India has undertaken one of the most significant labour reforms in its history by merging and rationalising 29 central labour laws into four comprehensive new Labour Codes. These new codes aim to modernise the labour framework, simplify compliance, expand worker protections, and create a unified structure suitable for the evolving workplace.
The four codes are-
Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions (OSHWC) Code (2020) collectively reshape the rights of employees, responsibilities of employers, and the future of work in India.
Why the reform was needed?
For decades, India’s labour ecosystem was governed by a patchwork of numerous laws such as the Payment of Wages Act, the Factories Act, the Industrial Disputes Act, the Trade Unions Act, and various welfare-specific laws. Many were outdated, overlapping, or created compliance complexities for businesses. Different laws used different definitions for basic terms like wages, workers, and establishments, often causing confusion and legal disputes. With India aiming to strengthen manufacturing, boost ease of doing business, and extend protection to informal and gig workers, the older legal framework needed to be simplified and harmonised. The new Labour Codes were introduced to overhaul this complex system and replace it with a streamlined, consistent, and technology-friendly structure.
The Four Labour Codes: A breakdown
The Code on Wages is the foundational reform, setting uniform rules for minimum wage, payment of wages, and equal remuneration. One of its major changes is the establishment of a National Floor Minimum Wage, ensuring a standard baseline below which no state can set its minimum wages. It also mandates timely payment of wages to all employees, regardless of their category, and lays down the principle of equal pay for equal work across genders.
The Industrial Relations Code governs trade unions, industrial disputes, hiring and firing norms, and dispute-resolution frameworks. It raises the threshold for government approval for layoffs, retrenchment, or closure from 100 to 300 workers, giving firms more flexibility in scaling operations. At the same time, it seeks to formalize trade union recognition, strengthen negotiation mechanisms, and speed up industrial tribunal processes to resolve disputes faster.
The Code on Social Security is among the most progressive parts of the reform, as it extends social security protections to workers who previously existed outside the regulatory net especially gig workers and platform workers such as those employed by delivery apps, ride-sharing platforms, and online service aggregators. It introduces provisions for provident fund, insurance, maternity benefits, and old-age security, with responsibilities shared between the state and digital aggregator platforms.
The OSHWC Code consolidates multiple safety and working-condition laws into one, covering factories, mines, construction, transport, media, and more. It standardises working hours across sectors, establishes clear norms for overtime (to be paid at twice the normal wage), mandates annual health check-ups for certain workers, and strengthens safety protections for women by allowing them to work night shifts only with consent and adequate security.
Gratuity after one year
One of the most immediate changes comes from a uniform definition of wages, which now applies across all labour laws. This alone reshapes how companies structure salaries, allowances, and benefits. It also alters gratuity calculations. Fixed-term employees, who form a huge chunk of India’s modern workforce, become eligible for gratuity after just one year of service instead of five, a significant shift for sectors built on contract or project-based cycles.
(Fixed-term employees– FTE for Gratuity refers to the concept of counting an employee as a Full-Time Equivalent (FTE) for the purpose of calculating eligibility and benefits under the Payment of Gratuity Act. In many organisations, especially those with part-time, contract, or variable-hour employees, the number of working hours may differ from person to person. To ensure fairness and uniformity, companies convert such workers’ working hours into a full-time equivalent value.)
Social-security for workers
For the first time, gig and platform workers- the delivery agents, ride-hailing drivers, service-platform staff and freelancers powering the urban economy are formally recognised under labour law. Aggregators must contribute to a dedicated fund that will finance insurance, health protection, disability support and old-age benefits for them.
Women allowed night shifts
Under the new framework, women can work night shifts across all sectors, including mining, manufacturing, logistics and even hazardous occupations, provided consent is given and safety measures are in place.
Mandatory health check-up
Sectors like textiles, beedi manufacturing, plantations, media, dock work and audio-visual production, which historically operated under varied and uneven safety rules, are now covered under uniform protections. Mandatory annual health check-ups become standard in several industries. As per the new code, “Employers must provide all workers above the age of 40 years with a free annual health check-up.”
Key worker-centric provisions
One of the notable features across the codes is the focus on transparency and formal documentation. The reforms make appointment letters mandatory for every employee, including those in the unorganised sector. This ensures that workers have written, legally recognised proof of wage structure, role, working conditions, and social security entitlements.
The introduction of a single, standard definition of wages is another major shift. Many companies previously structured salary components strategically to reduce provident fund obligations. The new framework ensures that at least 50% of total compensation counts as wages, which increases employer contributions to PF and gratuity, boosting long-term security for workers.
The codes also emphasise gender equality by strengthening equal pay protections, allowing women to work across sectors including night shifts (with safety measures), and standardising maternity benefits under the wider social security umbrella.
Gig and platform worker inclusion
Perhaps the most transformative aspect is the inclusion of gig and platform workers. For the first time, the law formally recognises these workers, acknowledging the realities of the digital economy. Aggregators such as e-commerce, food delivery, and mobility platforms must contribute a percentage of their annual turnover towards a social security fund. This marks a historic shift, ensuring that millions of workers in India’s fast-growing gig ecosystem are no longer outside the purview of social protection.
Employer-friendly reforms and compliance simplification
A major objective of the new codes is to promote ease of doing business. Under the old system, employers had to maintain dozens of registers and filings, each with different formats. The new codes introduce a single licensing, registration, and return-filing system, largely digital, making compliance simpler and more uniform.
Increasing the layoff threshold to 300 workers is meant to encourage businesses especially in manufacturing to expand without fear of getting locked into rigid labour structures. Supporters argue that this will attract investment, promote economic growth, and create more jobs, especially in sectors like textiles, auto components, and electronics.
Concerns and criticisms
Labour unions and worker groups have raised concerns about certain aspects of the new codes. The increased retrenchment threshold is viewed by some as a dilution of job security, giving employers more freedom to fire workers without external oversight. Critics worry that this may weaken the bargaining power of unions and lead to a more employer-dominant labour market.
Another concern is that while the codes include gig workers, the actual benefits will depend on how effectively state governments implement the schemes. Without strong enforcement, social security may remain theoretical rather than practical for many digital workers. Similarly, while the codes promise simplified compliance, many state governments may take time to adapt, potentially leading to delays in full rollout.
Broader Economic Implications
In the long term, the New Labour Codes aim to reshape India’s labour market into a more flexible yet secure system. By reducing legal complexities and easing hiring and scaling, the codes may boost both domestic and foreign investment. More formalisation through mandatory contracts, unified wage structures, and inclusion of gig labour is expected to bring millions of workers into the organised economy, increasing productivity and social protection.
For India’s ambition of becoming a global manufacturing and digital-service hub, modern labour laws are essential. The new framework attempts to strike a balance between worker welfare and employer flexibility, though finding that equilibrium in practice will take time and continuous refinement.
India’s New Labour Law Codes represent a historic overhaul of labour governance. By unifying 29 disparate laws into four cohesive codes, the reforms seek to create a simpler, fairer, and more future-oriented labour ecosystem. While the benefits — increased formalisation, expanded social security, uniform wage structures, and simplified compliance — are substantial, the concerns around job security and implementation must also be addressed carefully. Ultimately, the success of the Labour Codes will depend on how effectively employers, workers, and governments collaborate to translate legislative design into real-world fairness and growth.