India's Four New Labour Codes (2025): What Every Employer & HR Team Must Do Now
India's four new Labour Codes came into force across the country on 21 November 2025 — the biggest overhaul of the country's labour law in decades. They replace 29 older central laws with one modern framework. This guide explains, in plain language, what actually changed and the practical steps employers and HR teams should take now.
What are the four Labour Codes?
The Government of India has consolidated 29 existing central labour laws into four Codes, which now operate together as a single system: the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020. All four were brought into effect on 21 November 2025, a move the government has described as the most significant labour reform since independence.
Code on Wages
Universal minimum & floor wage, equal pay, timely payment, one standard definition of "wages".Industrial Relations
Mandatory appointment letters, fixed-term employment, faster dispute resolution.Social Security
PF, ESIC and gratuity reach more workers; gig & platform workers covered.Safety — OSHWC
Health check-ups, women in all roles & night shifts, single licence & welfare.The changes that matter most for employers
1. The 50% rule reshapes salary structures
The Code on Wages introduces a single definition of "wages" that applies across PF, gratuity, bonus and other calculations. In practice, allowances that are excluded from "wages" cannot exceed 50% of total remuneration — so basic pay (plus dearness allowance) must be at least 50% of an employee's gross salary. Many CTC structures today are built around a low basic and high allowances; those will need to be re-balanced. The effect is usually higher PF and gratuity contributions, a larger retirement corpus for employees, and a possible dip in take-home pay unless the package is re-modelled.
2. Appointment letters become mandatory for everyone
Every worker is now entitled to a formal appointment letter. For many establishments — especially in the unorganised and contract space — this is a new obligation. The letter creates a clear record of designation, wages, and terms, and is the first document a labour authority will ask for. Employers should issue compliant appointment letters to all existing staff who don't already have one, and build issuance into onboarding.
3. Fixed-term employment is formalised — with pro-rata benefits
Fixed-term employees must receive the same wages, hours and statutory benefits as comparable permanent staff. Importantly, the Social Security Code reduces the qualifying period for gratuity for fixed-term workers from five years to one year, so even short fixed-term engagements can now attract gratuity on a pro-rata basis. This gives employers a lawful, flexible hiring route, but the costing of fixed-term roles changes.
4. Gig and platform workers enter the social-security net
For the first time, gig and platform workers are recognised in statute and brought within social security, with provision for aggregators to contribute to a dedicated fund and for portable, Aadhaar-linked benefits. Platform businesses should plan for registration of their workforce and the contribution mechanics as the schemes are operationalised.
5. OSHWC standardises safety, welfare and working conditions
The OSHWC Code consolidates safety and welfare law: it provides for free annual health check-ups for older workers, allows women to work in all categories of jobs and on night shifts (with consent and safeguards), and replaces multiple registrations with a single registration, licence and return for many establishments.
What is in force now — and what is still rolling out
A key practical point: while the four Codes themselves are in effect from 21 November 2025, the detailed Central rules and several State-specific rules are still being notified. Labour is a concurrent subject, so each State frames its own rules, and the full set is expected to be finalised over the following months — with reports pointing to a target around 1 April 2026 for many of the remaining rules. Employers should treat the period ahead as a transition: align with the Codes now, and watch your State Labour Department for the rule notifications that fix the operational detail (thresholds, registers, returns and timelines).
A practical compliance checklist
- Re-model salary structures so basic + DA is at least 50% of gross; re-forecast PF, gratuity and take-home.
- Issue appointment letters to every worker, including contract and fixed-term staff.
- Review fixed-term contracts for parity of benefits and the new one-year gratuity trigger.
- Map your registrations and move toward the single registration / licence / return model.
- Update HR policies — working hours, leave, women's night-shift consent and safety, and standing orders.
- Register gig/platform workers (if applicable) and budget for social-security contributions.
- Track State rules as they are notified and diarise effective dates and return deadlines.
Getting ahead of these steps reduces the risk of penalties and shows your workforce that compliance is being handled properly. If you'd like help with a structured review, ShramKanoon offers compliance services — from a quick health-check to full policy drafting.