The implementation of the four Labour Codes, notified on Friday, is set to increase operating costs for large companies due to mandated higher wage-related expenses and stricter accountability for safety and working conditions.
However, companies will benefit from simplified compliance requirements, including a single registration, a PAN-India licence, and a single annual return. The Ministry of Labour and Employment replaced and streamlined 29 older labour laws with four Labour Codes—the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions (OSH) Code, 2020. As per the Ministry of Labour and Employment, the Labour Codes will bring major improvements in wages, workplace safety, social security, equality, and employee rights across several sectors.
“For employers, it means simpler compliance but also higher wage-related costs and greater accountability on safety and working conditions. For workers, it brings wider social security coverage, mandatory appointment letters, minimum wages for all, and stronger protections especially for women, gig workers and contract staff,” said Suhail Nathani, Managing Partner, Economic Laws Practice.
The new regulations mandate that all employers issue appointment letters and ensure timely payment of wages. They also require that all workers—including gig and platform workers—receive social security coverage such as PF, ESIC, insurance, maternity benefits, and pension. Under the new law, women are allowed to work at night in all occupations, subject to their consent and necessary safety measures. Gratuity eligibility has been reduced to one year of continuous service instead of five, and fixed-term employees must be paid wages equal to those of permanent staff. These provisions are likely to increase employer costs across sectors.
For the first time, the law defines gig work, platform work, and aggregators. The regulations also mandate guaranteed minimum wages and access to basic facilities—such as canteens, drinking water, and rest areas—for MSME workers. For IT and ITES employees, salaries must be released by the 7th of every month. Equal pay for equal work has been mandated, and women’s participation has been strengthened with the option to work night shifts in all establishments. For migrant workers in the textile sector—whether direct, contractor-based, or self-migrated—equal wages, welfare benefits, and PDS portability have been ensured. They can raise claims for up to three years to settle pending dues, and overtime must be paid at double the wage rate.
Kamal Karanth, co-founder of Xpheno, said that provisions such as mandatory annual health check-ups for employees above 40, wider social protection for all worker categories, and opening night-shift opportunities for women reflect a clear focus on inclusion and employee well-being. However, these measures may introduce notable cost implications for employers, and the reforms may feel slightly mistimed for many enterprises and sectors amid current market challenges.
“In India, nearly 6 million white-collar employees are aged 40 plus, and mandatory annual health screenings for this segment will add a significant cost burden. Also, reforms related to PF and ESI to gig, contract and fixed-term workers do have a significant cost to be budgeted. With gratuity eligibility reduced to one year, companies will now have to revisit their cost models and workforce planning. Enabling women to work night shifts will further require employers to invest in safety and security infrastructure, which can be a substantial additional cost for many organisations. The intent behind the reforms is positive, but enterprises, especially small and mid-sized businesses will now have to brace to absorb these changes without disrupting operations,” said Kamal Karanth, co-founder of Xpheno.
"Aggregators falling within the specified categories will mandatorily need to contribute to the social security fund in respect of their gig workers. Such contributions will be at a rate of 1-2% of their annual turnover (exclusive of any tax, levy and cess paid or payable to the Central Government) as notified by the Central Government but will not exceed 5% of the annual amount paid or payable by them to their gig workers,” said Minu Dwivedi, Partner, JSA Advocates and Solicitors.
Industry groups welcomed the move and termed it a balanced law. “Uber welcomes the government’s move to implement the new labour codes, including the Code on Social Security. Uber looks forward to working closely with the government to ensure the speedy and effective implementation of these reforms,” said an Uber spokesperson.
The Codes introduce sector-specific protections as well. All dock workers will receive formal recognition and legal protection, with mandatory appointment letters guaranteeing social security. In the export sector, fixed-term workers will receive gratuity, provident fund (PF), and other social security benefits. For beedi and cigar workers, minimum wages are guaranteed, and working hours are capped at 8–12 hours per day and 48 hours per week. Plantation workers are now covered under both the OSHWC Code and the Social Security Code. Digital and audio-visual workers—including journalists, dubbing artists, and stunt performers—will receive full benefits.
All workers must be issued appointment letters clearly stating their designation, wages, and social security entitlements. Overtime work beyond prescribed hours requires the worker’s consent and must be compensated at double the normal wage rate. For mine workers, the Social Security Code treats certain commuting accidents as employment-related, subject to conditions of time and place.
Suhail Nathani, Managing Partner of Economic Laws Practice, said the implementation of the four Labour Codes marks the most significant shift in India’s labour framework in decades. “The transition will require substantial operational changes across industries, but in the long run, the Codes are expected to bring the informal workforce in to a safer regime, improve transparency, and better align India’s labour market with global standards, and indeed in some examples with human rights as well,” he said. The laws will be implemented in a phased manner, with most States having already issued their draft rules.