India’s old labour framework reflected a different economy. With 29 central laws and hundreds of state variations, compliance became more about interpretation than action. Workers frequently missed out on benefits, and employers faced uncertainty at every compliance step.  

The four Labour Codes, effective from 21 November 2025, replaced this patchwork with a single legal structure. Covering more than 50 crore workers, the reforms aim to raise formal job coverage to 65 percent by 2026. The focus is simple but ambitious: simplify processes, expand protection, and modernise how India works. 

India’s Labour Laws Before 2025: Why Reform Was Inevitable 

Before the Labour Codes: 

• Wage laws differed across states and industries 
• Social security applied to less than one-fifth of workers 
• Contract workers lacked consistent protection 
• Compliance involved separate registrations under multiple Acts 
• MSMEs faced heavy inspection burdens 
• Gig workers had no formal status 

India’s unorganised workforce stood at nearly 90 percent, according to periodic labour surveys prior to reforms. The absence of portability, informal hiring, and unclear enforcement meant benefits existed but rarely reached workers. 

India’s New Labour Codes Explained 

The four Labour Codes were introduced to end fragmentation and expand coverage using digital governance. 

Code on Wages 2019 

The Code on Wages, 2019 brings all wage-related rules under one national system, effective from 21 November 2025. It replaces several outdated laws to ensure fair and timely salary payments for over 50 crore workers in both organised and informal sectors. The law introduces a universal floor wage that states must follow, with wages reviewed every five years in line with inflation and living costs. To make salaries more transparent, allowances are now capped at half of the total pay. 

• Enforces universal floor wages and timely payments nationwide.​ 

• Caps allowances at 50 per cent of total pay.​ 

• Standardises bonuses after 30 days.​ 

• Mandates appointment letters within three months for all hires.​ 

• Prohibits deductions over 50 per cent, with revisions tied to inflation.​ 

• Ensures equal pay for equal work, tackling gender gaps noted in ILO reports.​ 

• Fines for delays hit Rs 5 lakhs, pushing transparent payrolls.​ 

Code on Social Security 2020 

The Code on Social Security 2020 consolidates 13 legacy laws into a comprehensive welfare system, extending benefits like EPF, ESI, gratuity, and maternity leave to gig and platform workers for the first time, covering inter-state migrants and unorganised sectors nationwide. It establishes national and state boards with a dedicated fund financed by penalties, aiming to boost coverage from 19 per cent to over 64 per cent while introducing portable benefits.​ 

• Merges 13 laws, extending EPF, ESI, gratuity, and 26-week maternity leave to gig workers.​ 

• Covers inter-state migrants with journey allowances.​ 

• Funds unorganised welfare via employer-government contributions.​ 

• ESIC now mandatory for even one hazardous worker, up from 10-employee thresholds.​ 

• Annual health checks for over-40s.​ 

• Creches in 50-plus employee firms.​ 

• Portable benefits across states, aiding 2.78 million annual occupational deaths globally per ILO.​ 

Industrial Relations Code 2020 

The Industrial Relations Code 2020 streamlines employer-employee dynamics by raising layoff approval thresholds and formalising fixed-term contracts with pro-rata benefits, reducing litigation while supporting MSME flexibility amid rising costs. It balances dispute resolution with structured union processes, requiring grievance mechanisms and reskilling funds to foster stable industrial harmony.​ 

• Raises layoff thresholds from 100 to 300 workers.​ 

• Introduces fixed-term pro-rata benefits.​ 

• Funds 15-day reskilling per retrenched employee.​ 

• Limits contract labour in core roles.​ 

• Requires grievance panels for 20-plus workers.​ 

• Eases strike with 14-day notice, balancing stability.​ 

• Formalises unions while curbing multiplicity.​ 

• Supports flexible hiring, key for MSMEs facing cost hikes.​ 

Occupational Safety, Health and Working Conditions Code 2020 

The Occupational Safety, Health and Working Conditions Code 2020 unifies 13 laws with higher factory thresholds and single-window registrations, cutting administrative burdens by 40 per cent through digital records and mandatory audits. It prioritises worker welfare in hazardous sectors, enabling longer shifts with doubled overtime and safe conditions for women, including night work and creches.​ 

• Hikes factory thresholds to 20 powered or 40 non-powered workers.​ 

• Mandates safety audits.​ 

• Allows 12-hour shifts with overtime doubles.​ 

• Women get safe night shifts and creches.​ 

• One registration replaces six, unifying 10-employee thresholds.​ 

• Digital records cut admin by 40 per cent.​ 

• Targets hazardous sectors with inspections.​ 

Key Compliance Tips for Indian Businesses 

Firms must register on e-Shram and EPFO before hiring, update contracts electronically, and benchmark wages quarterly against state floors. Gig platforms contribute 1-2 per cent of turnover for worker welfare, while states roll out rules within 45 days.​ 

• Audit HR policies for grievance committees and mental health in 100-plus employee setups. 

• Use unified portals to slash filings from multiple to one. 

• Train staff on new definitions to avoid Rs 5 lakh fines.​ 

Workers, demand appointment letters and ESI cards for portable perks across jobs.​ 

These codes make India’s job market fairer and simpler, blending worker rights with business ease for real growth. 

Guidance for Workers 

India’s labour reforms are designed to protect workers beyond the workplace. From pay structures to insurance coverage, information is now easier to access and harder to withhold. With online systems linking employers, government departments, and employees, workers hold more control over their employment data. Staying informed helps avoid exploitation and ensures benefits follow employees across jobs and states. Workers should: 

• Demand appointment letters 
• Activate EPF and ESI accounts 
• Check salary structure under wage rules 
• Verify gig platform registration 
• Track social security benefits online 
• Seek grievance redressal within your company 
• Register on e-Shram for portability 

Workers can now track entitlements digitally, reducing dependency on employers for information. 

The Bigger Picture 

These Labour Codes are not just reforms on paper. They signal a renewed relationship between the people who build businesses and those who run them, and between work and dignity itself. India’s labour framework in 2025 is simpler, more transparent, and sharper in enforcement. With 500 million citizens projected to enter formal employment by 2030, the country is laying the groundwork for a five trillion-dollar economy through laws that value both productivity and people. Compliance becomes leadership for businesses, awareness becomes protection for workers, and dignity becomes non-negotiable for the nation. The future of Indian employment now rests on one integrated framework built for scale and fairness.