India’s New Labour Codes and Reforms | What’s Changed

Executive Summary: India’s New Labour Codes – Key Changes and Entity Implications

Overview

India has implemented four comprehensive Labour Codes effective from November 21, 2025, consolidating 29 existing central labour laws into a unified framework[cite: 10]. This historic reform modernizes India’s labour ecosystem, intended to cover workers across organized and unorganized sectors[cite: 11].

Central-State Applicability Framework

Federal Structure and Implementation

Labour is a concurrent subject under the Constitution of India, which means both Central and State governments have legislative powers[cite: 14]. The Central Government has enacted the four Labour Codes, but their implementation requires coordination with State governments[cite: 15]. Since labour is a concurrent subject, State governments have flexibility to modify the codes further as per their unique situation and requirements[cite: 16].

Transition Period Provisions

During the transition phase, relevant provisions of existing labour Acts and their respective rules, regulations, notifications, standards, and schemes continue to remain in force until States frame corresponding rules under the new codes[cite: 18]. The Government will engage public and stakeholders in framing corresponding rules, regulations, and schemes under the Codes[cite: 19].

The Four Labour Codes Framework

1. Code on Wages, 2019

• Universal Minimum Wage Coverage: Intended to guarantee minimum wages to workers across organized and unorganized sectors[cite: 22].
• Floor Wage Concept: Introduces floor wages to eliminate regional disparities in wage determination[cite: 22].
• Mandatory Review: Requires wage review every five years to ensure living standards[cite: 22].
• Equal Remuneration: Mandates equal pay for male, female, and transgender workers[cite: 22].

2. Industrial Relations Code, 2020

• Faster Dispute Resolution: Establishes two-member Industrial Tribunals for quicker case disposal within one year[cite: 24].
• Trade Union Recognition: Unions with 51% votes gain recognition as sole negotiating entities[cite: 24].
• Negotiating Councils: Creates councils where no single union achieves majority[cite: 24].
• Strike Rights Protection: Maintains right to strike while establishing systematic procedures[cite: 24].

3. Code on Social Security, 2020

• Universal Coverage: Extends social security to all workers including gig and platform workers[cite: 26].
• ESIC Expansion: Expands coverage from 566 to all 740 districts across India[cite: 26].
• Gig Worker Protection: Aggregators contribute 1-2% of annual turnover for gig worker benefits[cite: 26].
• Universal Account Number (UAN): Aadhaar-linked UAN ensures seamless portability across states and sectors[cite: 26].
• Hazardous Work Coverage: Even single worker in hazardous occupation receives ESIC benefits[cite: 26].

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

• Comprehensive Safety Framework: Covers factories, mines, plantations, and all establishments[cite: 28].
• Gender-Neutral Employment: Permits women to work night shifts and in all types of work with consent[cite: 28].
• Enhanced Safety Standards: Mandates safety committees and comprehensive workplace safety measures[cite: 28].
• Technology Integration: Requires IT-enabled inspection systems for transparency[cite: 28].

Key Transformational Changes

Employment Formalization

• Mandatory Appointment Letters: All workers must receive written appointment letters ensuring transparency and job security[cite: 31].
• Fixed-Term Employee Benefits: Fixed-term workers receive equal benefits as permanent employees[cite: 31].
• Reduced Gratuity Eligibility: Gratuity period reduced from five years to one year for fixed-term employees[cite: 31].

Compliance Simplification

• Single Registration System: Replaces multiple registrations with unified registration process[cite: 33].
• One Return Filing: Consolidates multiple returns into single filing requirement[cite: 33].
• Inspector-cum-Facilitator Model: Shifts from punitive “Inspector Raj” to guidance-based enforcement[cite: 33].
• IT-Enabled Processes: Mandates technology-driven compliance and inspection systems[cite: 33].

Social Security Revolution

• Unorganized Sector Coverage: Intended to provide first-time social security access to workers in the unorganized sector[cite: 35].
• Comprehensive Benefits: EPF, EPS, and medical benefits intended to be available to all workers[cite: 35].
• National Database Creation: Registration portal for unorganized sector workers[cite: 35].
• Mandatory Vacancy Reporting: Employers with 20+ workers must report vacancies online[cite: 35].

Critical Entity Implications

Immediate Compliance Requirements

• Appointment Letter Issuance: Mandatory for all workers across all categories[cite: 38].
• Single Registration: Transition from multiple registrations to unified system[cite: 38].
• Minimum Wage Implementation: Ensure compliance across all worker categories[cite: 38].
• Social Security Registration: Enroll all eligible workers in appropriate schemes[cite: 38].
• Safety Committee Formation: Establish committees for larger establishments[cite: 38].

Strategic Opportunities

• Workforce Flexibility: Utilize fixed-term employment with equal benefits[cite: 40].
• Reduced Compliance Burden: Benefit from streamlined processes and single filing[cite: 40].
• Enhanced Industrial Relations: Leverage structured dispute resolution mechanisms[cite: 40].
• Technology Integration: Implement IT-enabled HR and compliance systems[cite: 40].

Operational Changes

• HR System Overhaul: Integrate UAN-based employee management systems[cite: 42].
• Policy Updates: Revise employment policies for gender-neutral workplace practices[cite: 42].
• Training Programs: Implement safety training and compliance awareness programs[cite: 42].
• Documentation Systems: Establish comprehensive record-keeping for unified reporting[cite: 42].

Legislative Development & Modernization

The reform process involved extensive stakeholder consultation from 2015-2019, including nine tripartite discussions with Central Trade Unions, Employers’ Associations, and State Government representatives[cite: 44]. All four Bills underwent Parliamentary Standing Committee examination, ensuring comprehensive review before enactment[cite: 45].

The codes address the fundamental challenge of operating under fragmented, colonial-era labour laws from the 1930s-1950s[cite: 47]. By consolidating 29 laws with over 1,200 sections into four streamlined codes, the reform eliminates the previous system where workers needed to fill four forms for a single benefit[cite: 48].

Expected Outcomes

The labour codes are designed to enhance Ease of Doing Business, promote employment creation, and improve worker productivity while ensuring comprehensive social protection[cite: 50]. This transformational change creates a framework for both employees and employers, establishing India as a competitive destination for investment while ensuring social justice for workers[cite: 51].