India has moved closer to implementing its long-pending labour law reforms with all four labour codes now notified. The changes aim to simplify compliance for businesses while introducing new rules around wages, social security, overtime and employment conditions.
Four labour codes replace 29 old laws
The new framework merges 29 central labour laws into four broad codes covering wages, industrial relations, occupational safety and social security. The Centre says the overhaul is aimed at streamlining labour regulations and creating a uniform system for employers and workers.
The reforms are expected to impact salary structures, gratuity, provident fund contributions, working hours and retrenchment rules across industries.
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Salary structure and take-home pay may change
One of the biggest changes comes through the revised definition of “wages”. Under the new rules, basic pay must account for at least 50 per cent of total remuneration. This could increase contributions towards the provident fund and gratuity, while reducing the monthly take-home salary for some employees.
Experts have noted that while in-hand salaries may dip slightly, retirement savings and terminal benefits are likely to improve over time because PF, gratuity and bonuses will now be calculated on a higher wage base.
Longer shifts possible, but weekly cap remains
The labour codes allow companies to structure shifts differently, including 12-hour workdays, provided total working hours do not exceed 48 hours a week. Employees working beyond the limit will be entitled to overtime pay at double the normal rate.
The reforms also formalise several workplace requirements, including appointment letters and clearer rules around leave, overtime and settlements.
What changes for startups and businesses
For startups and employers, the new system is expected to reduce compliance complexity by replacing multiple laws with a unified framework. Contractors may also benefit from a single licence valid across states.
The Industrial Relations Code raises the threshold for mandatory government approval for layoffs and retrenchment from 100 workers to 300 workers, giving companies greater flexibility in workforce management.
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Gig workers enter the social security framework
A major shift under the new labour codes is the formal recognition of gig and platform workers. For the first time, workers in app-based and freelance sectors are being brought under the social security framework.
