Commencement of the Four Labour Codes (India)

India’s long‑pending labour law overhaul finally came into effect on 21 November 2025, when the Ministry of Labour& employment formally brought all four labour codes into force. These codes consolidate 29 central labour laws into four:

1. Code on Wages, 2019
2. Industrial Relations (IR) Code, 2020
3. Code on Social Security (SS), 2020
4. Occupational Safety, Health and Working Conditions (OSH) Code, 2020

 

Why Were the Labour Codes Introduced?

The government emphasized the need to replace fragmented, colonial‑era labour laws that were outdated and difficult to administer. The older laws were spread across decades (1930s–1950s) and struggled to keep up with modern employment structures. The new codes aim to simplify compliance, expand worker protections, and align India with global standards

Key Changes Introduced by the Labour Codes

1. Wage & Compensation Reforms

• ·   A uniform definition of “wages” now applies across all laws, affecting PF, gratuity, bonus, overtime, leave encashment, etc.
• ·       Minimum wages apply to all employees, not only scheduled industries.
• ·       National floor wage to be notified by the Centre; states cannot set wages below this level.
•       Employers must pay final dues within two working days of termination/resignation

2. Social Security Expansion

• ·      Social security coverage extended to gig workers, platform workers, unorganised workers, and fixed‑term workers.
• ·       Gratuity eligibility for fixed‑term employees reduced from five years to one year.
• ·       ESIC expanded, with mandatory coverage for hazardous industries regardless of workforce size.

3. Employer Compliance & Working Conditions

• ·       Mandatory appointment letters for all employees.
• ·       Defined work hours, overtime rules, and enhanced OSH provisions.
• ·       Women permitted to work night shifts with safeguards.
• ·       Stricter norms for safety, health, and welfare.

4. Industrial Relations Reforms

·       Changes to dispute resolution, standing orders, and trade union regulations.

·       Aims to reduce compliance complexity and encourage ease of doing business.

 

Aftermath: Impact & Outcomes After Implementation

A. Impact on Workers

• 1.      Better Social Security Coverage - Workers—especially gig/platform workers, unorganised sector employees and fixed‑term workers—gain access to PF, ESIC, insurance and other benefits.
• 2.      Transparency & Job Security - Mandatory appointment letters bring clarity in terms and conditions of employment.
• 3.      Potential Impact on Take‑home Pay - Because of the new wage definition, some employees may see reduced take‑home salaries but gain higher contributions to PF, gratuity, etc.

B. Impact on Employers & Industries

• 1.      Compliance Overhaul
• Companies must adapt to new wage structures, documentation requirements, and the broader definitions under social security laws. Dual compliance challenges arose initially as state-level rules     were still being finalised.

• 2.      Short‑term Operational Costs

Recalculating payroll, adjusting HR systems, updating policies, and conducting wage sensitivity analyses became necessary.

3.      Long‑term Benefits

·       Clearer regulations

·       Reduced overlapping laws

·       Better industrial harmony

·       Encouragement of formalisation

C. Impact on Gig & Platform Economy

• ·       The codes introduce formal definitions for gig/platform work and require aggregators to                contribute 1–2% of turnover (capped at 5% of worker payouts) towards social security funds.
• ·   This is one of the most transformative structural changes since gig workers were previously excluded from formal labour protections.

Overall Assessment

Positive Outcomes

• ·       Streamlined labour compliance regime
• ·       Expanded social security net
• ·       Greater formalisation of employment
• ·       Improved workplace safety norms
• ·       Clearer employer‑employee rights framework

Challenges

• ·  Initial confusion about implementation timelines
• ·       Payroll restructuring burdens
• ·       Possible short‑term reduction in take‑home pay
• ·       Varying readiness across states
• ·       Need for capacity building for small businesses

Summary

The four labour codes—effective 21 November 2025—represent India’s most significant labour reform in decades. Their aftermath includes a mix of administrative challenges and positive long‑term structural changes aimed at formalisation, welfare enhancement, and simplifying the regulatory landscape