New Labour Codes India 2025: Everything You Need to Know

The new labour reforms in India are a new era where it is expected that the new labour code India 2025, which is a more consolidated version revising 44 current labour laws into four historic codes,is to be implemented in India. 

Even though it has been pending implementation over the years, organisations throughout India are planning to roll out in November 2025. This guide will offer an in-depth analysis of the structure, impact, challenges and readiness roadmap of the HR and payroll teams.

Introduction 

The New Labour Codes India is the largest labour market reform in the Indian labour market in over 70 years. The old labour law, much of which was enacted pre-Independence, was no longer relevant to the realities of modern work, as the labour force was becoming more and more hybrid, gig-driven, digital-first, and compliance-intensive.

The four new codes are meant to facilitate compliance, safeguard workers, minimise litigation and generate a state-wide harmonised labour environment. With the growing geographical spread of businesses and their transition to automation and flexible work models, employers need to be informed about the specifications of these codes and be ready to equip HR systems, payroll systems and compliance framework with such tools.

This blog offers a prospective, panoramic perspective on how the New Labour Code India 2025 may be implemented, with a look into its effects on employers, the HR business, recruitment, contracts, remuneration, gig workers, and workforce digital regulation.

According to the Press Information Bureau, under the Code on Social Security, 2020, social security coverage has been extended to organised, unorganised, gig and platform workers for the first time in India. This includes provisions for provident fund, gratuity, maternity benefits and health coverage.

Four New Labour Codes: Introduction

The New Labour Code of India consolidates 44 central labour laws under four broad codes:

Official Ministry of Labour & Employment page summarising all four codes, including notifications and implementation timelines

New Wages Code 2025 (Code on Wages, 2019)

This standard equalises the definition of wages, schedules of payment, equal pay, minimum wage and bonus policies.

Key focus areas:

• Wage Definition New Regulations of salary structure
• Flooring wage according to the cost of living
• Equalization of definitions by states
• Allowance revision vs basic pay ratios

The Code of Industrial Relations (IR), 2020

This code is concerned with dispute resolution, standing orders, industrial relations, strikes, layoffs, and union rules.

Key focus areas:

• Faster dispute resolution
• Fixed-term employment rules
• Layoff and retrenchment conditions
• Automated standing orders of big businesses

Complete document on dispute resolution, fixed-term employment, and layoffs: 

The Social Security Code, 2020

This code extends social security to gig workers, platform workers and unorganised workers.

Key focus areas:

• Labour Code for Gig Workers
• Platform Worker Social Security India
• Universal social insurance schemes
• PF, gratuity, maternity, ESIC cover

Official document covering gig worker benefits, PF, gratuity, and ESIC extensions.

The OSHWC Code, 2020 (Occupational Safety, Health & Working Conditions Code)

Safety, health standards, inspection, contract labour that governs the workplace and working hours are regulated by this code.

Key focus areas:

• Contract Labour New Rules
• Working hours, overtime standards
• Health, safety and working conditions
• Contractor and staffing agency licenses

New Labour Code 2025: Status, Implementation & Latest Updates

Even though all four codes have been assented by the president, their implementation is subject to state level regulations and notifications. As of 2025:

• Key regulations of all codes are prepared.
• A great number of states have developed their rules.
• It is likely to be fully implemented nationwide in stages starting 2025.
• To comply with payroll and HRMS systems, organisations are upgrading them.

Businesses should begin planning early because it can happen without warning and be consistent once the states have reached an agreement.

Press release from Nov 21, 2025, announcing nationwide rollout and rationalisation of 29 new labour code laws

Old vs New Laws on labour: Comparison Tables

• Wages & Salary Structure

 

Category	Old Laws	New Labour Code India
Wage Definition	Varied across laws	Standardised across India
Basic:Gross Ratio	Flexible	Basic must be ≥ 50% of CTC
Allowances	Could be majority	Capped at 50%
Bonus Eligibility	Depending on state	Common national rules

• Working Hours & Overtime

 

Category	Old Rules	Overtime Rules India 2025
Working Hours	8–9 hrs/day	12 hours/day (max), with weekly cap unchanged
Overtime	Varied	Overtime beyond 8 hours/day
Weekly Off	Mandatory	Stricter record-keeping & digital logs

• Social Security

 

Category	Old Rules	Social Security Code Benefits
Gig Workers	No coverage	Social security schemes applicable
Gratuity	After 5 years	Likely for fixed-term employees as well
PF Contribution	Flexible percentages	Standardised definition increases PF base

Status of State-Wise Implementation

Since the codes demand central and state rules, it is implemented through the notifications of individual states. In order to monitor a State Labour Notification Tracker becomes necessary to oversee:

• Minimum wages
• Floor wage updates
• Shops & Establishment notifications
• Draft rules under each code
• Work-hour and overtime notification
• The rules of contract labour licensing

Some states such as Karnataka, Maharashtra, Gujarat, Uttar Pradesh, and Madhya Pradesh have been quicker and others are still putting in place rules.

According to BDO India’s November 2025 alert, key provisions of the four labour codes, including revised definitions of wages, worker/employee, and expanded social-security coverage to become effective on 21 November 2025.

Key Changes Under the New Labour Codes 2025

 

• Uniform Definition of Wages

 

The standardised definition of wages is the greatest change in the New Wages Code 2025. Wages should be at least 50 per cent of total CTC.

This affects PF, gratuity, leave encashment, retrenchment compensation and others.

As per Economic times the new framework replaces 29 earlier labour laws, consolidating wage, bonus, social security, safety and industrial-relations regulations under four comprehensive codes.

 

• Greater Social Security Coverage

 

More employees get PF, ESIC, maternity, gratuity and pension benefits, even gig and platform workers.

 

• Digital-First Compliance

 

Transparency in records, digital registers, electronic attendance and real time audit trails make Digital Payroll Compliance India a mandatory requirement.

 

• Working Hours & Overtime

 

In the new code, the conditions are that it permits a 12-hour workday with a weekly limit.

This brings in stiffer rules on Overtime Rules India 2025 which need automated tracking.

 

• Leave Rules New Labour Code

 

The OSHWC Code amends the leave accrual, carry forward, and entitlement regulations to various sectors.

 

• Contract Labour New Rules

 

Regulations enhance transparency, licensing, renewal of contracts and protection of workers- which is essential in an industry that absorbs a lot of employees.

Wage Structure Changes: Salary, PF and CTC Impact

The Impact of New Labour Code on Salary is one of the most discussed ones. The new wage structure radically changes the take home pay and the cost calculation of the employer.

Basic Salary at 50% of CTC

Basic wages need to be half-way CTC and beyond. This increases:

• PF contribution
• Gratuity cost
• Payments and leaves and statutory payments

PF and Gratuity Changes India

The increases in basic wages lead to an increase in PF contributions (12% of basic) and increases in gratuity outflows.

To the employees, this can lower the salary that they take home but boost the benefits during retirement.

Take Home Salary Reduction India

Since allowances must not surpass 50 percent of CTC:

• Net salary reduces
• The contribution of the employer goes up
• Long-term savings increase

Wage Definition New Rules

Any remuneration element other than specified exceptions will be classified as "wages" and so the structure will be similar across states.

What the New Labour Codes Mean for Hiring, HR Operations & Talent Acquisition?

HR members will have to re-design recruitment procedures, provide letters, contracts and CTC designs.

Key impacts:

• The templates of the offer letters should incorporate compliance with wages.
• Budgets on hiring have to be re-calculated.
• Recruiters should explain take-home and CTC changes.
• HR Compliance India 2025 is overloaded with records.
• The restructuring of contracts is necessary in staffing companies.
• The teams involved in talent acquisition should include increased statutory payouts.

Sector-Wise HR & Hiring Impact Analysis

IT & Tech

• An increase in salary restructuring.
• Increased cost for overtime
• Complexity in remote compliance

Manufacturing

• Significant modifications in tracking of overtime.
• It is essential to have contractor licensing regulations.

Retail & Hospitality

• Prolonged work-hour organizations must be reconsidered.
• Increased social security coverage.

Startups

• Restructuring of compensation can bring costs up.
• The flexibility is impacted by contract labour rules.

Gig & Platform Businesses

• Compulsory social insurance payments.
• Registration and record keeping issue

Impact on Gig, Platform and Contract Workers

Labour Code for Gig Workers

Gig workers gain:

• Universal social security
• Insurance coverage
• PF-like benefits (if notified)

Platform Worker Social Security India

• Aggregators have a structured contribution to platform workers (delivery, ride-hailing, app-based, etc.).

Contract Labour New Rules

The contract staffing firms need to:

• Have valid licenses
• Maintain digital registers
• Ensure workplace safety
• Provide statutory benefits

According to CNBC-TV18, the new labour codes formally recognise gig and platform workers under social-security provisions, a landmark step for workers in the app economy. This means that delivery or ride-share workers could now become eligible for benefits previously reserved for employees.

How do the New Labour Codes Affect Employer Costs?

 

• Higher PF outflows

 

Increase in basic salary = increase PF contributions.

 

• Increased gratuity obligations

 

According to higher minimum wages and experience.

 

• Increased compliance cost

 

Incorporates electronic mechanisms, auditing, paperwork and education.

 

• Overtime obligations

 

Strict monitoring and increased payout.

 

• Social security of gig workers

 

It requires aggregators to make contributions towards welfare funds.

All in all, the cost of labour can rise by 4-12% in accordance with the industry.

What Payroll and HRMS Upgrades Are Required for Compliance?

In order to meet the requirements of the Payroll Software Labour Code, HRMS platforms have to support:

• New design of wage definition.
• Computed PF, ESIC, gratuity and LWF.
• Overtime tracking
• Shift rule updates
• Leave Rules New Labour Code
• State-wise compliance changes.
• Audit logs and digital registers.
• Tracker of Notifications of the State Labour.
• Contractor management

Flexible rule engines are already provided on platforms such as uKnowva HRMS to suit the new codes.

Impact on Employee Experience

Take-home salary can be reduced but the employees enjoy:

• Higher retirement savings
• Greater transparency
• Unified wage structures
• Better working conditions
• Leave standardisation
• Increased job security
• Gig and platform workers Social security

Penalties for Non-Compliance

Strict financial and legal consequences are presented in the Labour Code Penalty Structure.

Examples include:

• Sanctions for late payment of wages.
• Penalties against breaking OSHWC safety regulations.
• Fines for misclassifying employees.
• Punishments in case of misleading digital registers.
• Increased punishment for second-time offences.

HR & Payroll Compliance Checklist

An HR checklist practice on Labour Code 2025 Explained:

• Modify CTC structures to be in line with the definition of wages.
• Redesign PF ESIC bonus, gratuity guidelines.
• Amend the offer document and appointment contract.
• Introduce electronic payroll and attendance.
• Set up overtime regulations and monitoring.
• Update leave policies
• Digitise records and paperwork.
• Track state notifications
• Train HR teams.
• Compliance of the audit contractor.

Common Mistakes to Avoid

There will be an assumption of delayed implementation.

• Wealth: Huge discrepancies in state levels will be neglected
• Failure to upgrade digital payroll systems
• Employing old pay scales
• Inept home HR and payroll personnel
• Poor documentation hygiene
• Misclassification of platform and gig workers

Preparation Roadmap for HR & Talent Teams

 

• Audit Current HR Processes

 

As the HR teams switch to the New Labour Code India 2025 framework, they are expected to have an extensive audit of all the current HR, payroll, and workforce management processes. These involve the examination of attendance systems, overtime payments, leave schemes, wage elements, salary cycles, legal deductions, and record keeping format. 

 

• Discover Payroll, Attendance, Leave, and Compliance Gaps

 

After the audit, HR must narrow down on the areas where the current systems are failing. To take the example, PF contribution workouts might not correspond to the new definition of the wage; the overtime will not correspond to the new 48 hours per week limit; and the leave registers will not correspond to the revised forms. 

The attendance systems should also be able to facilitate proper biometric or digital records since the new codes will focus on verifiable work hours. 

 

• Redesign Salary Structures

 

The definite meaning of wages embodied in the New Labour Code 2025 is that at least half of the total compensation must be deemed as basic wages. This will have an impact on CTC breakups, PF contributions, gratuity outflow, and take-home salary. HR should redesign salary designs to make sure that they are compliant without increasing budgets.

The employers might have to re-balance allowances, re-design variable pay and re-recipe statutory benefits. The transparency and accuracy will be ensured with the help of simulation exercises and impact analysis at the employee level.

 

• Equalise Wage Definition including PF/Gratuity Impact

 

PF and gratuity will now be calculated on a larger portion of the basic wage, this means that organisations have to look ahead to determine how much the employer will cost will rise. Modelling tools to be used by HR teams should provide estimates of financial implications of different categories of workers who include full-time, contractual, gig, and platform workers. 

There should be a revision of the compensation policies to ensure that PF, gratuity, overtime, bonus and leave encashment is in compliance with the new definition of wage.

 

• Enhance Digital Payroll Compliance

 

The New Labour Codes stipulate electronic document storage, computer calculation of wages, and switchable payroll records. HR should be in a position to make sure that the payroll software is capable of:

• PF, gratuity, bonus, overtime, and leave should be automatically calculated according to new regulations.
• Produce digital audit reports.
• Have tamperproof electronic registers.
• Protest against state-wise compliance changes.
• Give workflow approvals to contractor and gig workforce.

Implementing such a system as uKnowva HRMS will guarantee compliance with the new codes on an end-to-end basis.

• Secure Electronic Records & Audit Reports

Digital audit trails are largely stressed by the new structure. It implies that all records concerning the employees such as attendance logs, wage registers, contract agreements, bonus statements, muster roll, leave registers shall be kept locked up and should be easily retrievable in case inspection is required. The HR departments should adopt role-based access, encrypted storage and automatic backup solutions so that there is zero loss of data and immediate availability.

 

• Train HR Teams on the New Code

 

The new codes bring significant change in the wage structure, hours of work, safety in place of work, management of contractors, and employee benefits. HR and payroll teams should be trained on:

• New statutory definitions
• Amended returns and reports.
• Restructuring of overtime and leaves.
• Social security benefits.
• Online compliance procedures.

Training also provides the HR officers, payroll managers, and compliance executives with the capabilities to handle daily operations without the risk of making mistakes.

 

• Renew Employment Contracts and Offer Letters

 

Any employment document has to align with the regulatory environment of 2025. This includes:

• New wage structure
• Overtime eligibility
• State leave entitlements
• Working hour norms
• Contributions to social security
• The disclosures of contract labour

To make the system legally coherent and compliant with the law, HR should develop new templates regarding full-time employees, contract workers, platform workers, and gig workers.

 

• Improve Governance of Contractors

 

In the new Contract Labour provisions, the principal employers will be held to a higher responsibility in regard to enforcing compliance on the contractors. This requires:

• Monitoring the hours of the contractor digitally
• Ensuring that the wages are paid according to the new definition of wages
• Checking of PF/ESI contractor compliance
• Having digital muster roll and payment registers

The HRMS platform systems assist in the integration of contractors' information and minimizesthe  chances of non-compliance fines.

 

• Inform Employees of Change

 

Clear communication with employees wins trust and minimizes confusion associated with restructuring of salaries or new policies. HR should explain:

• Change of take-home salaries may vary
• The way in which PF and gratuity are on the rise
• New working hour and overtime regulations
• New leave rights or changes of entitlement
• The enhancement of the financial security in the long run through the new codes

The acceptance is made easy in town halls, FAQs, email announcements, and by one-on-one counselling (with the affected employees).

Conclusion

New Labour Code India 2025 will be a historic break in terms of modern workforce governance, which is unified and digital. Although organisations might experience some short term issues, especially on salary restructuring, payroll governance and upgrade of compliance, the benefits are long term as there is increased transparency, better protection of workers, and easier compliance in the whole of India.

Today, the proactive measures that can be done by the HR leaders, employers, and payroll teams include auditing the current systems, updating payroll software, and educating staff about structural changes. 

An organisation that is transforming the new labour codes effectively will not only sail through, but also be in a position to establish a healthy basis of scalability, ethical, and compliant growth in the coming years.

FAQs on the New Labour Code India 2025

1. Is the new labour code implemented in India?

As of 2025, the New Labour Codes have not been fully implemented nationwide. While the Central Government has completed notifications for all four codes, several states are still finalising their rules. Since labour is a concurrent subject, full implementation requires both central and state rules to be in place. Some states have made partial progress, but nationwide enforcement is still pending.

2. Will India implement a 4-day work week?

Yes, the New Labour Codes allow employers the option to adopt a 4-day work week. However, employees must still complete 48 hours per week. This means each working day would be longer—up to 12 hours including breaks. A 5-day or 6-day work structure remains permissible, giving companies flexibility based on their operations.

3. What are the main changes introduced by the New Labour Code India 2025?

Key reforms include:

• A uniform wage definition, requiring 50% of CTC to be fixed basic wages.

• New rules on overtime (48-hour weekly limit).

• Updated leave, attendance, and working hour structures.

• Increased PF and gratuity contributions due to wage restructuring.

• Stricter record-keeping and digital payroll compliance.

• Expanded social security for gig, platform, and unorganised workers.

• New safety and welfare norms under OSHWC Code.

• Streamlined employer filings and compliance processes.

4. How will the 2025 Labour Code affect gig workers, freelancers, and contract labour in India?

Gig and platform workers gain access to formal social security benefits such as insurance, pension, and maternity benefits under the Social Security Code. Contract workers will see stricter oversight of working hours, wages, and safety conditions. The Code mandates digital tracking of payments and work logs, ensuring timely and transparent wage disbursal. Freelancers working via platforms may also be included under specific social security schemes.

5. Why did the government introduce the Labour Code 2025 and what problems is it intended to solve?

The reform aims to modernise India’s fragmented labour system by consolidating 29 outdated laws into 4 simplified codes. The goals include:

• Reducing regulatory complexities

• Improving ease of doing business

• Promoting formalisation of the workforce

• Ensuring better social security for all workers

• Digitising compliance and payroll systems

• Reducing industrial disputes through clearer definitions

• Encouraging sustainable employment practices

6. How does the Labour Code 2025 differ from the previous Industrial Disputes Act and related labour laws?

Unlike older laws, the 2025 Codes introduce uniform definitions, digitised processes, and broader coverage. They reduce ambiguity in wage components, introduce clearer rules for hiring and retrenchment, expand worker protection across industries, and redefine working hours and leave rules. The compliance process is simpler, digital, and more transparent compared to the paper-based systems under the previous framework.

7. What immediate actions should small business owners take to comply with the New Labour Code India 2025?

Small businesses should:

• Review salary structures as per the new wage definition (50% basic).

• Update employment contracts, offer letters, and HR policies.

• Adopt a digital payroll & HRMS system for automated statutory compliance.

• Re-evaluate PF, gratuity, overtime, and leave liabilities.

• Maintain digital records for attendance, wages, and compliance filings.

• Train HR teams on state-wise rules and new registers.

8. How will the new Indian labour codes affect employee benefits by 2025?

Employee benefits such as PF, gratuity, leave encashment, and overtime calculations will increase due to the restructured wage definition. Employees may experience a slight reduction in take-home salary, but long-term social security benefits—including pension and gratuity—will grow significantly. Additional welfare measures under the OSHWC Code will also strengthen workplace health and safety.

9. How do the 2025 Indian labour codes compare to international labour standards?

The new codes align closely with global labour norms by focusing on worker safety, welfare, and social security. Comparable to EU and OECD guidelines, the codes emphasise fixed working hours, transparent wage structures, enhanced digital record-keeping, and stronger social protection for gig workers—an area where many countries are still catching up.

10. How will the new Indian labour laws 2025 affect multinational corporations (MNCs) operating in India?

MNCs will need to restructure compensation plans to meet the 50% basic wage criteria, upgrade digital payroll systems, and comply with unified working hour and overtime rules across states. The shift towards digitised compliance makes it easier for global organisations to standardise processes, but they must monitor state-wise rule variations closely. Contractor governance and gig-worker compliance will also require additional oversight.