India’s labour landscape is undergoing one of the most significant transformations in decades. For years, businesses struggled with 29 different labour laws, many of which dated back to the pre-independence era. These outdated and fragmented laws created confusion, compliance risks, and administrative burden for organizations across sectors.
To simplify and modernize this framework, the Government has consolidated all major labour laws into four comprehensive Labour Codes:
- Code on Wages, 2019
- Social Security Code, 2020
- Occupational Safety, Health & Working Conditions (OSHWC) Code, 2020
- Industrial Relations (IR) Code, 2020
These reforms aim to improve wage transparency, strengthen social protection, upgrade workplace safety, and enhance ease of doing business through unified compliance systems. Although rules under these Codes are still awaited, their impact is already being studied and prepared for by India Inc.
Why the New Labour Codes Matter
The new codes represent a shift from a fragmented regulatory setup to a simple, transparent, and digital-first compliance system. Key purposes include:
- Universal wage protection for all employees
- Expanded social security coverage including gig & platform workers
- Standardized workplace safety norms across industries
- Ease of doing business through single registrations and reduced paperwork
- Technology-enabled inspections to reduce subjectivity and corruption
Businesses, HR professionals and compliance teams must prepare proactively to ensure smooth transition once the Codes are implemented.
Benefits of New Labour Codes for Employers
✔ Simplified compliance
29 laws consolidated into 4 creates a streamlined regulatory environment with less duplication.
✔ Fixed-term employment options
Helps businesses hire for project-based roles without long-term commitments.
✔ Single registration, single licence & unified returns
Greatly reduces paperwork and multiple departmental interactions.
✔ Standardised legal definitions
Clear definitions of employee, employer, wage, worker reduce disputes.
✔ Flexible working hours (up to 12 hours/day)
Subject to overtime and safety safeguards.
✔ Layoff flexibility increased from 100 to 300 workers
Enables scalable workforce restructuring.
✔ Women permitted in all sectors including night shifts
With mandatory safety measures.
Detailed Breakdown of the Four New Labour Codes
1. Code on Wages, 2019
Purpose – To ensure fair, timely and uniform wage practices across India.
Key Provisions
- Universal definition of “wages”
- Basic + DA must be at least 50% of CTC
- Minimum wages applicable to all employees
- Mandatory wage timelines — monthly wages to be paid within 7 days
- Equal remuneration for men & women
- Digital inspection system for transparency
2. Social Security Code, 2020
Purpose – To extend social protection and statutory benefits to all classes of workers, including unorganized and gig workers.
Key Provisions
- ESIC expanded from 566 districts to all 740 districts
- ESIC benefits for establishments with even one hazardous worker
- Universal PF & ESI coverage
- Creation of a Social Security Fund for 40 crore unorganized workers
- Gratuity eligibility for fixed-term employees: 1 year
- Aadhaar-linked UAN for portability
- Mandatory online vacancy reporting for establishments with 20+ workers
- Centralised migrant worker database
3. Occupational Safety, Health & Working Conditions (OSHWC) Code, 2020
Purpose – To create uniform workplace safety, health and welfare standards.
Key Provisions
- Merges 13 Acts including Factories Act & Contract Labour Act
- Single registration & licence
- Mandatory appointment letters for all employees
- Women allowed in all sectors including night shifts
- Free annual health check-up for workers (40+ age)
- Stronger migrant worker protections—helplines, travel assistance, ration access
- Better ventilation, sanitation, and safety infrastructure
- Earned leave eligibility reduced from 240 to 180 days
4. Industrial Relations (IR) Code, 2020
Purpose – To balance employer flexibility with industrial harmony and speedy dispute resolution.
Key Provisions
- Merges Trade Unions Act, Standing Orders Act & ID Act
- Two-member Industrial Tribunals with 1-year decision timelines
- Re-skilling allowance: 15 days’ wages for retrenched workers
- Job-loss support under Atal Beemit Vyakti Kalyan Yojana
- Clear procedures for layoffs, strikes & closures
Conclusion
The New Labour Codes are not just statutory reforms—they are a transformational shift toward a modern, transparent, and growth-oriented labour ecosystem. Once implemented by the States, these Codes are expected to benefit both employers and workers through streamlined compliance, better social security, safer workplaces, and improved industrial harmony.
HI,
We need clarity on applying Section 2(y) of the Wage Code to our current compensation structure. Specifically:
For the 50% rule, should the denominator be only wage components (Basic+DA+Special Allowance) or total CTC including reimbursements, perks, PF/NPS, insurance, and statutory payouts?
For flexi reimbursements (telephone, fuel, stationery, driver, attire, handset, professional development, etc.), do these stay outside “wages” even if taxable when bills aren’t submitted?
Is the 15% in-kind cap applicable only to non-cash benefits provided in lieu of wages, or does it extend to monetary reimbursements?
Based on our component list, which items qualify as wages and which fall under exclusions (a) to (i), and does our structure risk breaching the 50% threshold?
Request your definitive view for compliance alignment.
Thanks