New Labour Code
On 21 November 2025, the Central Government officially brought into force for new Labour Codes. This move replaces 29 central labour codes that were outdated with a consolidated and modern framework.
The four new labour codes provide better protection, equal opportunities, better wages, and a emphasises on providing a better future for workers and workforces. The four codes are the Occupational Safety, Health and Working Conditions Code 2020, the Code on Social Security 2020, the Industrial Relations Code 2020, and the Code on Wages 2019.
What are the Four Labour Codes?
The four Labour Codes are mentioned below:
- The Code on Wages, 2019: Focuses on regulating wage and bonus payments for all employments.
- The Industrial Relations Code, 2020: Deals with trade unions, conditions of employment, and dispute resolution.
- The Code on Social Security, 2020: Extends social security coverage such as pension and insurance to a wider workforce, including gig workers.
- The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020: Regulates health and safety standards in establishments.
Key Changes Under the New Labour Codes
Some of the key changes under the new Labour Codes are mentioned below:
Sector-Specific Highlights
- Exports: Fixed-term employees (contract workers) are now eligible for pro-rata gratuity (even if they work for less than 5 years) and other social security benefits.
- Textiles: Better protection for contract labour and assurance of double wages for overtime work.
Salary Structure
- The 50% Cap: The new definition of wages mandates that allowances such as house rent, conveyance, mobile allowance, etc. cannot exceed 50% of the total Cost-to-Company (CTC).
- Impact on Take-Home Pay: Therefore, the Basic Pay portion must be at least 50% of the total salary. Since contributions to the Provident Fund (PF) and Gratuity are calculated on the Basic Pay, these contributions will likely increase.
Workers may see a reduction in their monthly take-home cash but will have a higher retirement corpus (PF and Gratuity) in the long run.
Women in Workforce
- Night Shifts: Women are now legally permitted to work night shifts (after 7 p.m.) in all establishments, provided they give consent and the employer ensures adequate safety and transport.
- Equal Pay: Stronger provisions are in place to ensure equal pay for equal work, prohibiting gender discrimination in recruitment and wages.
Other Changes
- Health and Safety: Employers are now required to provide free annual health check-ups for all employees above the age of 40. Additionally, specific safety standards are now mandated for hazardous sectors, and the definition of inter-state migrant worker has been expanded to ensure they receive portability benefits (like ration cards) and travel allowances.
- Mandatory Appointment Letters: A major boost for job security is the requirement for mandatory appointment letters. Every employee must now receive a formal letter of employment, bringing transparency to the employer-employee relationship and helping to prevent exploitation.
- Timely Payment of Wages: To end the cycle of delayed salaries, the new rules mandate that wages must be paid on time. For many sectors, this deadline is set for the 7th of every month. This applies to all employees, regardless of how much they earn.
- Expanded Social Security (Gig & Platform Workers): For the first time, gig workers (like food delivery couriers and ride-sharing drivers) and platform workers are legally recognised. They are now eligible for social security schemes, including life and disability cover, health and maternity benefits, and old age protection.
- Universal Minimum Wage: Previously, minimum wage laws only applied to specific scheduled employments (covering about 30% of workers). Under the new Code on Wages, all employees, across both organised and unorganised sectors, have a statutory right to a minimum wage. The government will set a Floor Wage based on living standards, no state can set wages below this threshold.
What the New Labour Codes Mean for Employees?
The various benefits of the new Labour Codes for employees are mentioned below:
- Platform and gig workers will be provided the benefits of welfare schemes.
- Safer workplaces.
- The guidelines on job terms, working hours, and leave are clearer.
- The wages are consistent and the rules are standardised.
- Better access is provided for welfare benefits and social security.
What the New Labour Codes Mean for Employers?
The several changes for employers under the new Labour Codes are mentioned below:
- The compliance framework, HR policies, and payroll have been updated.
- Talent acquisition practices can be improved with the help of the new framework.
- The wage structure must be revised to meet the new wage code.
- Job roles must be redefined depending on the new classification and definitions.
Differences between New and Old Labour Codes
The main differences between the old and new Labour Codes are mentioned in the table below:
Category | Post Labour Reforms | Pre Labour Reforms |
Compliance Burden |
|
|
ESIC Coverage | Nationwide. For establishments will less than 10 employees, the coverage is voluntary. | Only for certain regions and usually not provided for establishments with less than 10 employees. |
Night Shifts for Women | Night shifts available for all occupations. | Only for certain roles. |
Timely Wages | Wages must be provided on time. | No compliance was mandatory. |
Preventive Healthcare | Annual health-checkups must be provided for free for workers who are 40 years and above. | No obligations. |
Minimum Wages | All workers must be provided a minimum wage. | Earlier, the minimum wage rule was for only for schedule employments/ industries. |
Social Security Coverage | All workers must be provided insurance, ESIC, PF, and social security cover. | No social security coverage was provided. |
Formalisation of Employment | Appointment letter is mandatory. | Appointment letter was not mandatory. |
FAQs on New Labour Code
- What is the Inspector-cum-Facilitator?
This is the new role for government labour inspectors. Instead of just penalising companies for minor faults, they are tasked with helping and advising employers on how to follow the law correctly. Inspections will also be computerised and randomised to ensure transparency.
- What happens if an employer does not pay wages on time?
Employers must pay wages by the 7th of the following month. If they fail to do so, they can be penalised. The new codes also simplify the dispute resolution process for claiming unpaid wages.
- Do I get paid for unused leave?
The regulations regarding leave encashment and eligibility have been streamlined. For example, in some sectors, the eligibility for leave has been reduced from working 240 days to 180 days a year.
- What is the Floor Wage?
The Floor Wage is a minimum threshold fixed by the Central Government based on the minimum living standard. No state government can fix a minimum wage lower than this Floor Wage.
- Can women now work night shifts in factories?
Yes, women are allowed to work at night (between 7 p.m. and 6 a.m.) in any establishment, but it is subject to their consent. The employer must also provide safety measures, adequate lighting, and transport.
- I have never received an appointment letter. Is that illegal now?
Yes, under the new Occupational Safety, Health and Working Conditions Code, employers are legally required to issue an appointment letter to every employee.
- Can my boss force me to work overtime?
No, overtime generally requires the worker's consent. Furthermore, if you do work overtime, the new codes mandate that you must be paid at twice the normal rate of wages.
- I am a freelance delivery driver. Do these codes help me?
Yes, the Code on Social Security specifically recognises gig and platform workers. You are now eligible for social security benefits like health insurance and disability cover, funded through a special contribution by aggregators.
- Will my monthly take-home salary decrease?
It is possible if your Basic Pay was previously less than 50% of your total salary, your employer must increase it to meet the 50% requirement. This increases your PF contribution (deducted from your salary), which lowers your monthly cash in hand but increases your savings for retirement.
- When did these new Labour Codes come into effect?
The four Labour Codes officially came into effect from 21 November 2025.
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