India’s New Labour Codes 2025: Complete Guide with Key Provisions

India’s four Labour Codes took effect on November 21, 2025, consolidating 29 laws into unified regulations on wages, social security, industrial relations, and occupational safety. These reforms standardize compliance, expand worker protections, and introduce digital processes across sectors. Employers and employees face immediate adjustments in payroll, benefits, and operations.

Core Wage and Salary Reforms

Basic salary must comprise at least 50% of Cost to Company (CTC), excluding allowances like HRA, conveyance, and bonuses, to ensure fair calculations for PF, gratuity, and ESI. This shifts structures where basic pay previously hovered at 30-40%, potentially reducing take-home pay but increasing retirement benefits. Gender-based wage discrimination for similar work is prohibited, with a unified “wages” definition covering 50% basic plus retainers.

Salary credits require payment on or before the 7th of every month for establishments under the Code on Wages, including IT/ITES sectors, with electronic transfers mandatory to prevent delays. Weekly workday limits cap at 48 hours, with daily shifts not exceeding 8 hours unless averaged over three days, and rest intervals of 20-30 minutes after 5-6 hours. Overtime applies beyond daily limits at double the ordinary wage rate, capped at 50 hours quarterly or 100 hours annually with government approval, requiring worker consent.

Gratuity and Exit Provisions

Gratuity eligibility reduces to one year of continuous service for all employees, including fixed-term contract workers, calculated at 15 days’ wages per year (capped at ₹20 lakh). Previously limited to five years, this covers short-term roles pro-rata, with payment due within 30 days of exit. Full and Final (F&F) settlement mandates completion within two working days post-resignation or termination, including dues like leave encashment, variable pay, and reimbursements, verified via digital portals.

Appointment letters become compulsory for all hires, detailing salary structure (50% basic), working hours (48 weekly max), leave entitlements, and termination clauses, formalizing even informal engagements. Bonus eligibility extends without wage ceilings (previously ₹21,000/month), ranging 8.33-20% based on profits, paid directly to bank accounts within eight months of the financial year-end.

Expanded Social Security Coverage

The Code on Social Security includes gig and platform workers (e.g., delivery riders, drivers) via Aadhaar-linked portals, offering life/disability insurance, health/maternity benefits, and old-age protection funded by aggregator contributions (1-2% turnover). ESIC expands pan-India with voluntary enrollment for shops (<10 workers) and voluntary PF for self-employed. Interstate migrants gain benefit portability, including PDS access at destination states.

Employers must report vacancies to career centers (exempt <90 days or domestic), notify injuries/diseases within timelines, and provide free annual health check-ups for workers over 40. A National Social Security Board oversees unorganized sector schemes, with helplines and facilitation centers.

Industrial Relations and Safety Updates

Layoff/retrenchment/closure prior approval thresholds rise to 300 workers (from 100), exempting smaller firms; fixed-term employees get pro-rata benefits without retrenchment labels. Strikes require 14-day notice (60 days validity), banning flash actions; two-member tribunals speed dispute resolution. A Workers’ Reskilling Fund (15 days’ wages per retrenched worker) aids upskilling.

Occupational Safety mandates safety committees (500+ workers), welfare officers (250+ in mines/factories), and night shifts for women (7 PM-6 AM) with consent, transport, and CCTV. Commute accidents qualify for compensation if employer-provided transport; single license/return simplifies filings for multi-state operations.

Impacts, Benefits, and Compliance Roadmap

Employees gain timely pay, broader gratuity, gig protections, and safety nets, formalizing 90% informal workforce for higher savings despite short-term take-home dips (5-15% due to PF hikes). Employers benefit from simplified filings (one return vs. 10+), hiring flexibility (<300 workers), and digital audits but face higher costs (10-20% payroll via basic salary/OT). MSMEs get phased rollout till FY26.

Provision	Old Rule	New Rule 2025	Impact
Basic Salary promptpersonnel​	~30-40% CTC	≥50% CTC	↑ PF/Gratuity base; ↓ allowances
Gratuity Eligibility	5 years	1 year	Covers short-term staff
Salary Credit	End of month	By 7th	Timely cash flow
Overtime	1.5-2x; no cap uniformity	2x beyond 8 hrs; 50 hr/Q cap	Consent-based; higher costs
Weekly Limit	Varied by Act	48 hrs	Standardized rest
F&F Settlement ​	7-45 days	2 working days	Faster exits