India’s Ministry of Labor and Employment issued four notifications and a press release for implementation of the new labor laws with effect from November 21, 2025. These notifications activate major provisions of the following four Labor Codes:
- Code on Wages, 2019
- Code on Social Security, 2020
- Industrial Relations Code, 2020
These codes had already been passed in both the houses of the Parliament and had received presidential assent way back in 2020. However, the effective dates for the various provisions of the codes were to be notified subsequently. These four Codes replace twenty-nine old Central labor laws, bringing them together into a simpler and more modern system. The goal is to make the compliance easier for employers and improve protection and benefits for workers.
For full implement these Codes, both Central and State Governments need to notify rules which is expected soon. Draft rules for the central as well as various state governments have already been published earlier. The Government also needs to notify relevant regulations, schemes, etc. similar to employee provident fund scheme, employee pension scheme. Until then, the relevant provisions of the old labor laws and their rules, regulations and schemes will continue to apply.
The key provisions are as under:
Definition of worker and employee : The new labor codes provide separate definitions of the term ‘employee’ and ‘worker.’ The term employee means a person employed on wages by an establishment to do any skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment be express or implied. The term ‘worker’ is similar to the term ‘workmen’ under the old Industrial Dispute Act, 1947 and it mainly excludes employee under managerial, administrative or supervisory (where their wages exceed prescribed limit of 15000 or 18000 per month or as notified by the government) roles. Separately, labor codes also define terms like gig worker, platform worker, aggregator, etc. which would bring more clarity.
Definition of term wages: The Laborr codes provide uniform definition of term ‘wages’ across all codes. The definition is relevant for determination of minimum wages as also other entitlements like gratuity, overtime, leave encashment, statutory bonus, PF contribution, maternity benefits, etc. Wages will include basic pay, dearness allowance, retaining allowance while excluding certain other components like bonus, conveyance allowance, house rent allowance, etc. However, the excluded allowances or benefits cannot be more than the half of the total salary. Where the threshold is exceeded, such excess or such percentage as may be notified by the government would be considered as wages. Wider scope of the term wages may increase the cost for employer due to higher benefit eligibility. However, more clarity is expected on this point from the government.
Minimum wages : All employees need to be paid minimum wages for better financial security including employees in unorganized sectors.Earlier, minimum wages were notified by relevant state or central government. New law introduces the concept of national floor wages which will be fixed by the central government while appropriate state government will need to decide the minimum wages keeping in mind the national floor wages declared by the central government.
Working hours : The law limits working hours to 48 hours a week where the employee works for less than 6 days. The period of work shall not exceed 12 hours a day where the flexibility is provided. This includes intervals for rest. The remaining days of that week shall be a paid holiday for the employee.
Time limit for payment of wages : In case of monthly payment of wages, it must be paid within 7 days from the end of the month. The employer also has an obligation to pay due wages within 2 days of employee resignation. Earlier, this obligation was restricted only to termination which now will extend to resignation as well.
Workforce models: The labor code prohibits use of contract workers for core activities of the establishment subject to certain exceptions. Core activities are those for which the company or establishment is set up and the other activities which are necessary or essential for such activities. Labor codes also recognized the concept of fixed term employment subject to certain compliance requirements. Such workers are entitled to gratuity on completion of one year of service at the time of termination and also other benefits available to permanent workers on proportionate basis. The codes allows states to implement flexible work arrangements as well.
Benefits under social security code : Social security coverage is extended to gig workers, platform workers, fixed-term workers, and unorganized sector workforce. For gig workers, the aggregators may be required to contribute 1–2% of annual turnover, capped at 5% of total payments to platform workers. Further, the code expands the scope of the term ‘family’ to cover mother in law and father in law of a woman employee. Further any accident during commute between home and workplace will be considered as accident to be work-related. These provisions has the effect of expanding the scope of ESIC benefit. A woman returning from the maternity leave can ask for work from home if the nature of work permits.
Provisions of Occupational Safety Health and Working Conditions code: This code provides for standard safety rules across factories, construction sites, mines, plantation etc. Women would be allowed to work at night subject to certain safeguards. The principle of equal work equal wages must be followed without any gender discrimination. Free annual health check-up would be required for all workers above 40 years of age. It also provides for providing mandatory appointment letters, register formats and employer-provided facilities (drinking water, restrooms, creches where applicable) for workers.
Implications:
Employers should do the following:
- Check their salary structure to decide the impact of new definition of wages and also assess the impact on employee benefits. Where the excluded allowances and benefits constitute more than 50% of the total wages (or percentage notified by the government), such excess can be termed as wages impacting the quantum of benefits such as contribution to provident fund, bonus, etc.
- Check the contractual arrangements and fixed term arrangement for hiring human resources to understand the impact of provisions relating to them. Contractual labor cannot be used for handling core activities. Labor codes have enhanced benefits available to fixed term employees.
- Evaluate roles and responsibilities of their human resource to correctly classify them in light of definition of term worker and employee.
- Once the state level notifications are available, employer need to reassess their human resource and payroll policies in light of provisions of the labor codes and relevant central state rules where they employ people. They need to make suitable changes to their system and policies to remain compliant with the new law.
- New labor codes do not replace provisions of state-wise shop and establishment Acts and thus, in case of overlapping provisions, it can lead to conflict. Companies should keep this in mind while assessing impact of new law and updating their policies.