Labour Codes Implemented - A Landmark Reform

On 21 November 2025, the Government of India (GOI) announced the immediate implementation of four major pieces of labour legislation: Code on Wages, 2019 (Wage Code); Industrial Relations Code, 2020 (IR Code); Code on Social Security, 2020 (Social Security Code); and Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code).

Collectively referred to as the Labour Codes, these reforms represent one of the most significant changes in India's employment law framework in decades. All four Codes became effective on 21 November 2025 (Effective Date), although certain provisions within some Codes will be operationalised in phases.

Background and Legislative Framework

The Labour Codes consolidate 29 separate statutes into a streamlined structure designed to simplify compliance and enhance worker protections:

• Wage Code: Governs wage-related provisions, combining laws such as the Payment of Wages Act and Minimum Wages Act.
• Social Security Code: Integrates nine social security laws, including those on provident funds, gratuity, and maternity benefits.
• OSH Code: Merges 13 laws relating to workplace safety and working conditions.
• IR Code: Brings together laws on trade unions, standing orders, and industrial dispute resolution.

Wage Code

The Wage Code introduces a uniform definition of "wages", which includes basic pay, dearness allowance, and retaining allowance. Exclusions such as house rent allowance, overtime, and bonuses are permitted but capped at 50% of total remuneration—any excess is treated as wages. This definition applies across calculations for minimum wages, Employees' Provident Fund (EPF), Employees' State Insurance (ESI), gratuity, statutory bonus, and other wage-related provisions.

Key Highlights

• National floor wage: To be fixed by the Central Government, serving as a benchmark for state minimum wages.
• Equal remuneration: Obligations now extend to all genders for work of similar nature, including allowances and benefits under awards or settlements.
• Payment timelines: Employers must pay wages within two working days of termination or resignation.
• Scope of application: The Wage Code applies to all employees, removing the previous income threshold under the Payment of Wages Act.

Social Security Code

The Social Security Code consolidates nine social security laws and introduces coverage for gig workers, platform workers, and fixed-term employees, granting them statutory entitlements such as EPF, gratuity, maternity benefits, and accident compensation.

Key Highlights

• Aggregator obligations: Aggretators, which are defined as digital intermediaries or marketplaces connecting service buyers/users with service providers (including ride-sharing services, food and grocery delivery services, logistics services) must contribute a 1 to 5% welfare cess for social security.
• Career centres: Replace employment exchanges, offering recruitment information and vocational guidance.
• Electronic registration: Mandatory for all establishments.
• Transfer liability: Both transferor and transferee share responsibility for unpaid dues, with transferee liability capped at asset value received.
• Limitation period: As the limitation period for EPF and ESI proceedings is five years; pending inquiries must conclude within two years of the commencement of the Social Security Code.
• Compounding of offences: First-time offences punishable with fines may be compounded at 50%, whilst first-time offences punishable by up to one year imprisonment and fines may be compounded at 75%. Other offences may not be compounded.
• Penalties: Non-payment of contributions can attract imprisonment up to three years and fines of up to INR 3,00,000 for repeat offences.

OSH Code

The OSH Code consolidates 13 laws governing workplace safety and welfare. It applies to establishments with ten or more workers, covering most offices and service-sector units.

Key Highlights

• Definition of "worker": Includes manual, skilled, technical, operational, clerical, and supervisory staff (including journalists and sales promotion employees), excluding armed forces, police, managerial roles, and supervisory staff earning above INR 18,000/month.
• Working hours: Capped at eight per day; establishments must display work schedules.
• Appointment letters: Mandatory for employers to issue appointment letters to all workers.
• Women in night shifts: Permitted with consent and prescribed safety and welfare measures, in addition to any state-specific requirements which continue to apply.
• Contract labour: Provisions of the OSH Code pertaining to engagement of contract labourers are now applicable to establishments which employ at least 50 contractor labourers in the preceding 12 months (from 20). Contract labour is barred in core activity of an establishment (now defined), except where such work is ordinarily outsourced, does not require full-time roles, or there is a temporary spike in workload. The definition of contract labour includes workers engaged through contractors, including part-time and migrant workers, and excludes contractor's regular employees receiving increments, social security and welfare benefits.
• Inter-state migrant workers: Expanded definition includes self-migrating workers earning up to INR 18,000/month.
• Overtime: Payable at twice the ordinary rate of wages, subject to worker consent.
• Penalties: Higher monetary penalties apply; first-time offences may be compounded at 50% (fine-only offences) or 75% (offences with imprisonment up to one year plus fine).

IR Code

The IR Code consolidates laws on trade unions, standing orders, and dispute resolution, introducing significant changes to industrial relations.

Key Highlights

• Fixed-term employees: Entitled to statutory benefits at par with permanent employees, including ESI, EPF, bonus, and gratuity proportionate to tenure.
• Standing orders: Applicability threshold for standing orders increased to 300 workers. Expansion also now covers commercial establishments.
• Worker Re-skilling Fund: IR Code mandates the creation of a Worker Re-skilling Fund. Employers must contribute an amount equivalent to 15 days' last drawn wages for every retrenched worker within 45 days.
• Dispute resolution: Industrial Tribunals established with clearer processes and time-bound norms. Workers may approach tribunals directly after 45 days of conciliation, provided disputes are raised within two years.
• Collective bargaining: Recognition of a sole negotiating union supported by at least 51% of workers; where no majority exists, a negotiating council will be formed.
• Strike notice: Trade unions must provide 14 days' advance notice before striking.
• Penalties: Increased significantly, up to INR 2,00,000 for non-compliance, with additional fines for continued violations and up to INR 4,00,000 for repeat offences. Certain offences may be compounded at 50% or 75% of the maximum fine.
• Representation: Negotiating councils must include equal employer and worker representation, mandatory proportionate representation of women, and rotational chairpersonship.

Key Takeaways

The implementation of the Labour Codes represents a major shift in India's employment law landscape. By consolidating 29 statutes into four comprehensive codes, the Government of India has introduced a framework that requires immediate attention from employers. These changes go beyond procedural adjustments and necessitate a thorough review of organisational policies and compliance strategies.

Employers should act promptly to ensure readiness. Key priorities include reviewing wage structures to comply with the new definition of "wages", updating social security systems to cover gig and platform workers, strengthening workplace safety protocols, and revisiting industrial relations strategies in light of new union recognition and dispute resolution mechanisms. Early preparation will help mitigate compliance risks and ensure smooth implementation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.