Ten months after India's four new labor codes came into force on November 21, 2025, the country's workplace landscape is undergoing a significant transformation. These reforms, which consolidate 29 central labor laws, are prompting businesses to rethink their workforce management strategies, impacting everything from salary structures to social security and employee classification.
A recent report by Grant Thornton Bharat, titled "India’s new labour codes: From reform to readiness," highlights that companies are now moving beyond merely understanding the legislation to actively redesigning their operational frameworks. While the transition has brought greater clarity on various employment aspects, some implementation questions still remain.
The Four New Codes and Their Aims
The four codes central to this reform are:
- The Code on Wages
- The Industrial Relations Code
- The Code on Social Security
- The Occupational Safety, Health and Working Conditions Code
Their primary objectives include simplifying compliance, harmonizing definitions across different laws, expanding social protection to a broader range of workers, encouraging formal employment, and increasing the digitization of labor processes.
Key Changes for Employers
For employers, one of the most substantial changes is the streamlined compliance architecture. The Grant Thornton Bharat report notes a drastic reduction in regulatory burdens:
- The number of rules has decreased from 1,436 to 351.
- Required returns have been consolidated from 31 to a single form.
- Forms have been cut from 181 to 73, and registers from 84 to eight.
The new framework also introduces a single registration and a single license for businesses, aiming to ease administrative processes.
Another critical area of change is the common definition of "wages." The codes specify 11 exclusions from total remuneration, but these cannot collectively exceed 50%. Any amount above this threshold is added back into wages, significantly impacting statutory calculations for provident fund contributions, gratuity, bonus, and overtime.
Employers are also compelled to reassess how they classify workers. The new guidelines emphasize that classification should be based predominantly on actual duties, decision-making authority, and supervisory responsibilities, rather than solely on designation, grade, or salary.
Key Changes for Employees
Employees benefit from clearer statutory provisions concerning their rights and benefits:
- Overtime: Workers are now entitled to overtime pay at twice their wage rate when prescribed working hours are exceeded, subject to applicable conditions and worker consent.
- Leave: Eligible employees accrue one day of leave for every 20 days worked, with provisions for carry-forward.
- Social Security Expansion: The framework extends social security to newer forms of employment. Fixed-term employees now receive the same wages and benefits as comparable permanent employees and qualify for gratuity after just one year of service. Gig and platform workers are also brought under a structured social security framework, requiring aggregators to register them through specified mechanisms.
- Separation Settlements: A significant change mandates that wages due in cases of resignation, dismissal, removal, or retrenchment must be paid within two working days, requiring companies to overhaul their full-and-final settlement processes.
The Path Ahead
The next phase of India's labor code implementation will involve less legal interpretation and more operational embedding. Companies are now focused on integrating these new requirements into their payroll systems, technology infrastructure, governance models, and day-to-day workplace processes to ensure full compliance and smooth functioning.