India’s Labour Law Reset

 

A Legal Brief on the 2025 Labour Code Implementation

On 21 November 2025, India officially entered a new phase of labour regulation with the Ministry of Labour and Employment’s notification of the four consolidated Labour Codes: the Code on Wages, 2019 (Wage Code), the Industrial Relations Code, 2020 (IR Code), the Code on Social Security, 2020 (SS Code) and the Occupational Safety, Health and Working Conditions Code, 2020 (OSHW Code) (collectively, Labour Codes). These Codes subsume 29 existing labour legislations, representing the most extensive labour reform in independent India.

However, the manner of notification (issued without a staggered rollout, detailed implementation timeline, or simultaneously notified rules) has raised practical and interpretive challenges. Existing rules under repealed laws are, by default, expected to guide compliance, provided they do not contradict the new statutory framework. This transitory situation creates legal ambiguities, especially until states issue their respective rules or amendments.

This brief, crafted for legal practitioners, compliance officers, and industry stakeholders, summarises the structural changes introduced by the Labour Codes, highlights implementation risks, and offers a compliance-focused lens. While the reform aims at rationalising the compliance landscape, employers must now assess and realign their employment frameworks with urgency, balancing central provisions against state-specific variations.

 

Legislative Architecture and Codification Impact

 

Codification and Consolidation: The Legislative Breakthrough

The newly enforced Labour Codes are designed to unify and simplify India’s complex web of central labour laws. In a landmark step, the Government of India has consolidated 29 distinct pieces of legislation into four comprehensive codes, each focusing on a thematic area of employment law. The objective is two-fold: (1) to streamline compliance obligations, and (2) to create a uniform regulatory environment that balances employee rights and employer flexibility.

This reform alters long-standing judicial and administrative precedents tied to now-repealed statutes. It brings forth a codified, unified framework where consistency in interpretation will eventually be shaped by new jurisprudence.

 

The Four Labour Codes and Subsumed Legislations

Labour Code	Purpose / Key Focus	Subsumed Laws
Code on Wages, 2019 (“Wage Code”)	Enacted to regulate wage payment, minimum wages, bonus, and equitable remuneration.	Payment of Wages Act, 1936  Minimum Wages Act, 1948  Payment of Bonus Act, 1965  Equal Remuneration Act, 1976
Code on Social Security, 2020 (“SS Code”)	Encompasses social security, provident fund, employee insurance, gratuity, and maternity benefits.	Employees’ Provident Funds and Miscellaneous Provisions Act, 1952  Employees’ State Insurance Act, 1948  Payment of Gratuity Act, 1972 Maternity Benefit Act, 1961  Employment Exchanges Act, 1959  Employee’s Compensation Act, 1923 Building and Other Construction Workers’ Welfare Cess Act, 1996  Cine-Workers Welfare Fund Act, 1981  Unorganised Workers’ Social Security Act, 2008
Industrial Relations Code, 2020 (“IR Code”)	Governs trade union formation, employment standing orders, layoffs, retrenchment, and dispute resolution.	Industrial Disputes Act, 1947  Trade Unions Act, 1926  Industrial Employment (Standing Orders) Act, 1946
Occupational Safety, Health and Working Conditions Code, 2020 (“OSHW Code”)	Integrates health, safety, and working condition norms across diverse industries and labour categories.	Factories Act, 1948  Contract Labour (Regulation and Abolition) Act, 1970  Inter-State Migrant Workmen Act, 1979  Mines Act, 1952  Beedi and Cigar Workers Act, 1966 Motor Transport Workers Act, 1961 Dock Workers (Safety, Health and Welfare) Act, 1986 Building and Other Construction Workers Act, 1996  Plantations Labour Act, 1951  Sales Promotion Employees Act, 1976 Cine-Workers and Cinema Theatre Workers Act, 1981  Working Journalists Acts (1955 and 1958)

 

Legislative Status: Notification vs Enforceability

Although all four Labour Codes have now been notified with effect from 21 November 2025, they are not uniformly enforceable due to the absence of corresponding rules in several states. Particularly, only parts of the Wage Code and SS Code have been enforced, with gaps still remaining around the EPF and Central Advisory Board provisions.
 

Legal Ramifications of Repeals

The repeal of prior legislation is prospective. However, litigation, entitlements, and liabilities under the repealed laws will persist until resolved. Section 24 of the General Clauses Act, 1897, will apply to ensure continuity of actions, penalties, and investigations initiated under the repealed statutes. Moreover, the Employees’ Provident Fund Act, 1952, although listed for codification, has not been repealed by notification—creating a partial duality of law.

 

Key Substantive Changes and Their Legal Implications for Employers

The Labour Codes not only consolidate but substantially revise India’s labour regulatory framework. Employers must now grapple with both conceptual shifts and operational changes that alter the compliance landscape. Below is an analytical breakdown of the key substantive changes and their legal implications:
 

A. Expanded Definition of “Wages” and Its Ripple Effects

The new uniform definition of “wages” under all four codes is broader and standardised, unlike the fragmented definitions under prior laws. This has a cascading impact on multiple statutory benefits.

• Key Provisions:
  • Exclusions (e.g., HRA, bonus, overtime) are capped at 50% of total remuneration. If excluded components exceed this threshold, the excess is considered part of wages.
  • Remuneration in kind (e.g., food coupons) up to 15% is treated as wages.
• Legal Implications:
  • Gratuity: Will now include fixed allowances, leading to higher liabilities.
  • Maternity Benefits, Bonus, Retrenchment Compensation, and Leave Encashment calculations will be re-evaluated.
  • Action: Employers must re-examine salary structures and re-calculate financial provisioning under revised wage norms.

 

B. Restrictions on Contract Labour in Core Activities

The OSHW Code restricts engagement of contract labour in core activities, with limited exceptions for emergencies or specialised services.

• Legal Implications:
  • Establishments across sectors such as manufacturing, retail, logistics, and services may need to restructure operational outsourcing models.
  • Customary practices or statutory exemptions need to be examined and documented meticulously.
  • Risk of litigation or inspector scrutiny in ambiguous cases will increase.

 

C. Industrial Relations Overhaul: New Thresholds and Reskilling Mandates

The IR Code increases the threshold for prior government approval for layoffs, retrenchment, or closure from 100 to 300 workers.

• Reskilling Fund: Employers are mandated to contribute 15 days’ wages for retrenched workers (awaiting formal notification).
• Union Recognition: Legal recognition and collective bargaining rights for registered trade unions now follow a structured recognition model.
• Legal Implications:
  • Higher severance costs and compliance obligations for large industrial units.
  • Enhanced negotiation dynamics in unionised workplaces.
    

 

D. New Regulatory Mandates for Employers

Change	Legal Mandate	Implication
Grievance Redressal Committee	Mandatory for establishments with 20+ workers	Equal representation of workers, majority decision-making.
Standing Orders	Required for 300+ workers	New compliance burden for many industries.
Letters of Appointment	Mandatory for all workers	Closes previous informality loopholes.
Overtime Consent	Mandatory worker consent for OT	Strengthens worker rights; increases administrative responsibility.
Timeline for Final Wage Payment	2 days from resignation/termination	Requires HR/payroll overhaul for timely clearance.

 

E. Gig Workers and Platform Economy

The SS Code contemplates social security coverage for gig and platform workers, a novel inclusion in Indian law.

• Legal Implications:
  • Need to monitor central vs state scheme interactions (e.g., Karnataka law).
  • Onboarding protocols and contractual documentation for gig workers must be realigned.
    

 

F. Fixed-Term Employment Normalisation

Fixed-term employees are now entitled to benefits (including gratuity) pro-rata, removing the requirement of minimum continuous service (e.g., 5 years for gratuity under the old regime).

• Implication:
  • Employers must revise contracts, benefit policies, and payroll systems accordingly.

Compliance Roadmap for Employers

 

A. Immediate (0–3 Months): Legal Assessment and Policy Audit

Action Item	Objective
Comprehensive Legal Audit	Map current practices and policies against the Labour Codes. Identify conflicts and exposures.
Re-evaluate Wage Structures	Align compensation with new definition of ‘wages’ to avoid misclassification risks and higher liability.
Review Fixed-Term Employment Contracts	Ensure proportionate benefits (e.g., gratuity) are explicitly included.
Check Applicability of Core Activity Contract Ban	Assess vendor contracts and internal staffing for compliance with OSHW Code restrictions.
Prepare Final Settlement Compliance	Ensure payroll systems can process exit dues within 2-day timeline.

 

B. Short-Term (3–6 Months): Process Reengineering and Training

Action Item	Objective
Policy Updates and Standard Operating Procedures (SOPs)	Develop new SOPs for wage payments, overtime, dispute redressal, contract labour, etc.
Training for HR, Legal & Line Managers	Conduct structured awareness programs on changes in employment terms, grievance redressal, industrial relations, etc.
Grievance Redressal Committees	Constitute committees with equal worker participation, including representation of women.
Digitisation of Documentation	Automate issuance of appointment letters, contract records, and overtime consents.

 

C. Long-Term (6–12 Months): Strategic Alignment and State Monitoring

Action Item	Objective
Monitor State-Specific Rules	Track implementation status and amendments by relevant State governments.
Update Standing Orders	Draft and certify Standing Orders where applicable (300+ workers) to ensure clarity and legal protection.
Cost Impact Analysis	Regularly update financial forecasting models to reflect wage-linked liabilities (gratuity, PF, etc.).
Workforce Restructuring	Re-design workforce strategy to optimise between permanent, fixed-term, and contract employees.

 

D. Sector-Specific Considerations

Sector	Unique Focus Area
IT/ITES	Review exemptions under State standing orders and labour laws—may no longer apply
Manufacturing	Ensure retrenchment and layoff compliance with new thresholds and reskilling provisions
E-commerce & Platform	Assess gig worker coverage under social security provisions
Construction	Align with BOCW-specific schemes now under SS Code umbrella

 

Conclusion

The 2025 Labour Code implementation is not merely a statutory reform, it marks a paradigm shift in India’s labour jurisprudence. With the consolidation of decades-old fragmented laws into a simplified framework, India has initiated a modern, codified, and rights-balanced regime. However, the manner of rollout, absence of harmonised rules, and ambiguities in state-level alignment have diluted what could have been a smoother legal transition.

India’s labour reforms, long in the making, are now law. While procedural clarity may follow in months or even years, the substantive shift in labour law compliance has already begun. Employers who invest in early legal alignment, stakeholder training, and governance reforms will not only ensure compliance—but gain strategic advantage in attracting, retaining, and protecting human capital in the years ahead.