India’s New Labour Law Framework: A Practical and Legally Enhanced Overview

India’s labour law regime has undergone one of its most significant transformations with the enforcement of the four unified Labour Codes from 21 November 2025. These Codes repeal and consolidate twenty-nine Central labour enactments, creating a uniform framework for wages, social security, industrial relations, and workplace safety.

Most legacy statutes were drafted for the industrial environment of the 1930s–1950s. They no longer aligned with present-day business structures, digital platforms, or the nature of modern employment. The new Codes fill this gap by simplifying compliance, expanding worker protection, and creating a streamlined regulatory ecosystem.

Below is an upgraded legal explanation of the pre-reform vs post-reform landscape, along with sector-wise implications

B. Sector-Wise Legal Implications

1. Fixed-Term Employees (FTE)

Fixed-term employees are placed on par with permanent employees for wages, social security, medical benefits and leave entitlements. Gratuity becomes payable after one year instead of five, encouraging direct hiring and reducing contractual layers.

2. Gig and Platform Workers

Gig work, Platform work, and Aggregators have been defined for the first time under India’s new Labour Codes. Aggregators are mandated to contribute 1–2% of their annual turnover to a dedicated social security fund, capped at 5% of the amount paid to gig and platform workers. An Aadhaar-linked Universal Account Number will enable these workers to easily access welfare benefits that are fully portable across states, ensuring protection regardless of migration.

3. Contract Workers

Contract workers under the new Labour Codes are ensured benefits equal to permanent employees, including social security and legal protections. Fixed-term employees become eligible for gratuity after just one year of continuous service. The principal employer is responsible for providing health and social security benefits to contract workers, who are also entitled to free annual health check-ups. These reforms enhance employability and worker protections while promoting better welfare.

4. Women Workers

Equal remuneration for equal work is mandatory. Women may work night shifts and hazardous occupations with their consent and prescribed safety arrangements. Mandatory women’s representation in grievance redressal committees.

5. Youth Workers

Youth workers receive minimum wages, formal appointment letters, and protection against wage deductions. Workers will receive wages as per the floor wage determined by the Central Government.

6. MSME Workers

MSME workers receive expanded coverage under the Social Security Code, including minimum wages, double overtime, and access to workplace amenities.

7. Beedi & Cigar Workers

Workers receive minimum wages, defined working hour caps, voluntary overtime at double rates, and bonus eligibility after 30 days.

8. Plantation Workers

Governed by OSHWC and Social Security Codes, plantation workers receive mandatory safety training, protective equipment, Education Facilities for children and ESIC coverage.

9. Audio-Visual & Digital Media Workers

Workers such as journalists, digital media creators, and stunt professionals receive statutory protections including appointment letters and double-rate overtime.

10. Mine Workers

Mine workers are now covered under the Social Security Code, which includes recognition of certain commuting accidents as employment-related. The government has set national standards for occupational safety and health for mine workers. They are entitled to free annual health check-ups, and working hours are limited to between 8 and 12 hours per day, with a weekly maximum of 48 hours to ensure worker health and work-life balance.

11. Hazardous Industry Workers

Safety committees, uniform national safety norms, and free annual check-ups are mandatory. Women can now work in hazardous units with safety protocols.

12. Textile Workers

Migrant workers receive equal wages, social security benefits, and portability. Claims for pending dues allowed for up to three years, double wages for workers for overtime work.

13. For IT and ITES workers

The Labour Codes mandate that salaries must be released by the 7th of every month, ensuring transparency and financial stability. Equal pay for equal work is now compulsory, strengthening women’s participation, who are also allowed to work night shifts with safety measures to earn higher wages. The reforms guarantee timely resolution of harassment, discrimination, and wage-related disputes. Social security benefits are ensured through fixed-term employment and mandatory appointment letters, fostering better worker protection and trust in this sector.

14. Dock Workers

Dock workers receive formal recognition, compulsory appointment letters, PF, pension, insurance and employer-funded health check-ups. Dock workers to get mandatory medical facilities, first aid, sanitary and washing areas, etc., to ensure decent work conditions and safety.

15. Export Sector Workers

Fixed-term workers receive gratuity and PF. Leave accrues after 180 days. Women may work night shifts with consent and safety protocols. Safety and welfare measures include mandatory written consent, double wages for overtime, safe transportation, CCTV surveillance, and security arrangements.      

Additional Reform Highlights:

1. National Floor Wage ensuring standard minimum income.

2. Gender-neutral protections extended to all workers.

3. Inspector-cum-facilitator model for compliance support.

4. Industrial Tribunals for faster dispute resolution.

5. National OSH Board for uniform safety norms.

6. Mandatory safety committee for 500+ workers

7. Higher applicability thresholds ease burden on smaller units.

General Points:

There are challenges around wage definitions and salary structuring, specifically regarding the “50% test” on allowances, which may increase employer costs and cause payroll disputes.

For Example

If an employee has Basic + DA = Rs.45,000 and allowances of Rs.35,000, the Labour Code allows allowances only up to 50% of Rs.45,000 (Rs.22,500). Since allowances exceed this limit by Rs. 12,500, the excess must be added back to “wages.”

Contract labour rules now apply only if establishments have 50 or more contract workers, easing burden on smaller employers, but ambiguities remain about "core" vs. "outsourced" work.

Many people wrongly believe gratuity becomes payable after 1 year for all employees, but that is incorrect. Under the Code, gratuity is allowed only when a fixed-term employee completes the full tenure of their contract. So, if the contract is for 1 year and the employee completes that full year, they become eligible for pro-rata gratuity, otherwise not.

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Official Press Release

Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.