India Rolls Out New Labour Codes

On November 21, 2025, the Ministry of Labour and Employment formally implemented four major Labour Codes:

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

These codes consolidate and rationalize 29 central labour laws into a single framework covering wages, industrial relations, social security, and workplace safety (See Annexure for full list of laws subsumed by the new labour codes).
It is to be noted that Labour is a concurrent subject under the Constitution. While central codes are in force, each state must notify its own rules, for full implementation of these codes to take effect. The Government, via its press release dated 21st November 2025 has clarified that during this transitional phase, all existing laws, notifications, schemes, and standards continue to operate as is.
Accordingly, a step-by-step transition is envisaged for employers, and not an immediate change of regime.
What employers should you be doing?
Although central and state level rules are yet to be enforced, employers must adopt a proactive approach during this transition phase which includes reviewing existing wage and salary structures, employment policies, and compliance frameworks, as the complete implementation of the Labour Codes will significantly impact wage structuring, processes for managing industrial disputes, exit and retrenchment procedures, establishment-level compliance obligations, and the computation of social security contributions.
As a first step, employers should begin focusing on the following key changes that will require early attention:

• Wage definition: Under the old labour laws, “wages” had multiple definitions across different Acts, allowing employers to structure salaries with a lower basic component and higher allowances. Under the new Labour Codes, “wages” have been standardized to include only basic pay, dearness allowance and retaining allowance, and certain specified allowances are excluded but capped at 50% of total remuneration. If exclusions exceed this limit, the excess is added back to “wages.”
• National Floor Wage: The Central Government will prescribe a national floor wage, based on minimum living standards (food, clothing, housing, etc.), and revise it periodically. States must set their minimum wages at or above this floor, subject to limited exceptions.
• Minimum wages for all: Minimum wage obligations now apply uniformly across all roles and sectors, replacing the older model where only certain scheduled employments were covered.
• Workmen now re-defined as ‘Worker’: The definition of worker is adopted from the Industrial Disputes Act,1947 (ID Act) however, the threshold has increased from earlier INR 10,000 to INR 18,000 and does not include an apprentice. Working journalists and sales promotion employees are now included in the definition.
• Full and final settlement within two days of exit: All dues must now be settled within two working days of an employee’s last working day whether the exit is due to resignation, termination, or any form of separation. This marks a departure from the earlier regime, where the two-day timeline applied only in cases of dismissal, removal, retrenchment, or closure-related unemployment.

• Fixed term Employment: The IR Code formally recognizes fixed-term employment, granting fixed-term employees’ parity with permanent employees in wages, benefits, and working conditions. They are also made eligible for gratuity after one year of continuous service, irrespective of the fixed-term contract duration.
• 300-Worker Threshold for Layoff/Retrenchment Permissions: Industrial establishments now with more than 300 workers will be required to take permission from the appropriate government for any layoff, retrenchment, or closure.
• Re-skilling Fund: To train retrenched employees, this fund has been set up with the contribution to be made by an industrial establishment for an amount equal to 15 days’ wages for every worker retrenched. This is in addition to retrenchment compensation. The amount shall be credited to the workers’ account within 45 days of retrenchment.
• Single negotiation union / negotiation council: To reduce bargaining chaos and ensure smoother negotiations, the Code introduces a streamlined framework for recognizing the negotiating body. Where a single trade union has at least 51% of the workers as members, it is designated as the sole negotiating union. If no union meets this threshold, the employer must constitute a negotiating council with proportional representation from all unions. This mechanism simplifies collective bargaining, prevents overlapping demands, and reduces workplace disruption.
• Grievance Redressal Committee: The Grievance Redressal Committee (GRC) is now mandatory in all establishments employing twenty or more workers, marking a major shift from the earlier regime under the ID Act. Under the IR Code, a worker must first approach the GRC for resolution of any grievance before moving to conciliation. The worker is required to file the grievance within one year of the cause of action, and the GRC must complete its proceedings within 30 days. If the worker is dissatisfied with the decision or if the grievance is not resolved within this period, they may proceed to the conciliation officer within 60 days of the GRC’s decision.
• Mandatory 14-day period notice for strike: Workers and unions must now give a 14-day notice before going on strike, a requirement earlier limited to public utility services but now applicable to all industrial establishments. Strikes and lockouts are barred during conciliation and for 60 days after, and this prohibition continues through adjudication proceedings and for 60 days thereafter. The notice must also be sent to the conciliation officer within five days, triggering immediate conciliation.

• Recognition of gig and platform workers: Gig and platform workers recognized as independent labour categories and mandates creation of dedicated social security schemes for their protection. These schemes are intended to provide benefits such as life and disability insurance, health and maternity coverage, and retirement-linked savings protections traditionally unavailable to this workforce. Aggregators and digital platforms will be required to contribute a minimum of 1–2% of their annual turnover, capped at 5%, towards these social security funds.
• Wider Definitions of Employment Relationships: The definition of “employee” now includes workers hired through contractors, expanding employer obligations. Construction work definitions have been revised to exclude factory-related construction, small sites (under 10 workers), and residential projects under ₹50 lakh, altering coverage for the construction sector.
• Expanded ESIC & Streamlined EPF Framework: ESIC coverage has been extended pan-India by removing the “notified area” requirement, with voluntary opt-in allowed for establishments with fewer than 10 workers and mandatory coverage for hazardous occupations and plantation workers. Alongside this expansion, the EPF framework has been tightened through time-bound inquiries, now restricted to initiation within five years and required to be concluded within two years (extendable by one), with suo-moto reopening eliminated to ensure finality. Further easing compliance, the mandatory pre-deposit for EPF appeals has been reduced to 25% of the assessed amount, significantly lowering the financial burden on employers while improving access to justice.
• Social Security Fund: A dedicated fund to finance schemes for unorganized, gig, and platform workers, covering life, disability, health, and old-age benefits has been proposed. The amount collected through the compounding of offences will be credited to this Fund and used by the Government.
• Digitization of Compliance: Mandates electronic maintenance of records, registers, and returns, cutting costs and improving efficiency
• Inspector-cum-Facilitator: Inspectors have been redesignated as Inspector-cum-Facilitators and inspections are conducted through risk-based, web-based systems. Their role includes guiding establishments towards compliance rather than focusing solely on enforcement

• Core activity of an establishment: Engagement of contract labour in core activities is specifically prohibited, except where: (i) the activity is ordinarily done through a contractor in course of normal functioning of the employer’s establishment, (ii) the activities are such that they do not require full-time workers for the major portion of the working hours in a day or for longer periods, as the case may be, (iii) there is a sudden increase in the volume of work in the core activity that needs to be.
• Unified Registration: A single online registration is now required once an establishment has 10 (ten) employees, replacing the earlier need for multiple registrations. This centralized system will streamline compliance and make operations easier for businesses.
• Formalized conditions of work: Employers must issue formal appointment letters containing job details, wage components, and social security information, enhancing transparency and accountability. Normal working hours are capped at 8 hours per day and 48 hours per week, with overtime permitted only with the worker’s consent and payable at twice the ordinary wage rate.
• Revised Applicability Threshold: The threshold for applicability relating to contract labour has been increased from 20 to 50 workers. Contractors will now be eligible for a single, all-India license valid for five years, instead of work order–specific licenses. A common license is envisaged for contract labour, beedi and cigar manufacturing, and factories, with a deemed license mechanism introduced in case the authority does not act within the prescribed timeline. Licenses will be auto generated to reduce procedural delays. The earlier contract labour board has been removed, with designated authority now empowered to advise on core and non-core activities. Further, the Factory definition threshold is increased from 10 to 20 workers (with power) and 20 to 40 workers (without power), reducing compliance requirements for small units.
• Annual Leave Encashment: Workers are now entitled to encash their accrued leave both during service and at the time of exit, including in cases of voluntary resignation. Leave encashment must be paid within two days of separation, and within two months in the event of death or superannuation. Workers are permitted on-demand encashment of accumulated leave at the end of each calendar year. Further, any leave accrued beyond 30 days must be mandatorily encashed.
• Safety Committees: Establishments employing 500 or more workers must constitute safety committees with representation from both employers and workers, strengthening workplace safety and ensuring shared accountability.

The rollout of India’s new labour codes represents a transformative step in consolidating and modernizing the country’s labour law landscape. By integrating previously fragmented statutes into a single framework covering wages, industrial relations, social security, and occupational safety, the codes aim to provide clarity and consistency for both employers and workers. However, the practical effect of these codes is still unfolding, as many state- and central-level rules, notifications, and schemes remain under development. Please note that the Labour Codes are not intended to subsume or repeal all State-specific labour laws. State Shops and Establishments Acts, which regulate conditions of employment in commercial establishments, will continue to remain in force. However, where there is a subject-matter overlap between State laws and provisions under the Labour Codes for instance, on working hours, leave entitlements, employers will need to carefully examine the interplay between the Central Code and the applicable State legislation.

Key areas requiring attention include the revised definition of wages, which will impact statutory calculations for retrenchment compensation, notice pay, overtime, as well as the gradual implementation of social security schemes for unorganized, gig, and platform workers.

Ultimately, once fully operational, the codes are expected to simplify compliance through digital interfaces, standardized procedures, and unified definitions, providing a more structured regulatory environment.
During this interim period, existing laws continue to apply, offering continuity and a stable reference point for compliance. Employers should therefore begin reviewing and aligning their internal policies and employment practices with the forthcoming framework, while simultaneously monitoring updates on Central and State notifications and Rules as they are issued.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

Suhail Nathani, Managing Partner – Email – suhailnathani@elp-in.com

Retika Yadav, Senior Associate – Email – retikayadav@elp-in.com

List of Central Laws subsumed under the new labour codes: