India’s labour law framework has undergone one of its most significant reforms in decades. A set of consolidated labour codes has replaced a complex web of older laws, reshaping how wages, social security, working conditions, and industrial relations are regulated.
Here’s a clear breakdown of what has changed and what it means for workers and employers.
1. New Labour Codes Replace Old Laws
Four central labour codes have now been notified and brought into force, replacing 29 older labour statutes:
-
Code on Wages, 2019
-
Industrial Relations Code, 2020
-
Social Security Code, 2020
-
Occupational Safety, Health & Working Conditions (OSHWC) Code, 2020
These reforms aim to unify and simplify labour laws, improve compliance, and extend legal protection across both formal and informal sectors of the economy.
2. Wage and Salary Changes
A. New Definition of “Wages”
The statutory definition of wages has been standardised. Under the new rules:
-
Basic pay plus dearness allowance must make up at least 50% of total remuneration
-
Excessive use of allowances is restricted
As a result, statutory benefits such as Provident Fund (PF), gratuity, and other contributions increase, since they are calculated on a higher base wage.
B. Minimum Wage Rights
Every worker now has a legal right to minimum wages, regardless of whether they are employed in the organised or unorganised sector.
-
A national floor wage has been introduced
-
States must align their minimum wages with this benchmark
C. Overtime and Pay Transparency
-
Overtime must be paid at twice the normal rate of wages
-
Employers are required to issue written appointment letters, clearly stating salary structure and employment terms
3. Expanded Worker Coverage
A. Social Security for New Categories of Workers
The Social Security Code formally recognises several categories that were earlier outside the traditional labour framework, including:
-
Gig workers
-
Platform workers (such as delivery partners)
-
Contract and fixed-term employees
These workers are now eligible for social security schemes, including PF, ESI, and other welfare benefits, with mandatory employer contributions where applicable.
B. Equal Pay and Anti-Discrimination
-
The principle of equal pay for equal work is reinforced
-
Gender-based discrimination in wages is explicitly prohibited by law
4. Gratuity and Leave Reforms
A. Gratuity Flexibility
-
Fixed-term employees are now eligible for gratuity after just one year, calculated on a pro-rata basis
-
The earlier five-year continuous service requirement no longer applies to them
This significantly improves benefits for project-based and contractual workers.
B. Leave and Work Location Rules
-
Eligibility thresholds for paid leave have been reduced in certain cases
-
Work From Home (WFH) is now legally recognised, when mutually agreed upon by employer and employee
5. Working Hours and Workplace Safety
A. Standard Hours with Flexibility
-
The standard workweek is capped at 48 hours
-
Employers may adopt flexible structures such as:
-
8 hours × 6 days
-
12 hours × 4 days
-
Overtime payment rules have been strengthened and clarified.
B. Workplace Safety Enhancements
-
Employers must provide free annual health check-ups for workers above a specified age
-
Safety committees and hazard prevention measures are mandatory for many establishments
6. Industrial Relations and Compliance
-
Thresholds that trigger compliance requirements (such as standing orders and contract labour norms) have been revised
-
The industrial relations framework has been updated to simplify dispute resolution and clearly define employer–employee obligations
7. Emerging and Proposed Legal Developments (2025)
A. Right to Disconnect Bill, 2025
A proposed law seeks to give employees legal protection from being contacted outside working hours without consent or additional compensation. The bill is currently under consideration in Parliament.
B. Rural Employment Guarantee Act Updates
The Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 proposes:
-
Increasing guaranteed rural employment from 100 to 125 days per household
This change strengthens livelihood security under work guarantee laws.
Impact Summary
For Workers
-
Broader legal coverage for gig, platform, and contract workers
-
Guaranteed minimum wages and expanded social security
-
Improved overtime pay and easier access to gratuity
For Employers
-
New compliance requirements for wage structuring and benefits
-
A unified legal framework replacing multiple older laws
-
Higher documentation, payroll, and reporting standards
For the Economy and Labour Market
-
Simplified and modernised labour regulation
-
Increased formalisation of informal work
-
Greater encouragement for structured contracts and scalable workforce models