We write to alert you that India’s four new Labour Codes have been made effective on November 21, 2025.

The Labour Codes replace 29 central / federal level labour laws and are India’s biggest labour law reform. The Labour Codes were enacted in 2019 & 2020, and it took over 5 years for the government to make them fully effective.

We are providing below a high-level overview of the Labour Codes along with the key aspects that they cover.

1. Wages – New Definition: Possibly the biggest change across all the Labour Codes is the introduction of a new definition of ‘wages’. It consists of salary, allowances and other components expressed or capable of being expressed in monetary terms and includes basic pay, dearness allowance, and retaining allowance. There is a specific list of components that do not amount to ‘wages’, such as statutory bonus, provident fund and pension contributions, conveyance allowance, house rent allowance, overtime, besides others. Remuneration-in-kind, up to 15% of the total wages shall also be treated as wages. To tackle the issue of sham wage structures where wages are split into several components to, inter alia, limit social security contributions and other payouts, the Labour Codes clarify that in the event payments made to employees under the excluded components exceed 50% of the total remuneration, the excess amount shall be deemed to be ‘wages’.

2. Code on Wages, 2019 (“Code on Wages”): The Code on Wages subsumes four central / federal labour legislations pertaining to remuneration, being the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976.

1. 1. Applicability: The Code on Wages covers all types of employees and establishments, irrespective of their nature of business or activities.
   2. Floor Wages & Minimum Wages: The Code on Wages introduces a concept of ‘floor wage’. The ‘floor wage’ shall be notified by the central / federal government to serve as a baseline for the state governments to prescribe minimum wages. If the existing minimum wages fixed by the central / federal or state governments are higher than the ‘floor wage’, the existing minimum wages cannot be reduced.
   3. Anti-Discrimination: The Code on Wages expressly prohibits an employer from discriminating on the basis of gender in matters relating to wages, in respect of the same work or work of similar nature. There is also a prohibition on discriminating on the ground of sex while recruiting for the same work or work of similar nature and vis-à-vis the conditions of employment.
   4. Bonus: In respect of bonus payments to eligible employees, the Code on Wages lists factors for disqualification of bonus, which now include dismissal from service on being convicted for sexual harassment.

3. The Industrial Relations Code, 2020 (“IR Code”): The IR Code consolidates three central / federal labour laws that govern and regulate industrial relations and industrial disputes, being the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947.

1. 1. Fixed term employment: The IR Code formalizes the concept of fixed term employment, being the engagement of a worker on the basis of a written contract of employment for a fixed period. Further, a fixed term worker is entitled to: (i) parity in wages, working hours, allowances and other benefits applicable to permanent workers for doing same work or work of similar nature; (ii) statutory benefits as provided to permanent workers proportionate to the period of employment, notwithstanding the qualifying period to receive such benefits as prescribed in the legislations; and (iii) gratuity if the fixed-term worker renders service under the contract for a period of at least one year.
   2. Retrenchment (Termination), Lay-off and Closure: The threshold for seeking permission from the appropriate government in case of lay-off, closure and retrenchment in factories, mines and plantations has been increased to 300 workers, discretion being given to the authorities to notify a higher threshold.
   3. Grievance Redressal Committee: Every establishment that employs at least 20 workers is required to form a grievance redressal committee (“GRC”). The GRC should have not more than 10 members, with equal participation from employer and the workers, chosen in a manner as prescribed.  There should be equal representation of female workers and such representation should not be less than the proportion of female workers to the total workers in an establishment.
   4. Trade Unions: There shall be a negotiating union or negotiating council in an industrial establishment having a registered trade union, to engage in negotiations on certain prescribed matters. In case there is only one registered trade union, such union will be the negotiating union. However, in case there are multiple registered trade unions, the law provides for the manner in which the negotiating union shall be recognized.
   5. Standing Orders: Every establishment having at least 300 workers is required to adopt standing orders, which are akin to service rules. The concept of deemed certification of the model standing orders as prescribed by the government has been introduced, wherein, if an employer adopts the model standing orders (upon informing the authorities), it shall be deemed to have been certified. Incidentally, in 2020, draft model standing orders for the services, manufacturing and mining sectors have been published by the central / federal government.
   6. Payment to Worker Re-Skilling Fund: The employer is required to contribute 15 days’ wages to the Worker Re-Skilling Fund to be set up by the government for every worker retrenched (terminated). The fund shall provide monetary compensation to workmen who are retrenched.

4. The Code on Social Security, 2020 (“SS Code”): The SS Code streamlines India’s social security landscape, by rationalizing and consolidating 9 social security and welfare statutes, being: (i) Employee’s Compensation Act, 1923; (ii) Employees’ State Insurance Act, 1948; (iii) Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; (iv) Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959; (v) Maternity Benefit Act, 1961; (vi) Payment of Gratuity Act, 1972; (vii) Cine-workers Welfare Fund Act, 1981; (viii) Building and Other Construction Workers Welfare Cess Act, 1996; and (ix) Unorganized Workers’ Social Security Act, 2008.

1. 1. Categories of workers: The SS Code covers the following categories of workers (i) employees (ii) contract labour (iii) fixed term employees (iv) gig workers (v) platform workers (vi) home-based workers (viii) inter-state migrant workers (ix) self-employed workers and (x) building workers, and (xi) unorganized workers.
   2. Social Security obligations for Aggregators: Social security benefits need to be provided to / in respect of gig and platform workers. ‘Aggregators’, who are the digital intermediaries or marketplaces for buyers or users of a service to connect with the sellers or the service providers, are required to make social security contributions for gig and platform workers they engage.
   3. Coverage of the unorganized sector: The government can enact social security schemes for other unorganized workers such as home-based workers and self-employed workers. To avail the benefit of the schemes, the eligible beneficiaries are required to register themselves on a portal in the manner prescribed.
   4. Gratuity: Different thresholds are provided for eligibility for payment of gratuity to permanent and fixed term employees. A fixed term employee is eligible for payment of gratuity on pro-rata basis irrespective of the duration of their employment, subject to the eligibility threshold of 1 year prescribed under the Labour Codes.

5. The Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”): The OSH Code consolidates 13 central / federal  labour laws, being the (i) Factories Act, 1948; (ii) Contract Labour (Regulation and Abolition) Act, 1970; (iii) Mines Act, 1952; (iv) Dock Workers (Safety, Health and Welfare) Act, 1986; (v) Building & Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996; (vi) Plantations Labour Act, 1951; (vii) Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 ; (viii) Working Journalists and other News Paper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; (ix) Working Journalists (Fixation of Rates of Wages) Act, 1958; (x) Cine Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981; (xi) Motor Transport Workers Act, 1961; (xii) Sales Promotion Employees (Conditions of Service) Act, 1976; and (xiii) Beedi and Cigar Workers (Conditions of Employment) Act, 1966.

1. 1. Registration of Establishments and Licenses: All establishments must obtain a single registration within 60 days from the date of applicability of the OSH Code, unless they already have an existing central / federal labour law registration. Any subsequent change in the ownership or management or any particulars contained in the registration must be electronically intimated within 30 days. There is now a common license in respect of a factory and for engaging contract labour.
   2. Hours of Work, Annual Leave, Overtime Provisions: The daily hours of work are set at eight hours, with special hours for certain sectors. Consent of the worker is required for overtime work and rules may be prescribed to limit the hours of overtime. Further, the employer will be required to pay twice the rate of wages for overtime work. Annual leave may need to be encashed upon demand at the end of the calendar year, besides at the time of employment termination.
   3. Employment of Women: Female employees can work in night shifts upon their consent being obtained. Certain conditions / safeguards need to be complied with by the employer relating to the safety of female employees.
   4. Contract Labour: Employers engaging at least 50 contract labour (agency workers) and the agency deploying such workers, are required to ensure the prescribed compliances. The central / federal law also now prohibits engagement of contract labour in core activities, which has been well defined.
   5. Employer’s Duties: The workplace should be free from hazards which cause injury or occupational disease. Free annual health examination should be provided to certain classes of employees. Appointment letters should be issued to the employees.

The Labour Codes also provide for the maintenance of consolidated registers, concept of inspector-cum-facilitator, enhanced monetary penalties for non-compliance and the much-needed opportunity of ‘compounding’ of non-compliances before penalties are imposed. The four new Labour Codes are now in effect. Every employer, irrespective of their size, sector or location, is required to comply with the new Labour Codes, alongside certain provisions which trigger on satisfying prescribed employee thresholds.

AZB’s Employment, Labour & Benefits Law Practice Group (employmentlaw@azbpartners.com) looks forward to supporting you on this journey.