, OT etc will change every month and accordingly the 50 percent rule will be required to change. How to handle this situation. This will also impact on PF employer contribution to be considered for 50 percent rule.
Please clarify with one specific example.
S K Bandyopadhyay ( WB, Howrah)
98310 81531
skb@usdhrs.in
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33Please clarify with one specific example.
S K Bandyopadhyay ( WB, Howrah)
98310 81531
skb@usdhrs.in
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The new labour Codes are just copy and paste of the existing/ repealed Acts. Therefore, the management has nothing to do on it but just proceed with the activities as they have been doing now. There are minor changes like applicability of chapter VB of ID Act regarding taking permission for retrenchment and closure of establishments and these could have been achieved by means of amendment to the existing laws also.
Regarding unified definition of wages, I would say that that is the most idiotic thing about the Labour Codes. Earlier the definition of wages was according to the objects of the particular Act. Moreover, the 50% principle and the specific exclusions from the scope of wages certain allowances given in clauses (a) to (i) and the absence of the term "any other allowances" in the exclusion part will take you to courts to interpret what happens to allowances which are not mentioned in (a) to (i), whether they form part of "all remuneration" in the inclusion part or not.
From India, Kannur
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Regarding unified definition of wages, I would say that that is the most idiotic thing about the Labour Codes. Earlier the definition of wages was according to the objects of the particular Act. Moreover, the 50% principle and the specific exclusions from the scope of wages certain allowances given in clauses (a) to (i) and the absence of the term "any other allowances" in the exclusion part will take you to courts to interpret what happens to allowances which are not mentioned in (a) to (i), whether they form part of "all remuneration" in the inclusion part or not.
From India, Kannur
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Item (e) of the list (a) to ( i ) is nothing but any other allowances. Even if we consider ur logic of any other allowances are there, the variable allowances like OT, Food allowance, Attendance allowance etc. based on actual attendance will arise and that will change in every month. Question is how to deal with them for 50 percent condition. Moreover, due to change of Wages, PF contribution will also change. We need one proper clarification on the above maters.
S K Bandyopadhyay ( WB, Howrah)
CEO
USD HR Solutions
98310 81531
skb@usdhrs.in
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S K Bandyopadhyay ( WB, Howrah)
CEO
USD HR Solutions
98310 81531
skb@usdhrs.in
Acknowledge(1)Amend(0)CiteHR.AI
(Fact Checked)-Your concerns about variable allowances and their impact on the 50% wage rule are valid. The Code on Wages, 2019, indeed, requires careful calculation of these components. For fluctuating allowances, an average could be considered for calculations. PF contributions would indeed change with wage alterations. (1 Acknowledge point)
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Labr laws for Vendor compliance Management.pdf
Labour laws compliance.doc
CiteHR.AI
(Fact Checked)-Your understanding is correct. The 50% rule in the Code on Wages, 2019, applies to the sum of the exclusions. If the sum exceeds 50% of total remuneration, the excess will be considered as wages. This may indeed vary month to month. (1 Acknowledge point)