New Labour Codes 2025: Comprehensive Guide to Wage, Security, Safety & Compliance Changes

The Indian government launched four New Labour Codes 2025. This landmark reform aims to balance worker protection with business flexibility. It also expands social security coverage to around 50 crore workers. The codes streamline compliance by replacing 29 older laws.

The Four New Labour Codes 2025

Four codes form the foundation of the new Indian labour law framework: ​

• Code on Wages, 2019
• Code on Social Security, 2020
• Industrial Relations Code, 2020
• Occupational Safety, Health and Working Conditions (OSH) Code, 2020

These Codes replace many overlapping laws with a single, technology-driven system. This new system covers processes like registration, returns, inspections, and enforcement.

Key Objectives of the New Labour Codes 2025

The Labour Code reforms 2025 focus on three fundamental pillars:

Wage Security:

Universal minimum wages, timely payment guarantees, standardised wage definition

Social Security Expansion:

Extended PF, gratuity, and health insurance to unorganised and gig workers

Safe Working Conditions:

Uniform safety standards, reduced working hours, and improved leave policies

These reforms simplify business compliance through a single registration and digital filing. They also introduce risk-based inspections.

Major Changes Under the New Labour Codes

1. Worker Classification and Definitions

The labour law classification changes introduce clear, consistent definitions

across all four Codes:

This standardisation ensures social security for gig workers. It also helps cut ambiguity in benefit entitlements. Understanding the fundamentals of a legal contract is crucial for managing these relationships.

2. Code on Wages: Impact on Salary Structure

• New Wage Definition: “Wages” will now mean basic pay plus specific allowances, which must constitute at least 50% of the total cost to the company (CTC). This shift will directly impact the calculation of PF, gratuity, and overtime, potentially boosting long-term benefits while affecting immediate take-home pay. Employees should understand the tax implications of PF withdrawal when planning their finances, and can learn more about the general PF withdrawal process in India.
• National Floor Wage: A central benchmark below which states cannot set minimum wages.
• Universal Coverage: Minimum wages apply to all sectors, with mandatory review every five years.

3. Working Hours, Leave, and Overtime Rules

• Flexible Work Arrangements: Codes enable models like compressed workweeks within set limits.
• Increased Overtime Pay: Calculated on the broader “wage” definition.
• Easier Leave Eligibility: Paid annual leave now requires 180 days of work (down from 240).

4. Social Security Expansion (PF, Gratuity, ESI)

• Wider Coverage: Benefits extend to gig workers, platform workers, and unorganised sector employees.
• Gig Economy Contribution: Aggregators may contribute 1-2% of turnover toward worker social security.
• Faster Gratuity: Fixed-term employees are eligible after 1 year of service. See detailed updates in the New Gratuity Rules 2025

5. Industrial Relations Code: Hiring, Firing, and Unions

• Structured Dispute Resolution: Aims to reduce litigation.
• Re-skilling Fund: Employers contribute to a fund for retrenched workers (e.g., 15 days’ wages per worker) to support skill development.
• Regulated Strikes: Clearer notice periods and procedures.

6. OSH Code: Safety and Working Conditions

• Single Compliance Framework: Merges 13 laws.
• Women’s Safety: Allows night shifts with mandated safety and transport provisions.
• Enhanced Welfare: Focus on health check-ups, crèches, and safety training.

Compliance Simplification: Inspector-Cum-Facilitator

The codes replace the “inspector raj” with a technology-driven system:

• Single Registration and Unified Return
• Risk-Based, Random Inspections to reduce harassment.
• Inspector-cum-facilitators to guide employers.

Practical Impact: For Employees and Employers

For Employees & Workers:

• Possible change in take-home salary due to new wage definition.
• Higher PF and gratuity accruals over time.
• Stronger minimum wage and timely payment
• Improved leave policies and retrenchment protections.

For Employers & HR Teams:

• Audit Salary Structures to ensure 50% basic wage compliance.
• Update HR Policies, appointment letters, and contracts. Startups can refer to our guide on creating compliant HR policies.
• Reclassify Workforce (gig, platform, migrant) and ensure correct social security coverage.
• Leverage Simplified Compliance via digital portals and unified processes. Many businesses find that partnering with expert payroll management services ensures accurate, hassle-free compliance with these changes.

Next Steps for Businesses

Employers must act to ensure compliance with the Labour Codes 2025. Key actions include reviewing payroll systems and mapping workforce categories. Companies must also prioritise communicating changes to employees about their compensation and benefits.