India’s new labour codes, effective November 21, 2025, consolidate 29 laws, promising universal minimum wages, enhanced social security for gig workers, and improved safety. While offering businesses flexibility, they also introduce new classifications for employees and workers, impacting benefits and contract labour. Employers must adapt HR and payroll to these significant changes.
Decoding India’s New Labour Codes: A Game Changer for Workers and Businesses
For years, India’s labour laws felt like a tangled web, a confusing mix of outdated regulations struggling to keep pace with a rapidly evolving economy. But now, a seismic shift is underway. The government is rolling out four new labour codes, designed to consolidate, simplify, and modernize the country’s labour laws. Forget the bureaucratic nightmare of the past; these codes promise a streamlined future for both employees and employers. But what do they really mean for you? Let’s break it down.
Minimum Wages: Setting a New Floor
One of the most significant changes is the emphasis on minimum wages. The new codes aim to establish a universal floor wage across all sectors, ensuring that no worker is exploited, regardless of their industry or location. This is a critical step toward reducing wage inequality and improving the living standards of millions of Indian workers, particularly those in the unorganized sector who are most vulnerable to unfair pay practices. The central government will set a benchmark, and states will then need to ensure their minimum wages are no lower. This should spur states lagging behind to get on board.
Gratuity: Earning Your Due Sooner
Gratuity, a lump-sum payment given to employees upon retirement or resignation after a certain period of service, is getting a makeover. The eligibility requirement for gratuity has been reduced from five years to just one year for journalists and in cases of death or disablement. For all other workers, the gratuity benefits will be easier to access. This change acknowledges the increasingly mobile nature of the workforce, where long tenures with a single employer are becoming less common. It ensures that employees receive their due compensation even if they switch jobs more frequently.
Appointment Letters: Formalizing the Employment Relationship
Imagine starting a new job without a clear understanding of your role, responsibilities, or terms of employment. The new codes address this issue by mandating that all employees receive a formal appointment letter. This letter will outline key details such as the job title, responsibilities, wage structure, and working conditions, providing greater transparency and security for workers. This requirement helps to formalize the employment relationship and reduces the scope for disputes arising from ambiguity or misunderstanding.
Layoff and Retrenchment: A More Structured Approach
Restructuring is inevitable in today’s dynamic business environment, and sometimes, that means layoffs. The new labour codes outline a more structured and transparent process for layoffs and retrenchment. While the specifics may vary depending on the size of the establishment, the codes generally require employers to provide adequate notice, compensation, and opportunities for retraining to affected employees. These provisions aim to mitigate the hardship caused by job losses and ensure a fair and equitable process. This aspect of the new minimum wages codes is designed to provide a safety net for employees during challenging times.
Fixed-Term Employment: A Win-Win for Flexibility?
The codes introduce the concept of fixed-term employment, allowing employers to hire workers for a specific duration based on project requirements or seasonal demands. Fixed-term employees will be entitled to the same benefits as permanent employees, including wages, working hours, and social security benefits. This provides businesses with greater flexibility in managing their workforce while ensuring fair treatment for fixed-term employees. This can provide avenues for people who may not be able to commit to a permanent role, and is a boost for many in the gig economy. You can read more about that here.
Social Security: Expanding the Safety Net
The new labour codes aim to expand the coverage of social security benefits to a wider range of workers, including those in the unorganized sector, gig workers, and platform workers. This includes access to benefits such as Employees’ Provident Fund (EPF), Employees’ State Insurance (ESI), and other welfare schemes. This is a significant step toward creating a more inclusive and equitable social security system that protects all workers, regardless of their employment status.
Strikes and Lockouts: A Balancing Act
The codes introduce new regulations regarding strikes and lockouts, requiring workers and employers to provide advance notice before resorting to such actions. This aims to promote dialogue and negotiation and prevent disruptions to business operations and essential services. While the new rules may impose some restrictions on the right to strike, they also aim to ensure that strikes are conducted in a peaceful and responsible manner.
Impact on Employers
While the focus is often on employee benefits, the new codes also impact employers. They will need to adapt to the new regulations, update their HR policies, and ensure compliance with the new requirements. However, the simplified and consolidated nature of the codes should ultimately reduce the administrative burden on employers and promote a more harmonious and productive workplace. Investment in compliance is an investment in stability.
The Road Ahead
The implementation of these new labour codes is a monumental undertaking, and the journey is far from over. Challenges remain, including the need for effective enforcement, awareness campaigns, and ongoing dialogue between stakeholders. However, the potential benefits are enormous. By modernizing and streamlining India’s labour laws, these codes can unlock economic growth, improve working conditions, and create a more just and equitable society for all. The move towards new regulations on minimum wages is a sign of progress.
A Brighter Future for India’s Workforce
The new labour codes represent a bold step towards a more modern and equitable labour market in India. While implementation will require careful planning and execution, the potential rewards are significant. By empowering workers, simplifying regulations, and promoting a more collaborative relationship between employers and employees, these codes can pave the way for a brighter future for India’s workforce and its economy.
