In a landmark move, the Government of India announced the implementation of the 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 (OSHWC) Code, 2020 – effective from November 21, 2025.
This comprehensive overhaul replaces 29 central labour laws that were fragmented and outdated. The new codes are designed with a dual objective: to ensure universal social security and protection for India’s massive workforce, while simultaneously simplifying the complex, archaic compliance structure for businesses to promote the ‘Ease of Doing Business’.
The reforms are hailed as one of the most progressive since independence, establishing a strong foundation for universal social security, minimum wages, and safe workplaces.
Modernising India’s labour ecosystem
The implementation of the Four Labour Codes introduces fundamental changes across the employment lifecycle:
- Universal wage security: The Code on Wages now establishes a statutory right to minimum wages for all workers, up from the previous coverage of only about 30%. A national floor wage will be set by the central government, ensuring no state can fix minimum wages below this basic standard of living. All employees, regardless of their wage limit, are also guaranteed timely wage payment and compensation for overtime at twice the normal rate.
- Expanded social security: The Code on Social Security formally defines and recognizes gig workers and platform workers for the first time. Aggregator companies are required to contribute 1–2% of their annual turnover (capped at 5% of payouts) towards a dedicated social security fund for these workers.
- Fixed-term employment parity: Fixed-Term Employees (FTEs) must receive all benefits equivalent to permanent staff, including leave and social security. Crucially, FTEs are now eligible for gratuity after just one year of continuous service, instead of the earlier five-year requirement.
- Gender neutrality and safety: The codes mandate equal pay for equal work and explicitly prohibit gender discrimination. Women are permitted to work night shifts in all establishments, including previously restricted sectors like mining, provided they consent and the employer ensures adequate safety protocols.
- Compliance simplification: The framework is streamlined with a single license, single registration, and single return system for multiple laws, reducing bureaucratic friction. The system now uses an ‘Inspector-cum-Facilitator’ model that prioritizes guidance and relies on technology for random, transparent inspections.
What this means for skilled workers
The implementation of the Labour Codes significantly boosts the dignity and financial stability of India’s large workforce.
- Formalisation and stability: Mandatory appointment letters for all workers will formalize employment for millions, ensuring clarity on wages, designation, and entitlements.
- Enhanced benefits: Employees, particularly in the contract-heavy tech and gig sectors, gain access to portable social security benefits via Aadhaar-linked accounts and mandatory contributions from employers/aggregators.
- Salary restructuring impact: The new definition of ‘Wages’ mandates that basic pay must be at least 50% of an employee’s total remuneration. While this increases the base for calculating statutory benefits like PF and Gratuity, boosting long-term savings, employees may see a re-jigging of their Cost-to-Company (CTC) resulting in a potential shift in their monthly take-home salary.
- Health and safety: Workers over 40 years of age, especially in hazardous industries, are now entitled to free annual health check-ups paid for by the employer.
What it means for employers
For companies operating or expanding into India, the codes offer a modernized, simplified regulatory landscape, but they also necessitate immediate changes to payroll and HR structures.
Navigating these structural shifts independently is highly risky. Multiplier’s Global hiring gap report shows that only 8% of companies worldwide say they are being fully compliant with international tax and labor laws.
The reforms benefit employers by promoting Ease of Doing Business through:
- Simplified compliance: Replacing multiple registration, licensing, and return filings across states with a unified, digitized, ‘one license, one registration, one return’ system.
- Reduced legal risk: The new ‘Inspector-cum-Facilitator’ framework emphasizes guidance over punishment and decriminalizes many first-time minor offenses, creating a more transparent and predictable compliance environment for employers.
- Legal clarity for new models: The explicit recognition of fixed-term employment provides legal certainty for hiring project-based talent, provided they are given parity in pay and benefits with permanent staff.
However, the compliance burden has shifted in complexity, requiring mandatory adjustments to salary and benefits administration:
- Restructuring compensation: Companies must immediately recalculate their entire compensation structure to ensure the basic wage component accounts for at least 50% of total remuneration, which affects PF, gratuity, and bonus calculations.
- Managing new worker categories: Businesses, especially tech aggregators and media companies, must implement systems to comply with new social security contributions and formal entitlements for gig and platform workers.
To navigate these complex, mandatory legislative changes while ensuring compliance and accurate payroll, multinational and domestic employers need expert, real-time support.
By partnering with an Employer of Record (EOR) provider like Multiplier, global organisations can:
- Ensure compliance in real time: Multiplier’s Global Payroll platform centralizes payroll across 150+ countries, automatically factoring in complex local tax laws and statutory deductions, which is essential for adhering to India’s new wage definition and benefit requirements.
- Manage fixed-term and gig workers: Multiplier offers both EOR services for compliant full-time hiring in India, and Contractor of Record (COR) services, ensuring non-employee talent (freelancers, consultants) are properly classified to avoid the risk of misclassification penalties or disputes over IP ownership.
- Streamline global operations: Instead of dealing with disparate local systems, employers can manage payroll, benefits, and compliance for their entire international team – including mandatory appointment letters and new social security provisions – all through one unified, compliant platform.
Adapting to India’s labour laws shift
India’s four Labour Codes represent a fundamental modernization of the world’s largest labour market, balancing economic pragmatism with necessary worker protection. While the reforms simplify the administrative process (one license, one registration) for companies, they significantly deepen the compliance responsibilities related to wages, social security, and benefits for all employee types, especially fixed-term and gig workers.
Companies leveraging the dynamic Indian talent pool must align their HR and payroll strategies immediately. With an EOR or Global Payroll platform like Multiplier, employers can confidently manage their workforce, ensuring full compliance with the new national standards, guaranteeing accurate and timely payments in local currency, and dedicating their focus to business growth.
FAQs
What major change is introduced by the new Labour Codes regarding the minimum wage in India?
The new Labour Codes introduce universal minimum wages. Unlike the old system which only covered certain "scheduled employments," every worker in both the organized and unorganized sectors now has a statutory right to a minimum wage. Additionally, the Central Government will set a national floor wage, and no state government is permitted to set a minimum wage below this level, ensuring a foundational standard of living across the country.
How does the new Code on Social Security, 2020, specifically benefit gig and platform workers in India?
The Code on Social Security, 2020, formally recognizes gig and platform workers for the first time under Indian labour law. This is a major change that ensures these workers are brought under a social security net. The code mandates that aggregators (companies operating these platforms) must contribute 1–2% of their annual turnover (up to 5% of payments to workers) to a dedicated welfare fund to finance benefits like health insurance, disability support, and old-age coverage for these workers.
What is the new eligibility criteria for gratuity under the Four Labour Codes, particularly for fixed-term employees?
Under the new Labour Codes, eligibility for statutory gratuity has been significantly reduced for fixed-term employees (FTEs). Previously, an employee needed to complete five years of continuous service to qualify. Now, fixed-term employees are eligible for gratuity on a pro-rata basis after completing just one year of service, a major change from the previous requirement of five years. This aims to increase formal employment and stability for project-based workers.
How does the new definition of 'Wages' under the Code on Wages, 2019, impact an employee's salary and benefits?
The new definition of 'Wages' is standardized across all four codes. It mandates that an employee's basic pay (including Dearness Allowance and Retaining Allowance) must constitute at least 50% of their total remuneration (CTC). Since mandatory contributions like Provident Fund (PF) and Gratuity are calculated based on this high basic pay, the rule prevents employers from artificially lowering benefits and will generally lead to higher contributions toward long-term savings.
How do the new Labour Codes simplify the compliance process for employers operating across multiple states in India?
The new Labour Codes are designed to enhance the ‘Ease of Doing Business’ by simplifying regulatory compliance. They introduce a unified, technology-driven framework, including a ‘one license, one registration, one return’ system, consolidating numerous fragmented forms and bureaucratic steps that previously existed. This digitization and centralization significantly reduce administrative burdens, ensure regulatory uniformity, and simplify inspections through a randomized, web-based ‘Inspector-cum-Facilitator’ system.
What are the key provisions introduced for women workers under the new Indian Labour Codes?
The new codes strongly promote gender equality and inclusion in the workforce. Women are now legally allowed to work in night shifts and in all job categories, including hazardous roles like underground mining, provided they consent and the employer ensures adequate safety, security, and equal opportunity. The codes explicitly enforce the principle of equal pay for equal work, prohibiting discrimination in recruitment and employment conditions.
