Indian Government’s Labour Codes 2025

India Labor & Employment Law Updates 2025

EFFECTIVE: NOVEMBER 21, 2025

India’s New Labor Codes

A guide to the consolidation of 29 central labor laws into 4 unified codes, impacting wages, social security, & industrial compliance for employees & employers.

Employee Rights Employer Compliance

The 4 Pillars of Labor Reform

Understanding the industrial legislative framework.

Code on Wages (CoW)

Consolidates 4 wages laws. Introduces a statutory “Floor Wage” applicable across all states and defines a mandatory 50% Basic Pay Threshold.

Social Security Code (SSC)

Universalizes access to ESI and PF schemes. Provides specific, dedicated social security cover for Gig & Platform Workers via a new aggregator contribution fund.

Industrial Relations Code (IRC)

Increases the threshold for seeking government approval for layoffs/closures to 300 workers. Legalizes ‘Fixed Term Employment’ with pro-rata benefits.

OSH & WC Code

Consolidates laws on safety, health, and working conditions. Mandates Safety Committees in large establishments and grants women full working flexibility, including night shifts.

Key Impact on Employees

Understanding your new rights and salary structure for enhanced security

Critical Change: The New Definition of “Wages”

The Code on Wages standardizes the definition of ‘Wages’ to prevent employers from minimizing statutory contributions (PF, Gratuity) by paying low Basic Salary.

The 50% CTC Threshold Rule:

Total Remuneration (Basic Pay + DA) must constitute at least 50% of your total Cost to Company (CTC).

If excluded allowances (HRA, Bonus, etc.) exceed 50% of CTC, the excess amount is mandatorily added back to ‘Wages’ for statutory calculations.

Key Takeaway: This ensures a higher base for PF and Gratuity contributions, directly increasing your long-term retirement corpus and security.

Your future savings grow significantly, even if your immediate cash-in-hand changes slightly.

Higher “Wages” = Higher Retirement Benefits

Work Hours, Overtime & Leave

Overtime Rate: Mandatory payment at 2x the normal wage rate for work exceeding the daily limit (CoW).
4-Day Week: Permissible (if agreed), but maintains the 48 hours/week total (e.g., 4 x 12-hour shifts).
Women’s Shifts: Night shifts (7 PM – 6 AM) allowed with consent and mandatory safety and transport provided by the employer.
Annual Leave: Initial eligibility reduced to 180 days of service in the first year (down from 240 days).

Exit & Settlement Deadlines

Full & Final Settlement (FnF)

Must be paid within a strict deadline of only 2 working days of resignation, termination, or layoff.

Claims Limitation Period

A unified 3-year window is established for filing all claims related to wages, bonus, gratuity, etc.

Fixed Term Gratuity

FTEs become eligible for pro-rata Gratuity after completing just one year of service.

Gig & Platform Workers: New Social Security

First-time legal recognition and dedicated welfare fund

Legal Coverage & Definitions

The Social Security Code legally defines these workers and includes them under a framework for welfare schemes, funded by a dedicated levy.

Platform Workers: App-based drivers, delivery partners.
Gig Workers: Freelancers outside the traditional employer-employee relationship.

The Aggregator Fund & Benefits

Aggregators are legally required to contribute a percentage of their turnover to a central social security fund.

1% to 2%

Aggregator Turnover Levy

(Capped at 5% of turnover per transaction)

Health and Maternity Benefits
Life and Disability Cover
Old Age Protection (Pension)

Compliance & Flexibility for Employers

Key operational and legal changes for establishments

The “300 Employee Rule”

The threshold for retrenchment (layoff/closure) requiring prior government approval is increased from 100 to 300 employees, granting greater operational flexibility.

Fixed Term Employment (FTE)

Direct hiring for fixed tenure is simplified. FTE staff must receive equal wages and statutory benefits, including pro-rata gratuity.

Mandatory Health Checks

Employers must arrange and pay for mandatory annual health check-ups for employees who are 45 years of age or older (OSH Code).

One Compliance, One Return

Compliance is simplified: One License, One Return, and One Inspection. Physical records are reduced to 5 core digital registers.

Penalties Decriminalized

Minor procedural violations are decriminalized. Focus shifts to heavier financial fines (up to ₹1 Lakh) via an Adjudication Officer.

Centralized Registration

New establishments register electronically via a unified portal. A single registration number is used for compliance across all 4 codes.

Old vs. New: The Core Differences

Parameter	Previous Rules (Pre-2025)	New Code Regime (2025)
PF/Gratuity Base (Wages)	Ambiguous; often minimized (e.g., < 50% of CTC)	Mandatory ≥ 50% of CTC (Wages Threshold)
Annual Leave Eligibility	Minimum 240 working days in a year	Reduced to 180 working days in the first year
Full & Final (FnF) Settlement Time	Typically 30-60 Days	Strict limit of 2 Working Days
Mandatory Health Checkup	Only for high-risk workers/specific industries	Mandatory Annual Checkup for all employees aged 45+
Layoff/Closure Threshold (Gov. Approval)	100 Employees	Increased to 300 Employees
Gig/Platform Worker Social Security	None defined	Dedicated fund via Aggregator Contribution (1%-2% levy)

Frequently Asked Questions (FAQ)

Will my in-hand salary decrease under the new codes?

If your current Basic Pay is less than 50% of CTC, your employer must increase it. Since PF (12%) and Gratuity are calculated on this higher base, your statutory deductions will increase, leading to a small reduction in monthly cash, but a significant boost to your retirement savings.

Is the 4-day work week mandatory for all companies?

No, it is optional. It is only allowed if the employer and employees mutually agree. If adopted, the total working hours per week (48 hours) must remain constant, meaning the daily shift would be 12 hours.

How does the new OSH Code affect contract workers?

The OSH Code places direct responsibility on the principal employer to ensure the health, safety, and working conditions of all workers on its premises, including contract laborers. This significantly enhances their protection.

What benefits do Gig Workers actually receive from the new fund?

The fund provides essential coverage, including health and maternity cover, life and disability insurance, old age security (pension), and educational assistance for workers’ children.

Will all states adopt the codes uniformly and immediately?

The Central Codes are passed, but implementation requires States to notify their specific rules. While most are prepared for the November 2025 rollout, minor procedural variations might exist between State rules.

What are the changes regarding Gratuity eligibility?

The eligibility for regular employees remains 5 years of service. The major update is that Fixed Term Employees (FTEs) are now eligible for pro-rata gratuity after completing just 1 year of service.