In a significant reform move, the Indian government has finally implemented the four Labour Codes on November 21, 2025, marking a transformative shift in the country's labour regulatory landscape. These comprehensive codes replace 29 fragmented central labour laws with a unified, modern framework designed to benefit both workers and employers.
Why India Needed New Labour Codes
The implementation comes over five years after Parliament initially cleared these reforms. India's previous labour laws were characterized by complexity, outdated provisions, and excessive compliance burdens that discouraged business growth and formal job creation. The old system left many workers, particularly those in gig economy, MSMEs, and migrant labor, without uniform social security protection.
As labour falls under the Concurrent List, while most states had finalized rules aligned with the four codes, central-level implementation remained pending. This delay created uneven social security coverage for workers and compliance complexity for employers operating across multiple states.
Key Features of the Four Labour Codes
Code on Wages
This code amalgamates four wages and payment-related labour laws, defining wage, employee, and minimum wage to cover all employees regardless of industry, sector, wage level, or gender. A National Floor Wage will now serve as the baseline standard for all states.
Key provisions include wage deductions not exceeding 50% of total pay, overtime wages fixed at twice the normal rate, and working hours capped between 8-12 hours per day with a maximum of 48 hours weekly. The code also mandates timely wage payments and requires employers to issue wage slips electronically or physically.
Code on Social Security
Merging nine existing social security laws, this code extends coverage to both organized and unorganized sectors. It legally defines gig and platform workers for the first time and establishes national registration and a social security fund for unorganized and gig workers.
Aggregators for gig workers must contribute 1-2% of annual turnover toward social security, capped at 5% of payouts to workers. Fixed-term employees now receive the same benefits as permanent staff, with gratuity eligibility starting after one year instead of five.
Industrial Relations Code
This code merges three industrial laws and introduces significant changes including fixed-term employment for shorter tenures. The threshold for seeking government approval for layoff, retrenchment and closure has been increased to 300 workers from 100.
Strike conditions have been extended from public utility services to all industrial establishments, requiring 60 days notice instead of six weeks. The definition of strike now includes mass casual leave taken by more than 50% of workers on a given day.
Occupational Safety, Health and Working Conditions Code
Combining 13 central labour laws, this code streamlines compliances through single registration and electronic filings. The threshold for factory licenses has been increased from 10 to 20 workers for power-aided manufacturing units.
Women can now work night shifts with consent and safety provisions. The definition of inter-state migrant workers has been expanded, and mandatory appointment letters are required for all employees.
Impact on Different Worker Groups
The new labour codes bring varied benefits across worker categories. Gig and platform workers gain legal recognition and social security coverage through aggregator contributions. Contract workers receive assured health benefits and social security from principal employers.
Women workers benefit from equal pay provisions, consent-based night work with safety protocols, and extended maternity leave up to 26 weeks. Migrant workers gain equal wages, PDS portability, and double overtime wages.
Sector-specific provisions cover workers across MSMEs, plantations, beedi and cigar manufacturing, audio-visual media, textiles, mines, IT, and hazardous industries, ensuring regulated working hours, safety standards, and social security coverage.
Formalization and Job Creation Prospects
The labour codes have generated mixed reactions from experts and stakeholders. While industry representatives welcome the reforms as reducing compliance burdens and encouraging formal job creation, trade unions have expressed concerns about certain provisions easing hiring and firing.
The reforms aim to address long-standing issues in India's labour market, including the tendency of firms to remain small to avoid regulatory burdens. Studies indicate that a majority of manufacturing firms employ fewer than 10 workers, limiting scale and formal job creation.
The government's move represents a crucial step toward undoing India's regulatory maze, with further reforms needed in inspection regimes and compliance procedures to fully realize the benefits of these landmark changes.
