Historically, India’s labour law regime has been shaped by constitutional mandates of social justice under Articles 14, 19, 21, 23, and 24, post-independence industrialisation, and welfare-oriented policymaking. Over decades, this has created a complex mix of 29 Central labour laws supported by over 1400 rules, along with numerous State-specific amendments. Although well-intentioned, this framework has led to overlapping jurisdictions, inconsistent definitions, regulatory uncertainty, and limited coverage for most of India’s workforce, especially in the unorganised and informal sectors.
To address these challenges, the Government of India initiated comprehensive labour law reforms based on the Second National Commission on Labour’s recommendations. After stakeholder consultations from 2015 to 2019, the Parliament enacted four consolidated Labour Codes between 2019 and 2020. Phased implementation began in 2021, with the Codes taking effect on November 21, 2025, following a press release. This unified regime aims to modernise labour regulation, balance worker protection, industrial harmony, and economic efficiency.
Structural Shift: Earlier Labour Laws vs Labour Codes
The Labour Codes represent a shift from a fragmented, statute-based system to a unified, digital, and facilitative governance framework.
| Basis | Earlier Labour Laws | Labour Codes |
| Number of laws | 29 Central Acts, 1436 Rules | 4 Codes, 351 Rules |
| Registration | Multiple registrations | Single all-India registration |
| Returns | 31 separate filings | Single electronic return |
| Inspections | Physical, paper-based | Risk-based digital inspections |
| Compliance philosophy | Punitive, fragmented | Cooperative, technology-driven |
| Coverage | Primarily organised sector | Organised, unorganised, gig, migrant |
This consolidation reduces regulatory overlap, increases transparency, and aligns labour regulation with India’s digital governance and economic reforms.
Code on Wages, 2019
The Code on Wages, 2019, consolidates and modernises wage-related laws to ensure fair, timely, and equitable remuneration across all sectors and forms of employment.
Laws Subsumed
- Payment of Wages Act, 1936
- Minimum Wages Act, 1948
- Payment of Bonus Act, 1965
- Equal Remuneration Act, 1976
Uniform definition of “wages”, introduced under Section 2(y) of the Code on Wages, 2019 and adopted as the common wage base across the other three Codes. Under the earlier regime, different statutes defined wages differently, allowing employers to structure compensation to reduce social security liabilities.
The Wages Code now defines wages to include basic pay, dearness allowance, and retaining allowance, while excluding items such as house rent allowance, overtime, bonus, commissions, and special allowances. The total value of these exclusions is capped at 50% of total remuneration; any excess is treated as wages. This ensures that statutory contributions and benefits are calculated on a realistic wage base, preventing dilution of employee entitlements.
Another major reform under the Code on Wages is the introduction of a statutory floor wage under Section 9. Previously, States fixed minimum wages under the Minimum Wages Act, 1948, leading to wide regional disparities. Section 9 now empowers the Central Government to fix a national floor wage based on minimum living standards, including food, clothing, and housing. While States retain the power to fix minimum wages under Sections 5 and 6, they are prohibited from prescribing rates below the floor wage. This provision did not exist previously and was added to establish a national wage baseline while preserving federal flexibility.
The scope of minimum wage protection has also been expanded. Under the earlier Minimum Wages Act, statutory protection was limited to “scheduled employments,” covering only a fraction of India’s workforce. Section 5 removes this limitation by extending the right to minimum wages to all employees, irrespective of sector or employment category. This marks a structural shift from selective coverage to universal wage protection.
Compliance Obligations
- Review salary structures to ensure compliance with the 50% wage rule.
- Align payroll systems with floor wage notifications.
- Maintain digital wage registers and electronic returns.
- Timely payment of wages and bonuses within statutory timelines
Overall, the Wages Code increases wage certainty, reduces litigation, and promotes transparent, equitable remuneration aligned with social security goals.
Code on Industrial Relations, 2020
The Industrial Relations Code, 2020, aims to balance business efficiency with collective worker rights by streamlining dispute resolution, union recognition, and workforce rationalisation.
Laws Subsumed
- Trade Unions Act, 1926
- Industrial Employment (Standing Orders) Act, 1946
- Industrial Disputes Act, 1947
The Industrial Relations Code, 2020, introduces key definitional and procedural changes in collective labour relations. Section 2(p) defines “industry” based on the Bangalore Water Supply principle, but excludes charitable, social, or philanthropic institutions and domestic service. This clarification addresses long-standing interpretational disputes under the Industrial Disputes Act, 1947, and narrows the scope of ambiguity that previously led to litigation.
Section 2(zr) of the Industrial Relations Code, 2020 broadly defines “worker” to include most employees in manual, skilled, technical, or supervisory roles earning up to ₹18,000, as well as working journalists and sales promotion employees. It excludes apprentices, members of the armed forces, police, and higher managerial or administrative staff.
A notable addition under the Industrial Relations Code is the statutory recognition of fixed-term employment under Section 2(o). While fixed-term contracts were previously permitted only through executive notifications and were sector-specific, the Code formally incorporates this form of employment into the statute. The proviso to Section 2(o) ensures that fixed-term employees receive wage and benefit parity with permanent workers performing similar work. More importantly, the Code adds a new entitlement by making fixed-term employees eligible for gratuity after one year of continuous service, a benefit previously denied due to the five-year requirement under the Payment of Gratuity Act.
Trade union recognition has been rationalised through Section 14 of the Industrial Relations Code, which introduces the concept of a negotiating union. A union with 51% or more membership is recognised as the sole negotiating union. If no union meets this threshold, a negotiating council is formed based on proportional representation. This replaces the earlier system, which allowed multiple unions to raise demands simultaneously, often resulting in industrial instability. The negotiating union framework is a new statutory mechanism aimed at structured collective bargaining.
The Code also modifies the law relating to strikes and lockouts. Under the earlier Industrial Disputes Act, the requirement of prior notice applied only to public utility services. Section 62 of the Industrial Relations Code now mandates a 14-day prior notice for strikes and lockouts in all industrial establishments. This expansion is a significant addition, intended to improve predictability and create space for conciliation before industrial action.
With respect to workforce rationalisation, the threshold for prior government approval for lay-offs, retrenchments, and closures has been raised from 100 to 300 workers under Chapter X of the Industrial Relations Code. This change enhances operational flexibility for medium and large establishments. At the same time, Section 83 introduces a new Re-skilling Fund, requiring employers to contribute an amount equivalent to 15 days’ wages of each retrenched worker to facilitate skill development and re-employment, an obligation that did not exist under the earlier law.
Compliance Obligations
- Update standing orders and HR policies.
- Implement strike/lockout notice protocols.
- Budget for contributions to the re-skilling fund.
- Reassess union engagement strategies.
Code on Social Security, 2020
The Code on Social Security, 2020, consolidates India’s social welfare laws and extends protection to non-traditional forms of work, reflecting the realities of the gig and platform economy.
Laws Subsumed
- Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- Employees’ State Insurance Act, 1948
- Payment of Gratuity Act, 1972
- Maternity Benefit Act, 1961
- Building and Other Construction Workers Welfare laws, among others
The Code on Social Security, 2020, marks a significant shift by recognising unorganised workers, gig workers, and platform workers as beneficiaries under Sections 2(86), 2(35), and 2(61), respectively, and providing provisions for their registration and welfare schemes. Earlier social security laws were premised almost entirely on a traditional employer-employee relationship. The new definitions acknowledge evolving work arrangements and expand the universe of protected workers.
The Code introduces a national Aadhaar-verified database for unorganised, gig, and migrant workers, enabling benefit portability across States and jobs. This digital system improves access to, continuity of, and delivery of welfare benefits.
The Code expands and standardises coverage under the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI), reduces litigation by introducing uniform thresholds, and allows voluntary enrolment for smaller establishments. Fixed-term employees are now entitled to gratuity after one year, supporting employment parity.
Section 114 introduces aggregator liability, requiring digital platforms classified as aggregators to contribute a set percentage of their turnover to social security schemes for gig and platform workers. This is a new legislative response to platform-based labour models.
By digitising records, simplifying compliance, and extending benefits to previously excluded workers, the Social Security Code aims to universalise social protection while maintaining fiscal and administrative efficiency.
Compliance Obligations
- EPF/ESI enrolment alignment and threshold review
- Registration of eligible gig/platform workers
- Turnover-based contribution planning for aggregators
- Digital record maintenance
Occupational Safety, Health and Working Conditions Code, 2020
The Occupational Safety, Health and Working Conditions Code, 2020 unifies 13 labour laws, including the Factories Act, Mines Act, Contract Labour Act, and Inter-State Migrant Workmen Act, into a single framework for workplace safety, health, and welfare across all sectors, including factories, mines, plantations, construction, transport, and services.
The definition of “inter-State migrant worker” under Section 2(zf) has been expanded to include not only workers recruited through contractors but also those who self-migrate for employment. This expansion brings a large segment of migrant labour within the statutory framework, entitling them to journey allowance, benefit portability, and grievance redressal mechanisms, protections that were previously unavailable to self-migrating workers.
The Code sets uniform standards for working hours, establishing a maximum of 48 hours of working per week, with daily hours and overtime limits determined by the rules. Further, overtime compensation has been set at twice the normal rate. The OSHWC Code also mandates the issuance of appointment letters for all employees, formalising employment terms and reducing disputes over service conditions. Earlier labour laws did not impose a universal obligation of this nature. Further, the Code recognises accidents occurring during commuting as employment-related for compensation purposes, thereby significantly expanding employer liability.
The Code adopts a risk-based inspection regime, replacing routine physical inspections with digital inspections, third-party audits, and safety committees for larger establishments. Safety committees are mandated for factories with 500 or more workers, mines with 100 or more workers, and large construction establishments, as well as for strengthening a preventive safety culture. Worker welfare and safety are central to the Code. Employers are required to provide safe working conditions, annual health check-ups, welfare facilities such as crèches and canteens, and personal protective equipment.
By integrating safety, health, and working conditions into a single technology-enabled framework, the OSHWC Code strengthens preventive safety culture and reduces regulatory complexity.
Compliance Obligations
- Issuance of appointment letters
- Constitution of safety committees, where applicable
- Health check-ups, PPE, and welfare facilities
- Digital safety and inspection readiness
Compliance Architecture, Penalties, and Enforcement Mechanisms
Inspector-cum-Facilitator Framework
All four Labour Codes replace the traditional labour inspector with an “Inspector-cum-Facilitator,” shifting from enforcement to a facilitative compliance model. Inspectors now conduct inspections and advise employers on compliance, particularly in cases of initial contraventions.
Inspections are now conducted through a centralised, web-based system with randomised, risk-based selection. Reports are uploaded electronically, reducing discretion and increasing transparency.
Compounding of Offences and Reduced Criminalisation
The Codes reduce criminal penalties for procedural and technical non-compliance. Many offences are now compoundable with prescribed penalties. Criminal prosecution is reserved for serious or repeat violations involving safety or wage defaults.
Common Registers, Returns, and Registration
Employers are required to:
- Obtain a single, unified registration for establishments across India.
- Maintain common electronic registers under each Code.
- File single or consolidated annual electronic returns, replacing multiple legacy filings.
This digital compliance system reduces administrative burden while increasing traceability and audit readiness.
Strategic Compliance Roadmap for Employers
To transition smoothly to the new labour law regime, employers should follow this phased compliance strategy:
Phase 1 – Diagnostic Review
- Review existing wage structures for 50% wage compliance.
- Identify applicability thresholds under each Code.
- Map workforce composition (permanent, fixed-term, contract, gig)
Phase 2 – Policy and Documentation Alignment
- Amend HR manuals, standing orders, and employment contracts.
- Issue appointment letters in the prescribed format
- Update union engagement and grievance redressal mechanisms.
Phase 3 – Systems and Payroll Reconfiguration
- Reconfigure payroll software for uniform wage definition
- Integrate EPF, ESI, gratuity, and bonus calculations.
- Digitise statutory registers and returns
Phase 4 – Training and Ongoing Compliance
- Train HR and compliance teams.
- Prepare for risk-based inspections.
- Conduct periodic legal audits.
Frequently Asked Questions (FAQs)
- Are the four Labour Codes applicable to all establishments?
Yes, the Labour Codes significantly expand coverage to include organised, unorganised, fixed-term, contract, gig, and platform workers.
- What is the biggest immediate compliance risk for employers?
The uniform definition of wages and the statutory 50% cap on exclusions pose the most immediate risk.
- Do employers need to restructure existing salary break-ups?
In most cases, yes. Employers must review whether allowances exceed 50% of total remuneration.
- Are fixed-term employees now treated at par with permanent employees?
Largely, yes. Fixed-term employees are entitled to the same wages, benefits, and social security as permanent employees performing similar work.
- Does the Industrial Relations Code restrict the right to strike?
No, however, it is now procedurally regulated. A mandatory 14-day prior notice is now required for strikes and lockouts in all industrial establishments.
- How does the threshold increase from 100 to 300 workers impact employers?
Establishments employing up to 300 workers can now undertake lay-offs, retrenchments, and closures without prior government approval, providing greater operational flexibility.
- What is the Re-skilling Fund, and who must contribute?
Employers retrenching workers are required to contribute an amount equivalent to 15 days’ wages per retrenched worker to the Re-skilling Fund.
- Are gig and platform workers considered employees?
No. Gig and platform workers are not treated as traditional employees. However, they are statutorily recognised beneficiaries of social security schemes under the Code on Social Security, 2020.
- What obligations do digital platforms have under the Social Security Code?
Platforms classified as aggregators must contribute a notified percentage of their annual turnover towards social security schemes for gig and platform workers, subject to prescribed caps.
- Is Aadhaar mandatory for social security benefits?
Aadhaar is required for registration on the national database of unorganised, gig, and migrant workers.
- Are appointment letters mandatory for all employees?
Yes. The OSHWC Code mandates issuance of appointment letters to all employees, irrespective of sector or category, formalising employment terms and reducing disputes.
- How have inspection mechanisms changed under the new regime?
Inspections are now risk-based, digital, and transparent, conducted through a centralised system that generates electronic reports, reducing discretionary enforcement.
- What penalties apply for non-compliance?
Penalties vary across Codes and depend on the nature of the violation. Minor and first-time offences are generally compoundable, while serious violations involving wage defaults, safety breaches, or repeat offences may attract higher fines and prosecution.
- Do State Governments still have a role under the Labour Codes?
Yes. Labour remains a Concurrent List subject. States are responsible for framing Rules, fixing minimum wages (subject to the floor wage), implementing inspection systems, and enforcing compliance.
- How can employers future-proof compliance under the new regime?
Employers should adopt a compliance-by-design approach, involving regular legal audits, digitisation of HR systems, proactive engagement with Inspector-cum-Facilitators, and continuous monitoring of Central and State Rules.
Authors: Manisha Singh (Partner) & Kratika Patel (Associate)