What the new 2025 labour code means for workplaces

On 21 November 2025, the Indian labour ecosystem turned a new page. The government enforced four sweeping new labour codes, replacing 29 older laws, some dating back decades. 

For the first time in years, India’s labour regulations reflect the realities of modern work: gig-economy, flexible employment, diverse workplaces, and the need for standardisation. But this isn’t just a compliance exercise. For employers, especially the kind that care as much about people’s well-being as their paycheque, this shift also reshapes how companies think about welfare, security and long-term employee health.

What changed in the new labour code

• The four codes now in force are: Code on Wages, 2019, Code on Social Security, 2020, Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC), and Industrial Relations Code, 2020.
  
  
• These replace 29 older central laws, many from an industrial age India, ill-suited to today’s world of startups, platforms and remote work.
  
  
• The goal: simplify, standardise, and modernise labour compliance while strengthening worker protections, social security coverage and clarity around wages, contracts and working conditions.
  
  

What the new labour code means for workers and employers

The new regime carries significant implications – some immediately visible, others more structural.

• Uniform definition of “wages” and benefit calculations: The codes bring in a standard definition of what counts as “wages,” which affects how gratuity, leave encashment, overtime, statutory bonus and other benefits are computed. For many employers, this may lead to higher labour costs; for workers, more predictable and fair calculations.
  
  
• Revised employment models: fixed-term and contract labour rules: The new laws recognise fixed-term employment as valid. Fixed-term employees now become eligible for gratuity after just one year of service (instead of five!), aligning their benefit profiles more with permanent employees.
  
  
• Restrictions on using contract labour for “core activities”: Organisations can no longer routinely rely on contract workers for their core business functions — a shift likely to push employers toward more formal, stable employment contracts.
  
  
• Expanded social security, formal contracts and inclusion of gig/platform workers: Even gig-workers, platform staff and unorganised-sector workers have been brought under the social-security umbrella — potentially gaining access to benefits like insurance, gratuity, pensions, maternity coverage, health provisions.
  
  
• Mandatory formal job letters, clarity on working conditions for “workers”: To reduce ambiguity and ensure fair treatment, the codes mandate formal appointment letters, clearer classification (employee vs worker), and defined standards for working hours, leave, safety, welfare, and retrenchment.
  
  

Why the new labour code matters now

For a country witnessing rapid growth in startup hiring, contract roles, gig engagements and variable workplaces, this overhaul is more than regulatory housekeeping. It’s an opportunity to build a more humane workforce environment.

• Companies willing to comply and invest in fairer wages, clearer policies and worker well-being will likely see stronger employee trust, lower attrition and better morale.
  
  
• For HR professionals, talent teams, and leadership: this is a prompt to re-evaluate hiring models, compensation philosophies and welfare frameworks. Think of it as a reset button for what it means to treat employees humanely not as cost centres but contributors whose welfare matters.
  
  
• At a macro level, formalising gig, contract and unorganised-sector work under social security could expand coverage dramatically – a move that may help mitigate inequality and provide a safety net for many who’ve worked outside traditional employment models.
  
  

What to do now: a checklist for compliance and care

If you’re building or managing a team (like you are), here are the immediate steps to take:

1. Review all job descriptions, contracts and workforce classifications:  ensure “worker” vs “employee” definitions align correctly under the new codes.
   
   
2. Reassess salary and benefit structures: especially components that count toward “wages” under the new definition.
   
   
3. For organisations using contract labour or gig workers: pause and evaluate: can you shift to fixed-term or permanent roles? Or ensure compliance mechanisms are in place.
   
   
4. Update HR policies around appointment letters, working hours, leave, gratuity, social security contributions and welfare benefits.
   
   
5. Engage with employees: communicate what this change means for them. Transparent dialogue builds trust.
   
   
6. Track upcoming notifications: some parts of the codes are effective now; others await supporting rules from central or state governments. Keep an eye out.
   
   

The 21 Nov 2025 labour overhaul isn’t just legal change. It’s a sign that India’s working world is evolving — from patchwork laws to a unified understanding of wages, work, welfare. For employers, it means more responsibility. For workers — more clarity, more security.

For mission-driven companies, it’s a chance to lead by example: to build workplaces where people don’t just work, but grow — healthy, secure, and humanely treated.

For Employees: What This Means for You

The new labour codes are designed to give workers more clarity, more security, and more predictable benefits. Here’s what changes on your side:

• Clearer salary and benefit calculations: With a standard definition of wages, PF, gratuity, bonus, and leave encashment will now be calculated more consistently.
• Better protection for fixed-term and contract roles: If you’re on a fixed-term contract, you’ll now receive the same statutory benefits as permanent employees — including gratuity after one year.
• More transparency at joining: All employees must receive a formal appointment letter with clear terms on hours, leave, pay, and classification.
• Safer working conditions: New standards under the OSHWC Code set stronger requirements for safety, health, and welfare in the workplace.
• Expanded social security: Gig, platform, and unorganised workers are now eligible for certain social-security schemes for the first time.

In short: these reforms aim to make work more predictable, fair, and secure — regardless of your role or employment type.

Frequently Asked Questions (FAQ)

1. When did the new labour codes come into effect?
The four labour codes became effective on 21 November 2025, replacing 29 older central labour laws. Some state-level rules will continue to be notified over time.

2. Which labour codes have been implemented?
The implementation covers:

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

3. What’s the biggest change HR teams need to prepare for?
The uniform definition of wages. It affects PF, gratuity, bonus, leave encashment and more. Most organisations will need to review and restructure salary components.

4. Do fixed-term employees now get gratuity?
Yes. Fixed-term employees become eligible for gratuity after one year of service. This is a significant shift from the five-year requirement under older laws.

5. Can companies still use contract labour?
Only for non-core activities. Contract labour in core work is restricted unless specific exceptions apply. Organisations must re-check how they deploy vendors and contractors.

6. What changes apply to gig and platform workers?
For the first time, the Social Security Code extends benefits such as insurance, welfare funds, and social-security schemes to gig, platform and unorganised workers.

7. Are appointment letters now mandatory?
Yes. Employers must issue formal appointment letters to all workers, with clear terms around classification, working hours, leave, and wages.

8. Do these laws apply to all companies?
Most provisions apply to organisations that fall within established thresholds under each code (e.g., number of workers, nature of establishment). HR teams must check applicability for each code individually.

9. Will payroll systems need updates?
Most likely. Any salary structure where allowances exceed 50% of total compensation will need recalibration to meet the new statutory wage definition.

10. What should HR teams do first?
Start with a three-part audit:

1. Salary structure and payroll configuration
2. Employee contracts and appointment letters
3. Contract labour deployment and vendor roles

11. Are there penalties for non-compliance?
Yes. The new codes include updated penalties for violations related to wages, safety, working conditions, and social security contributions. Penalties vary by code and severity.

12. Do the codes change maternity benefits?
The Maternity Benefit provisions continue under the OSHWC framework, with employers required to comply with existing entitlements (including 26 weeks of paid leave for eligible employees).

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