Labour Codes 2025 in India: Key changes, Wage Rules and Impact on employers

The Ministry of Labour & Employment has officially activated key provisions of the new labour law framework in India. This marks one of the biggest labour law reforms in India in decades, replacing 29 separate laws with just four Labour Codes to make regulation simpler and more modern. These changes come at a time when economic conditions are shifting, GST rules have changed, and the rupee is weakening against the US dollar, all of which impact employers and wage decisions.

Which Labour Codes Are Now Effective in India as of 21 November 2025?

Code on Wages, 2019 – Partially Active
- Rules on wages, bonus payments, standard definitions and salary payment timelines are now enforced.
Code on Social Security, 2020 – Partially Active
- Provisions related to ESI, maternity benefits, gratuity and EPF are active.
- Government is expected to introduce new EPF rules.
Industrial Relations Code, 2020 – Fully Active
- Trade union recognition, dispute handling, retrenchment rules and standing orders now apply.
OSHWC Code, 2020 (Occupational Safety, Health & Working Conditions) – Fully Active
- Regulations on working hours, workplace safety, health facilities and mandatory registers are now effective.

Note: Final rules from the Central and State Governments are still awaited. Until then, old labour laws and rules will continue to apply wherever necessary.

Why Are These Codes Important?

The new Codes aim to:

Simplify compliance and reduce red tape
Promote formal employment
Extend social security to all workers
Improve workplace safety
Support digital labour governance and registrations

Key Changes Under the New Labour Codes

1. Standard Definitions & Wider Coverage

New legal categories include worker, employee, gig worker, platform worker, and inter-state migrant worker.
A uniform definition of “wages” will apply to all labour laws and will be used to calculate PF, ESI, gratuity, bonus, and leave encashment.
This uniform wage structure may lead to higher employment costs, so salary components may need revision.

2. Employment Models – Clear Rules Introduced

Fixed-term employment is now formally recognised and eligible for gratuity after one year of continuous service.
Contract labour will not be allowed for core business activities, except under specific exemptions.
Women may work night shifts if employers provide the required safety measures.

3. Stronger Social Security Coverage

Social security benefits are now extended to gig workers, platform workers, fixed-term workers, and unorganised workers.
Aggregator platforms may have to contribute 1–2% of their annual turnover for gig worker benefits.
Aadhaar-linked portability of benefits aims to make access easier across different jobs and locations.

4. Industrial Relations & Restructuring

Government approval for retrenchment, closure, or layoffs will now be required only if the number of employees exceeds 300, compared to the previous limit of 100.
A Reskilling Fund must be created, where employers contribute an amount equal to 15 days of the last drawn wages for each retrenched worker.
Digital registers, grievance redressal systems, and updated standing orders will now be compulsory.

5. Workplace Safety & Health (OSHWC Code)

There are clear rules on working hours, overtime, medical checks (for workers aged 40+), restrooms, drinking water, creches, and other welfare facilities.
Appointment letters and standard register formats are mandatory for all employees.

The new Labour Codes represent a major step toward a more formal, transparent, and regulated labour market in India. They aim to improve worker protection, promote social security, and simplify compliance for employers. However, businesses will need time to adjust to the new wage definitions, employment rules, and reporting requirements. As State-level rules are still awaited, a careful transition approach will be essential. With proper planning, the Codes can support both economic growth and better working conditions in the long run.