New Labour Codes India — 4 Codes, Employee Impact & Key Changes 2025

India has consolidated 29 existing labour laws into 4 new Labour Codes — passed by Parliament. While implementation is pending full rollout as states continue to frame rules, these codes will significantly change employment conditions, salary structures, and worker protections. Here's what employees need to know.

The 4 New Labour Codes

Code	What It Covers	Replaces (Old Laws)
Code on Wages, 2019	Minimum wage, equal pay, wage payment rules	4 laws including Minimum Wages Act
Industrial Relations Code, 2020	Hire/fire, strikes, trade unions, fixed-term	3 laws including Industrial Disputes Act
Social Security Code, 2020	PF, ESIC, gratuity, maternity, gig workers	9 laws including EPF Act, Gratuity Act
OSH Code, 2020	Working hours, leave, safety, welfare	13 laws including Factories Act

Key Changes That Directly Affect Employees

1. Basic Wage Must Be Minimum 50% of CTC

Under the new Code on Wages, the basic wage must not be artificially reduced — it must be at least 50% of total wages (CTC). Currently many employers keep basic very low to reduce PF and gratuity contributions.

Impact:

• PF contribution increases (12% of higher basic = larger monthly PF deduction)
• Monthly take-home pay decreases slightly (more deductions)
• Gratuity at exit will be higher
• Long-term retirement savings increase significantly

2. Fixed-Term Employment — Statutory Benefits

Under the Industrial Relations Code, fixed-term employees are entitled to all statutory benefits proportionally — including gratuity. Currently, gratuity requires 5 years of continuous service, which excluded contract workers.

Impact: Fixed-term employees get gratuity even for short tenures — calculated proportionally on service period.

3. 4-Day Workweek Option

The OSH Code allows employees to work 4 days a week (instead of 5 or 6) — but with a maximum of 12 hours per day (instead of 8-9 hours), keeping total weekly hours at 48. This is an option the employer can offer — not a mandatory right for every employee.

4. Annual Leave Encashment Flexibility

The OSH Code allows accumulated earned leave (up to 30 days) to be carried forward or encashed annually — up to 300 days accumulated leave can be encashed at retirement.

5. Gig and Platform Workers — Social Security

For the first time, gig workers (Swiggy, Ola, Uber, Urban Company delivery/service workers) will be covered under the Social Security Code. Government will set up a fund for their welfare — though exact rules are still being finalized.

6. Retrenchment Rules — Industrial Relations Code

• Prior permission from government for layoffs in establishments with 300+ workers (increased from current 100+ workers)
• Organizations under 300 workers can retrench without prior permission
• Notice period before retrenchment: 3 months (up from 1 month)

The 50% basic wage rule is the change most employees will feel directly — through lower take-home and higher PF contributions. Long-term, it means significantly more retirement corpus.

Implementation Status

All 4 codes were passed by Parliament. However, labour is a concurrent subject — both Centre and States must frame rules. As of 2025, most states are still finalizing their rules. The codes have NOT fully come into force yet — but many provisions are expected to be implemented.

What Should Employees Do Now?

• Understand your current salary structure — check basic vs total CTC ratio
• Once implemented, expect changes in payslip — higher PF, lower take-home
• If on a fixed-term contract, track your service period for gratuity eligibility
• Gig workers: watch for social security registration notifications