New Labour Laws in India 2025: What HR Leaders and Employers Need to Know

India’s labour regulatory framework has undergone a landmark transformation with the introduction of the four new Labour Codes, consolidating 29 legacy labour laws into a unified framework. These reforms aim to modernise employment practices, enhance workforce protection, and significantly simplify compliance for organisations operating across sectors and states.

With implementation targeted from November 21, 2025 (subject to state rules), HR professionals, business leaders, and compliance teams must prepare for wide-ranging changes affecting wages, working hours, contracts, social security, safety, and inclusion.

This article provides a comprehensive, practical overview of the new labour laws in India, integrating statutory changes, cost implications, compliance risks, and a clear action roadmap for employers.

Why the Labour Law Reforms Matter for Organisations

India’s earlier labour framework was fragmented, paperwork-heavy, and inconsistent across states. The new labour codes are designed to:

• Consolidate and simplify compliance

• Promote formal and fixed-term employment

• Expand social security to gig, platform, and contract workers

• Standardise wages, working hours, and safety norms

• Strengthen inclusion, gender equality, and transparency

• Balance employee welfare with operational flexibility

For HR teams, this translates into clearer thresholds, digital-first compliance, higher accountability, and fewer interpretational gaps but also higher preparedness requirements.

Overview of the Four Labour Codes and Key Changes

1. Code on Wages, 2019

(Compensation & Pay Structure Overhaul)

This code standardises wage definitions and timelines across industries.

Key changes and obligations:

• Basic salary must be at least 50% of CTC (earlier typically 35–40%)
  → Higher PF contributions, lower take-home pay

• Equal pay mandatory across genders, explicitly including transgender employees
  → Employers must audit and justify pay gaps

• Gratuity eligibility after 1 year of service (earlier 5 years)
  → Applies to fixed-term employees as well

• Overtime payable at 2× rate beyond 48 hours per week

• Wages must be paid by the 7th of every month

• Final settlement within 2 days of exit

HR Impact:
Payroll restructuring, higher statutory costs, and immediate review of CTC breakups.

2. Industrial Relations Code, 2020

(Retrenchment, Layoffs & Workforce Flexibility)

This code governs employment security, disputes, and workforce restructuring.

Major changes:

• Government approval for layoffs only if workforce exceeds 300 employees
  (Earlier threshold: 100)

• 60-day notice mandatory for layoffs in establishments with 300+ workers

• Standing Orders mandatory only at 300+ employees

• Reskilling fund: Employer must contribute 15 days’ wages per retrenched worker

HR Impact:
Greater flexibility for mid-sized employers, but mandatory reskilling and formal processes for large organisations.

3. Code on Social Security, 2020

(Expanded Coverage & New Worker Categories)

This code significantly broadens who qualifies for social security.

Key provisions:

• Gig and platform workers formally recognised (delivery agents, drivers, freelancers)

• Platform aggregators must contribute 1–2% of turnover
  (Capped at 5% of total worker payouts)

• PF and ESI access extended to previously uncovered workers

• Aadhaar-linked, portable benefits across employers

HR & Business Impact:
New reporting, contribution tracking, and coordination with aggregator-led social security mechanisms.

4. Occupational Safety, Health & Working Conditions Code, 2020

(Working Hours, Safety & Welfare)

This code standardises workplace safety and conditions across sectors.

Key requirements:

• 48-hour work week standardised

• 12-hour shifts allowed with employee consent, subject to weekly cap

• 1 day leave for every 20 days worked, carry forward capped at 30 days

• Fixed-term employees entitled to permanent benefits (PF, gratuity)

• Free annual health check-ups for employees aged 40+ (employer-paid)

• Commute accidents compensable (home-to-work included)

• Safety committees mandatory at 500+ workers

• Basic amenities compulsory (drinking water, restrooms, first aid)

Women, Inclusion & Diversity: Major Structural Changes

Women at Work

• Night shifts permitted with consent, plus mandatory transport, security, and lighting

• All occupations open to women, including mining, hazardous roles, and heavy machinery

• 26 weeks maternity leave (12 weeks for adoptive/commissioning mothers)

• Creche mandatory at 50+ employees (total headcount, not women count)
  → Mothers entitled to 4 visits per day

• Women on grievance committees compulsory

• Parents-in-law included in the definition of “family”

Inclusion Mandates

• Transgender employees explicitly recognised

• Gender-neutral restrooms required

• Anti-discrimination policies mandatory

• Equal pay, facilities, and grievance redressal enforced

Contract Labour & Fixed-Term Employment

• Contract labour cannot be used for core business activities
  (Subject to notified exceptions HR must define “core vs non-core”)

• Enhanced social security obligations for contract workers

• Fixed-term employees receive parity with permanent staff, including gratuity after one year

HR Action:
Vendor audits, contract reviews, and workforce mix reassessment are now essential.

Compliance & Digitalisation

• Single labour registration portal
  → One error can affect all registrations

• Digital records only (no paper registers)

• Appointment letters mandatory for all workers

• Work-from-home formally recognised
  → Policy documentation required

• Inspector-cum-facilitator model replaces punitive inspections

Cost Implications for Employers

Expected Cost Increases

• Higher PF due to 50% basic salary rule

• 1-year gratuity liability

• Creche costs (50+ employees)

• Annual health checks (40+ employees)

• Night shift safety for women

• Reskilling fund contributions

• Platform worker contributions (1–2%)

Potential Savings

• Reduced approvals due to 300+ layoff threshold

• Centralised compliance via single digital portal

HR Action Checklist & Implementation Timeline

Week 1

• Audit CTC structures for 50% basic

• Issue missing appointment letters

• Digitise statutory registers

Month 1

• Calculate gratuity liabilities (1-year rule)

• Update fixed-term contracts

• Finalise health check vendors (40+)

Month 2–3

• Plan creche facilities (50+)

• Implement women’s night shift safety

• Train managers on overtime, equal pay, 12-hour shifts

Month 3–6

• Constitute women’s grievance committees

• Update payroll timelines (7th deadline)

• Formalise WFH policy

• Enable gender-neutral facilities

• Establish reskilling fund mechanisms

6–12 Months

• Reassess workforce mix

• Define core vs non-core activities

• Build multi-state compliance matrix

• Set up platform contribution systems (if applicable)

Top Compliance Risks to Avoid

• Non-compliant CTC structures

• Missing appointment letters

• No creche facility at 50+ employees

• No annual health checks for 40+ staff

• Women night shifts without safety measures

• Paper-based registers

• Contract labour deployed in core activities

Key Numbers HR Must Remember

• 50% basic salary

• 1-year gratuity eligibility

• 26 weeks maternity leave

• 50+ employees = creche mandatory

• 40+ age = annual health check

• 48 hours weekly cap

• 12 hours daily max

• 300+ layoff threshold

• 7th of month wage deadline

• 2 days exit settlement

• 15 days’ wages per retrenched worker (reskilling fund)

Conclusion

India’s new labour laws represent a decisive shift toward a modern, inclusive, and compliance-driven employment ecosystem. While they increase statutory responsibility and cost for employers, they also bring clarity, uniformity, and long-term workforce stability.

HR professionals sit at the centre of this transformation. Organisations that act early by restructuring payroll, digitising compliance, strengthening inclusion policies, and training managers will not only mitigate legal risk but also enhance employer brand, trust, and workforce engagement.

FAQs: New Labour Laws for HR & Employers

Q1. Do the new labour laws apply to private sector employers?
Yes. They apply to both public and private establishments, subject to employee thresholds and state notifications.

Q2. Do HR policies need to be updated?
Absolutely. Wage structures, contracts, grievance policies, safety guidelines, and WFH policies must be reviewed.

Q3. How do the laws impact fixed-term hiring?
Fixed-term employees now receive benefits equal to permanent staff, including gratuity after one year.

Q4. What changes affect payroll teams the most?
50% basic salary, 7th-day wage deadline, overtime rules, and expanded social security coverage.

Q5. Are gig workers employees now?
They are formally recognised and eligible for social security benefits, though their employment classification remains distinct.