India’s new labour codes, effective November 2025, consolidate 29 laws into 4 modern codes. Learn how these reforms benefit workers through clearer rights and better safety while helping businesses with simpler compliance and faster approvals. Discover the critical role of state implementation in India’s economic growth.
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On November 21, 2025, India took a monumental step by introducing four comprehensive labour codes that replace 29 older, scattered labour laws. This marks the most significant overhaul of India’s labour framework in decades. After years of anticipation, the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code are now in effect. This transformation promises to reshape how workers are protected, how businesses operate, and how India positions itself in the global economy.
Understanding the Reform
Imagine navigating 29 different rules, each with its own definitions, requirements, and procedures. That was the reality for businesses in India, with companies facing over 69,000 compliances annually across 1,536 legal provisions. These scattered laws created confusion, increased costs, and discouraged companies from formalising their operations. The new codes consolidate all these rules into four unified, clear frameworks that apply consistently across the country.
The Code on Wages establishes a uniform definition of wages and guarantees minimum wages for all workers. It mandates timely payment and ensures that deductions do not exceed 50 percent of total pay. The Industrial Relations Code simplifies how disputes are resolved between employers and employees, merging three industrial laws into one coherent framework. The Code on Social Security extends benefits like provident fund coverage, insurance, and maternity benefits to millions of unorganised and gig workers who previously had no formal protection. The Occupational Safety Code sets standard norms for workplace safety, working hours, and worker welfare.
Benefits for Workers
The impact on workers is substantial and immediate. For the first time, India’s gig workers and informal labourers are formally recognised and included in social security schemes. Consider a delivery worker in Delhi who previously worked without any safety net. Under the new codes, this worker is now eligible for provident fund benefits, health insurance, and accident coverage. This represents a fundamental shift from exclusion to inclusion.
Fixed-term employees, who were often treated as temporary, now enjoy the same statutory benefits as permanent staff. Importantly, gratuity eligibility has been reduced from five years to just one year of continuous service. This means workers receive financial security much earlier in their employment journey. Women workers have gained the right to work night shifts across all establishments, subject to consent and mandatory safety measures. This opens new employment opportunities that were previously restricted, particularly benefiting the textile and apparel sectors where women constitute the majority of the workforce.
Clearer appointment letters, mandatory wage payments, and prohibition on excessive deductions mean workers know exactly what they are entitled to and can seek redress if these rights are violated. The codes also mandate that all workers receive annual health checkups, particularly important in hazardous industries.
Benefits for Businesses
Businesses are gaining significant operational flexibility. Instead of managing registrations with multiple authorities, companies now need just one unified registration. A single license replaces six separate licenses previously required. Administrative burden has reduced dramatically, with the inspector-cum-facilitator system replacing strict enforcement with a more supportive compliance framework. Small units with fewer than 20 workers (or 40 without power) are exempt from factory regulations, easing the burden on small enterprises.
The threshold for seeking government approval before retrenchment or closure has increased from 100 to 300 workers. This gives businesses greater autonomy in managing their workforce and responding to market conditions. Companies can now employ fixed-term workers without long-term liabilities, providing flexibility during seasonal peaks or economic slowdowns. The framework also allows for flexible working arrangements, including work-from-home options in service sectors, which is particularly attractive for technology and business services companies.
The textile and apparel industry, which employs millions of women, particularly welcomed these changes. Industry leaders note that allowing women night shifts means factories can run double shifts, increasing production capacity without adding infrastructure. This makes Indian garments more competitive globally. Textile exporters highlighted that the uniform national change would immediately help the sector expand capacity and enhance India’s competitiveness as a global sourcing base.
The Central Government Has Done Its Part
It is important to understand that the central government has completed its role. It has passed the codes, set the broad rules, and provided the framework. However, these laws cannot operate effectively without action at the state level. Labour is a concurrent subject under India’s Constitution, meaning both the centre and states share responsibility for implementation.
The Critical Role of State Implementation
Here is where reality becomes complex. While 32 states and union territories have released draft rules, the actual rollout remains uneven. Some states like Maharashtra are moving quickly, while others like West Bengal and Lakshadweep have not released draft rules yet. Delhi has released only the Code on Wages rules, while Tamil Nadu is still working on the Code on Social Security rules.
This fragmentation is problematic. A company operating in multiple states will face different compliance requirements, defeating the purpose of consolidation. A worker migrating from one state to another may find varying benefits and protections.
Challenges States Face
States struggle with multiple obstacles. Building digital infrastructure to implement unified registration and licensing systems requires significant investment and technical expertise that many state governments lack. Many state labour departments face inadequate staffing, training, and resources to manage the transition. Additionally, states must align their existing rules with the new codes while addressing local concerns and business interests.
Political factors also complicate implementation. Ten large trade unions have strongly opposed the four new labour codes, calling them anti-worker, which has caused protests and delayed state notifications in some regions. This creates conflicting pressures that hinder consensus-building necessary for smooth implementation.
Why Uniform and Timely Implementation Matters
Delays in state-level implementation have consequences. Workers in slow-implementing states remain trapped in the old system, missing out on new protections and benefits. Businesses face uncertainty and continued confusion about compliance requirements. India’s competitiveness suffers when different rules apply in different regions.
The State Bank of India projects that if implemented effectively, the labour codes could reduce unemployment by 1.3 percent, creating 77 lakh new jobs. Social security coverage could reach 85 percent, up from the current estimated share of 60.4 percent. Consumption spending could increase by 75 thousand crore rupees, driving economic growth.
Why Modern Labour Reforms Matter for India
India aspires to become a five trillion dollar economy and a global manufacturing hub. This cannot happen with outdated labour laws. Modern labour codes provide clarity, reduce compliance costs, and attract foreign investment. They protect workers, ensuring that growth is inclusive and sustainable. By formalising millions of informal workers, the codes expand social security coverage, reducing poverty and building economic resilience.
More fundamentally, these reforms recognise that economic growth is not just about business. It is about creating dignified jobs, ensuring workers are protected, and building an economy where both businesses and workers can thrive. In an era of global competition, India needs a labour framework that is as modern, flexible, and protective as those of advanced economies.
Conclusion
India’s new labour codes mark a turning point in how the country treats both workers and businesses. By replacing a confusing mix of 29 laws with four clear frameworks, the government has created a foundation that is easier to understand, easier to follow, and far more inclusive. Workers gain stronger protections, fairer wages, safer workplaces, and access to social security that millions never had before. Businesses benefit from simpler processes, fewer compliance hurdles, and more flexibility to grow and compete.
But the true impact of these reforms depends on what happens next. The central government has set the stage, yet the success of this transformation rests with the states. Without uniform and timely implementation, India risks slipping back into a patchwork of inconsistent rules that hold back workers and discourage investment. States need the capacity, coordination, and political will to turn the promise of these codes into everyday reality.
If the rollout is steady and nationwide, India stands to gain more jobs, stronger industry, and a workforce that feels secure and valued. These reforms are more than administrative changes. They offer a chance to build a fairer, more modern labour market that supports growth and dignity for millions.
Source: Labour codes: What changes for workers and employers & Minimum Wage, Health Checkup, WFH And More: 12 Changes In Labour Rules Every Employee Must Know
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