Employment Law Reimagined: Decoding India’s New Labour Codes

At the moment, twenty nine, in addition to several local and state rules /regulations based on the employee’s location, regulate labour law in India. From the year 1926 to the year 2008, these laws were enacted, including following subjects:

• Trade unions
• Child labour
• Sexual harassment
• Migrant work
• Wages
• Holidays

It’s understandable that many of the laws currently in effect are which were there in existence, are outdated, complex, and not easily applicable to the nature of modern work, especially since some of these laws date back nearly a century, while others are around forty years old.

The Indian government began reworking and reforming the nation’s labour code in order to address this issue. The year 2019 and 2020 saw the consolidation of Indian labour laws into four primary Codes:

• The Code on Wages, 2019
• The Occupational Safety, Health, and Working Conditions Code, 2020
• The Industrial Relations Code, 2020
• The Code on Social Security, 2020

The employment laws in India have been updated and simplified by these codes, which also promise to enforce far harsher penalties for non-compliance up to 20 times greater in certain situations. The codes have been passed by the Indian Parliament in the years 2019 and 2020, but the effective date of these new Codes as per the respective Gazette Notifications issued by the Central Government on November 21, 2025.

While all the provisions of the Occupational Safety, Health, and Working Conditions Code, 2020 and the Industrial Relations Code, 2020 have come into effect with effect from November 21, 2025, only certain provisions of the Code on Social Security, 2020 and the Code on Wages, 2019, have come into effect with effect from November 21, 2025. The rest of the provisions of the Code on Social Security 2020 and the Code on Wages, 2020 are yet to be notified through a Gazette Notification.

THE FOUR LABOUR CODES: KEY CHANGES AND IMPLICATIONS

The cornerstone of India’s recent labour law reforms is the consolidation of 29 central labour laws into four comprehensive labour codes. These codes were passed by the Indian Parliament in 2019 and 2020, marking a watershed moment in the country’s labour law history.
Let us examine each of these codes in detail:

A. Code on Wages, 2019

The Code on Wages, 2019, marks a significant milestone in India’s labour law reform, consolidating four existing laws into a single comprehensive code. This legislation introduces several key provisions that will impact companies operating in India. It establishes a universal minimum wage for all employees across both organized and unorganized sectors through a floor wage determined by the central government based on minimum living standards with scope for regional variation, ensuring a uniform baseline across the country. The Code mandates timely payment of wages in current coin or currency notes or by cheque or by crediting the wages in the bank account of the employee or by the electronic mode ; it also provides that government may by notification specify the employer of a specified industrial or other establishment will have to pay the wages to the employee only by cheque or by crediting the wages in his bank account. The Code prohibits gender discrimination in wages and recruitment. It retains existing bonus provisions while the wage threshold for eligibility shall be as per the notification to be issued the appropriate Government Notably, the Code significantly enhances penalties for non-compliance, serving as a stronger deterrent. The Code replaced the following four laws- Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965, and Equal Remuneration Act, 1976.

These changes bring both opportunities and challenges. The consolidation of multiple laws simplifies compliance processes, potentially reducing administrative burdens. The introduction of a floor wage may lead to a more standardized wage structure across states, which could benefit companies with multi-state operations. The emphasis on digital wage payments aligns with global best practices, promoting transparency and efficiency in payroll management. However, manufacturers will need to carefully review and possibly adjust their wage structures and payment systems to ensure compliance with the new regulations. Overall, the Code on Wages represents a step towards modernizing India’s labour laws, aiming to balance worker protections with the need for business- and employee friendly reforms.

B. Industrial Relations Code, 2020
The Industrial Relations Code, 2020 represents a significant overhaul of India’s labour laws, consolidating, simplifying and rationalising provisions of the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946 which were hitherto in existence. This comprehensive legislation introduces several key provisions that will substantially impact companies operating in India. One of the most notable changes is the increased flexibility in retrenchment policies. The Code raises the threshold for requiring government permission for retrenchment, layoffs, or closure from establishments with 100 workers to those with 300 workers. This provision aims to provide businesses with greater flexibility in managing their workforce, particularly during economic downturns or restructuring periods. However, it’s important to note that states have been given the authority to modify this threshold, which may lead to variations across different regions.

The Code also introduces the concept of fixed-term employment, a new category that offers employers more flexibility in hiring while ensuring that fixed-term worker receive benefits on par with permanent worker. This provision is particularly relevant for industries with seasonal or project-based work patterns, allowing manufacturers to align their workforce with business cycles more efficiently. To address the concerns of workers affected by retrenchment, the Code mandates the creation of a re-skilling fund. Employers are required to contribute to this fund, which will be used to support retrenched workers by crediting fifteen days wages last drawn by the worker to his account who is retrenched, within forty-five days of such retrenchment in such matter as may be prescribed.. This initiative provides a safety net for workers.

In an effort to promote industrial harmony and reduce sudden disruptions, the Code introduces a requirement for workers in all industrial establishments to provide a 14-day notice before going on strike. This provision aims to create a window for negotiations and potentially avert strikes, providing manufacturers with more stability in their operations.

The Code also addresses the issue of multiple trade unions by providing for a sole negotiating union where the Trade Union having 51% or more of workers on the muster roll of that industrial establishment or a negotiating council, where no Trade Union has 51% or more of workers on the muster of that industrial establishment, then negotiating council shall be constituted with one representative for each registered Trade Unions which have support of no less than 20% of the total workers on the muster roll of that establishment and one representative for the remainder after calculating the membership on each 20%. . This measure is designed to streamline collective bargaining processes and reduce conflicts arising from competing union claims, potentially leading to more stable industrial relations.
The Code’s emphasis on fixed-term employment aligns with global trends towards more flexible and skilled workforces. This could potentially enhance India’s competitiveness as a manufacturing destination, provided these provisions are implemented effectively.

C. Occupational Safety, Health and Working Conditions Code, 2020

The Occupational Safety, Health and Working Conditions Code, 2020 represents a comprehensive overhaul of India’s labour laws related to workplace safety and working conditions. This sweeping legislation consolidates and amends 13 existing laws, including significant acts such as the Factories Act, 1948, The Mines Act, 1952, the Contract Labour (Regulation and Abolition) Act, 1970, the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 and The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. The Code’s wide-ranging provisions aim to modernize and streamline regulations governing workplace safety, health, and working conditions across various sectors. One of the Code’s most significant aspects is its expanded coverage. By applying to establishments employing 10 or more workers, it extends the safety net to a much larger portion of the workforce. This expansion is particularly important in a country like India, where a substantial part of the labour force has historically operated in the informal sector with limited protections. The Code sets clear parameters for working hours, stipulating a maximum of 8 working hours per day. However, it also introduces flexibility by allowing the appropriate government to modify this limit. This provision aims to balance worker protection with the diverse needs of different industries and regions, potentially allowing for more adaptable work schedules.

A landmark provision of the Code is its approach to women’s employment. It permits women to work night shifts, subject to their consent and the provision of adequate safety measures. This change represents a significant step towards gender equality in the workplace, potentially opening up new employment opportunities for women across various sectors. The Code also introduces special provisions for inter-state migrant workers, including the creation of a database for their registration. This focus on migrant workers is particularly relevant given India’s large internal migrant workforce and aims to ensure better protection and management of this crucial labour segment.

Another notable provision is the mandatory free annual health check-up for workers above a certain age, as prescribed by the government. This measure underscores the Code’s emphasis on worker health and wellbeing, potentially leading to a healthier and more productive workforce. The Code’s aim to provide uniform working conditions and safety standards across sectors could simplify compliance for manufacturers operating across multiple industries. This uniformity may reduce the complexity of managing diverse operations and potentially lower compliance costs.

The provision allowing women to work night shifts, with appropriate safeguards, is particularly significant. It enables manufacturers to tap into a larger talent pool, potentially addressing skill shortages and promoting gender diversity in the workforce. However, implementing this provision will require careful planning and investment in safety measures to ensure a secure working environment for women during night shifts. The enhanced provisions for migrant workers can help manufacturers more effectively manage their diverse workforce. With a formalized system for registering and tracking migrant workers, companies can better address the unique needs of this group, potentially improving worker satisfaction and retention. However, compliance with these new regulations may require significant changes to existing HR systems and processes.

The mandatory health check-ups for older workers represent an additional responsibility for employers but can lead to long-term benefits. Regular health monitoring can help in early detection of occupational health issues, potentially reducing absenteeism and improving overall workforce productivity. Implementing these wide-ranging changes will require significant effort from manufacturers. Companies will need to review and potentially overhaul their existing health and safety protocols, working hour policies, and systems for managing diverse worker groups. This may involve substantial initial investments in infrastructure, training, and management systems.

However, the long-term benefits of these reforms could be substantial. A safer, healthier, and more diverse workforce can lead to increased productivity and innovation. The uniformity in standards across sectors could make India a more attractive destination for manufacturing investment, as it simplifies regulatory compliance.

D. Code on Social Security, 2020

The Code on Social Security, 2020 represents a landmark reform in India’s social security framework, consolidating nine existing laws related to social security and welfare. This comprehensive legislation brings together key acts such as the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Employees’ State Insurance Act, 1948 Employees Compensation Act, 1923, and the Maternity Benefit Act, 1961, Payment of Gratuity Act, 1972, the Building and Other Construction Workers’ Welfare Cess Act, 1996; the Unorganised Workers’ Social Security Act, 2008 among others. The Code aims to modernize and expand social security provisions, addressing the evolving nature of work in India’s rapidly changing economy.

A central feature of the Code is its expanded coverage. It extends social security benefits to all workers, including those in the unorganized sector and the growing gig economy. This expansion is particularly significant in the Indian context, where a large portion of the workforce has historically operated outside the formal social security net. By bringing these workers under its ambit, the Code aims to provide a safety net to a much larger segment of the population. One of the most notable provisions is the extension of gratuity benefits to fixed-term employees. Under the new Code, fixed-term workers become eligible for gratuity even if employed for less than five years, a significant departure from previous norms. This change acknowledges the increasing prevalence of contractual and short-term employment in various sectors, including manufacturing.

The Code also introduces the concept of a social security fund specifically for unorganized workers, gig workers, and platform workers. This provision recognizes the changing nature of work in the digital age and aims to provide some form of social protection to workers in these emerging sectors. Additionally, the Code mandates the constitution of a National Social Security Board, tasked with recommending schemes for different sections of unorganised workers, gig workers and platform workers ensuring a more adaptive and responsive social security system.

Another significant aspect is the reduction of thresholds for coverage under various social security schemes. This change is designed to bring more establishments under the purview of these schemes, expanding the social security net to a broader range of businesses and their employee. The comprehensive social security coverage aimed at by the Code can potentially lead to improved worker satisfaction and productivity. A workforce that feels secure and protected is likely to be more engaged and loyal, which can translate into better performance and reduced turnover.

The recognition and inclusion of gig and platform workers in the social security framework is particularly relevant for manufacturers exploring new business models or partnerships in the digital economy/e-commerce. As the lines between traditional employment and gig work continue to blur, this provision allows for more flexible workforce strategies while ensuring basic protections for workers. The provision of gratuity for fixed-term employees aligns with the increasing trend of using a contractual workforce in manufacturing. This change may make fixed-term employment more attractive to workers, potentially easing recruitment for short-term or project-based roles. However, it also represents an additional financial obligation for employers, which needs to be factored into labour cost calculations.

Implementing these wide-ranging changes will require significant effort from manufacturers. Companies will need to review and potentially overhaul their existing social security practices, payroll systems, and HR policies. This may involve substantial initial investments in infrastructure and management systems to ensure compliance with the new regulations. The reduced thresholds for coverage under various schemes mean that smaller manufacturing units or subsidiaries that were previously exempt may now fall under the purview of these regulations. While this expands social security coverage, it also increases compliance requirements for a broader range of businesses.

However, the long-term benefits of these reforms could be substantial. A more comprehensive social security system can contribute to social stability, potentially reducing labour unrest and improving the overall business environment. It can also enhance India’s image as a responsible manufacturing destination, aligning with global trends towards more comprehensive worker protections.

These four labour codes represent a significant shift in India’s approach to labour regulations. While they aim to simplify and modernize the regulatory framework, they also introduce new concepts and expand the scope of provisions of various laws hitherto in existence.

CHALLENGES IN IMPLEMENTATION AND WAY FORWARD

The implementation of India’s new labour codes presents significant challenges navigating the evolving regulatory landscape. Delayed implementation due to complex rule formulation and stakeholder concerns creates uncertainty in planning. State-level variations, stemming from labour being a concurrent subject, may complicate compliance for multi-state operations. Technological readiness poses challenges, with digital compliance requirements potentially straining smaller establishments and raising data privacy concerns.

Workforce adaptation to new concepts and definitions, along with reskilling requirements, may lead to initial confusion and resource allocation challenges. Changing industrial relations dynamics, particularly regarding trade union recognition and strike provisions, could cause temporary turbulence. The extension of social security to gig and unorganized sector workers presents new challenges that may indirectly affect companies and employers through their supply chains.

Compliance costs, both initial and ongoing, may necessitate reassessment of cost structures and pricing strategies. Ambiguities in certain provisions and transition challenges could lead to legal uncertainties until jurisprudence develops around the new codes. The shift in enforcement approach and the need for capacity building in labour departments may result in inconsistencies in implementation across regions.

India’s ambitious labour law reforms require a concerted effort from policymakers and businesses, including foreign manufacturers, to ensure successful implementation. Policymakers have a crucial role to play in this process. They need to provide a clear implementation timeline, allowing businesses to adequately prepare for the transition. Ongoing stakeholder consultations with industry bodies, trade unions, and state governments are essential to address concerns and refine implementation strategies. Significant investment in training labour department officials, particularly for the new Inspector-cum-Facilitator role, will be necessary for effective implementation and support of businesses in complying with the new codes. The development of robust digital platforms for compliance, returns filing, and data management under the new codes is crucial to ease the compliance burden for businesses and improve overall efficiency. Comprehensive awareness campaigns should be launched to educate both employers and workers about their rights and responsibilities under the new codes, facilitating a smoother transition and reducing potential disputes. A unified portal for all labour law compliances, integrating various schemes and returns, would simplify compliance for businesses.

Policymakers should establish a mechanism for regular review of the implementation process, making necessary refinements based on feedback and emerging challenges. Enhanced coordination between central and state governments is vital to minimize variations in implementation across states, creating a more uniform regulatory environment for businesses. Efficient dispute resolution mechanisms should be established to address conflicts arising from the interpretation and implementation of the new codes. Additional support and guidance for Micro, Small, and Medium Enterprises (MSMEs) in adapting to the new regulatory framework will ensure that smaller suppliers and partners to comply with the new regulations.

For employer and the companies, the reforms necessitate a comprehensive approach to adaptation and compliance. A thorough assessment of how the new codes impact various aspects of operations, including wage structures, working conditions, and industrial relations, is essential. This will help in identifying areas requiring change and in developing a targeted compliance strategy. All HR policies, employment contracts, and internal processes should be reviewed and updated to align with the new codes, ensuring compliance and potentially optimizing HR practices. Investing in digital solutions for payroll management, attendance tracking, and compliance reporting can streamline operations and reduce the risk of non-compliance. Comprehensive training programs for HR personnel, managers, and workers on the new labour laws are crucial to increase awareness and reduce the risk of unintentional non-compliance. Proactive engagement with trade unions, worker representatives, and local labour authorities is important to understand and address concerns, helping maintain harmonious industrial relations during the transition period.

Regular internal audits should be conducted to ensure compliance with the new codes and identify any gaps, avoiding penalties and reputational risks associated with non-compliance. Workforce strategies should be reassessed in light of new provisions like fixed-term employment and flexibility in retrenchment, potentially leading to more efficient resource allocation and reduced labour costs. The readiness of suppliers and contractors to comply with the new codes should be evaluated, with support provided where necessary to ensure the entire supply chain remains compliant.

Businesses should develop contingency plans for various scenarios, such as state-level variations in implementation or potential industrial disputes. Active participation in industry associations and chambers of commerce can help companies stay informed about developments and contribute to policy discussions. Engaging legal experts specializing in Indian labour laws can provide ongoing guidance and support in navigating complex legal provisions and managing compliance risks effectively. Compensation structures and budgets may need to be reassessed to account for potentially increased social security contributions. Internal grievance redressal mechanisms should be established or strengthened in line with the new code requirements. Systems for maintaining detailed records of employment, wages, working hours, and other relevant data should be enhanced to facilitate compliance reporting and serve as evidence of compliance during inspections. Finally, aligning Corporate Social Responsibility (CSR) initiatives with the spirit of the labour reforms, focusing on areas like skill development and worker welfare, can enhance a company’s reputation and contribute to the broader objectives of the labour reforms.

These reforms present both challenges and opportunities. By taking a proactive and comprehensive approach to compliance and adaptation, they can not only navigate the new regulatory landscape effectively but also leverage the reforms to enhance their operational efficiency and competitiveness in the Indian market. The successful implementation of India’s labour law reforms ultimately requires a collaborative and sustained effort from all stakeholders involved.

Conclusion
India’s recent labour law reforms, embodied in four new labour codes, represent a significant shift in the country’s approach to regulating employment and industrial relations. The consolidation of 29 labour laws into four codes aims to simplify compliance and reduce the regulatory burden on businesses, potentially improving the ease of doing business. The reforms offer increased flexibility in workforce management through provisions like fixed-term employment and eased retrenchment norms, allowing manufacturers to adapt more easily to market fluctuations. While the expanded coverage of social security benefits may increase costs, it can lead to a more satisfied and productive workforce.

Uniform standards for safety and working conditions across sectors can help create a safer work environment and potentially reduce accidents and related costs. However, potential state-level variations, and the need for significant changes in existing systems pose challenges that manufacturers need to navigate carefully. The new codes introduce several new compliance requirements that employers must adhere to, necessitating a thorough review and update of existing policies and practices. Both policymakers and businesses have crucial roles to play in ensuring the successful implementation of these reforms. Proactive engagement, investment in technology and training, and a focus on stakeholder communication will be key.. While the initial transition may require significant investment in updating systems and processes, this can lead to long-term benefits in terms of streamlined operations and reduced compliance risks.

If implemented effectively, these reforms could make India a more attractive destination for foreign investment in manufacturing as well, potentially leading to increased opportunities for expansion and growth. Given the evolving nature of the regulatory landscape, companies/ employers need to remain adaptable and responsive to changes in implementation and interpretation of the new codes. While leveraging the flexibility offered by the new codes, companies/employers will need to balance this with maintaining positive industrial relations and ensuring worker welfare. Although there may be short-term challenges and costs associated with adapting to the new regime, the long-term benefits in terms of operational efficiency and regulatory clarity can be significant. India’s labour law reforms marks a transformative shift in the country’s regulatory landscape, offering greater operational flexibility and simplified compliance for companies/employers. In order to fully leverage these benefits, companies will implementation challenges, invest need to adeptly manage in systems and training, and a proactive mindset. As these reforms are put into practice companies/employers who stay well informed, actively engaged, and adaptable will be best equipped to succeed in India’s rapidly evolving business environment.

-By Karuna Kumar
Senior Partner

The author has over 30 years of experience and has vast exposure as an advocate and in-house counsel in handling Contract Management and Industrial Relations & Employment related issues in pragmatic yet culturally astute manner. In case of any clarifications, please feel free to contact the author at karuna.kumar@orbitlaw.co.in

Research & Assistance: Saman Rizwan, Associate.

DISCLAIMER:
This is issued in the general interest of our clients. Nothing contained herein is, purports to be, or is intended as legal advice and an independent legal advice should be sought before you act on any information or view expressed herein. No recipient of this write up should construe this alert as an attempt to solicit business in any manner whatsoever.