Contributors: Mr. Bhushan Shah (Partner) · Ms. Shreya Dalal (Associate Partner)
On 21 November 2025, India’s Government made four consolidated labour codes effective, namely (a) Code on Wages, 2019; (b) Industrial Relations Code, 2019; (c) the Code on Social Security, 2019; (d) Occupational Safety, Health and Working CondiDons Code, 2019 (collectively referred to as “Labour Codes”), replacing 29 older central labour laws. The reform is pitched as one of the most significant labour-law overhauls since independence, streamlining regulation, widening coverage, and balancing worker protections with ease of doing business. Though the Labour Codes are notified, some detailed rules (especially at the state level) are still to be notified.
Key highlights of the Labour Codes:
- Unified Definition of “Wages”: There is now a standardized definition across different codes/documents.
- Minimum Wage: A national floor wage is introduced, ensuring a baseline for minimum wage across states. Minimum wage obligations now apply more broadly, including to previously uncovered workers.
- Timely Payment of Wages: Employers are required to pay wages within defined Timelines. Appointment Letters: Mandatory appointment letters must be issued to all workers, clarifying their employment terms.
- Overtime Pay: When work exceeds regular hours, overtime must be paid at double the rate.
- Gender-Neutral Pay: Prohibits wage discrimination — covers not just men/women but also transgender workers.
- Penalties / Enforcement: The code includes offences and penalties for non- compliance. The following are some examples:
- Short payment/unauthorized deductions by the employer: First offence: Fine up to ₹50,000 Repeat Offence: (within 5 years): Up to 3 months’ imprisonment or fine up to ₹1,00,000, or both.
- Other Code violations: First offence: Fine up to ₹20,000. Repeat (within 5 years): Up to 1 month’s imprisonment or fine up to ₹40,000, or both
- Non-maintenance/improper records by the employer: Fine up to ₹10,000
- Trade Unions and Collective Bargaining: Regulates how trade unions form, register, and negotiate; rationalizes standing orders.
- Layoff, Retrenchment, Closure: The threshold for “prior government permission” for retrenchment/layoffs has increased: up to 300 workers can be laid off without prior approval.
- Fixed-Term Employment: Fixed-term workers are formally recognized. Further, they now become eligible for gratuity ager 1 year (rather than ager a longer service).
- Dispute Resolution: The methods of Dispute Resolution provided for under the code is as follows:
- Works Committee: For establishments with 100+ workers; promotes dialogue between employer and workers.
- Grievance Redressal Committee (GRC): Mandatory for establishments with 20+ workers to resolve individual disputes.
- Conciliation: Conducted by Conciliation Officers to facilitate amicable settlement of industrial disputes.
- Industrial Tribunals: Adjudicate unresolved disputes relating to wages, conditions of service, retrenchment, closure, etc.
- National Industrial Tribunal: Handles disputes of national importance or those affecting multiple states.
- Voluntary Arbitration: Parties may mutually agree to refer disputes to arbitration.
- Prohibition on Strikes/Lockouts: Requires prior notice and adherence to specified timelines to avoid illegal strikes/lockouts.
- Reskilling Fund: Reskilling fund is provided to the retrenched worker by the employer so they can upskill or reskill for new employment opportunities. Employer contributes 15 days last drawn wages for every worker retrenched amount is transferred directly to the worker within 45 days of retrenchment.
- Coverage Expansion: A major win now includes gig workers, platform workers, fixed-term employees, unorganized workers, and more.
- Portability: Social security benefits can be linked (e.g., via Aadhaar) and made portable across states.
- Employer Contributions: For gig/platform workers, “aggregators” may need to contribute a share (1–2% of turnover, capped in certain ways) toward social security.
- Gratuity: As mentioned, fixed-term employees get gratuity ager 1 year.
- Institutional Mechanisms: Bodies / governance frameworks for managing social security (e.g., for unorganized workers, maternity benefits, etc.) are part of the code.
- Working Hours:
- Standard hours: Up to 48 hours/week;
- Daily cap: up to 12 hours allowed in certain cases.
- Overtime: Again, paid at double the normal rate when beyond prescribed Hours.
- Health & Safety Obligations: Employers must provide free annual health check-ups (especially for certain categories, e.g. workers above age of 40 years). Statutory registers, safety committees, and more formal safety systems are required.
- Women at Work: Women are allowed to work night shifts but only with their written consent and based on safety measures.
- Welfare Provisions: Drinking water, rest rooms, canteens, first-aid more mandated welfare infrastructure.
- Migrant Workers: Special protections for interstate migrant workers (welfare, travel allowance, etc.) under the code.
- Licensing / Registration: Single registration, single license, single return system to simplify compliance.
MHCO Comment: The Labour Codes are expected to increase formalization by bringing gig and platform workers into the regulatory framework and mandating written appointment letters for clearer employment terms. However, employer costs may rise due to revised wage structures under the unified definition of “wages,” expanded social security obligations, and additional requirements for workplace safety and welfare infrastructure. At the same time, compliance becomes easier through single registrations, unified returns, and inspectors functioning more as facilitators. Workers benefit from broader social security coverage, stronger non-discrimination and equal-pay protections, improved grievance mechanisms, and mandated health and safety measures. For businesses seeking clarity, a labour & employment law firm in India can help navigate these shifting obligations, especially as states must notify their own detailed rules, meaning implementation may differ depending on how these rules are framed. Further there might be some ambiguity with respect to the implementation of the Labour Codes, as certain acts from the old labour laws, such as the Employees Provident Fund and Miscellaneous Act are still in force.
This article was released on 26 November 2025 by MHCO Law
The views expressed in this update are personal and should not be construed as any legal advice; please contact us for any assistance.