Historic Labour Law Overhaul: India Implements Four New Labour Codes

On the morning of 21 November 2025, when the news broke that the government had finally implemented the four long-pending labour codes, many employers and workers reacted with the same mixture of disbelief and relief that accompanies any long-awaited decision in India. It took five years, countless committee consultations, multiple rounds of protests, and three postponements before these codes, the Code on Wages, the Industrial Relations Code, the Social Security Code, and the Occupational Safety, Health and Working Conditions Code, together replacing 29 separate labour laws, formally came into force.

The moment felt historic not because the changes were sudden or surprising, but because India had been carrying the weight of a fragmented, outdated labour law system for decades. A senior HR manager I spoke to compared the old regime to “operating a modern business with a rulebook from the 1970s.” Companies had grown more sophisticated, worker expectations had evolved, and the economy had diversified far beyond the industrial blueprint of the post-Independence era. Yet the laws governing employment remained scattered across statutes, notifications, and state-specific rules that even seasoned labour lawyers found overwhelming. That background explains why the government called this “the biggest overhaul of workers’ laws in decades” and why the reform has attracted such intense reactions across the political and economic spectrum.

For some, this reform signals India’s long-delayed leap into a labour framework suited for a dynamic, investment-driven economy. For others, particularly trade unions, it represents a dilution of hard-won worker protections in the name of flexibility and corporate convenience. The truth, as with most structural reforms, lies somewhere in the tension between these two readings. What the new codes really do is introduce coherence where there was chaos, standardization where there was confusion, and national-level rationality where there was rampant variation. But they also recalibrate the balance of power in the workplace, leaning more toward managerial freedom than many unions consider acceptable. The result is a reform that promises clarity and modernization while also igniting a fierce debate about job security, fair wages, and the direction of India’s economic model.

If one had to choose a single change symbolizing the codes’ new direction, it would be the revised rule on prior government approval for layoffs, retrenchments, and closures. Under the old Industrial Disputes Act, factories with 100 or more workers needed government permission to terminate employees. The threshold now rises to 300 workers. Industry bodies like CII and FICCI have long argued that the earlier threshold discouraged scaling up, trapped firms in the “dwarf company” syndrome, and curbed formal-sector job creation. With the new limit, medium-size manufacturers can restructure more freely. But unions read the same reform as an erosion of job security disguised as modernization. A trade union leader told the press, “This is a licence to retrench,” arguing that when layoffs become easier, bargaining power inevitably shifts away from workers. Both views are partially right. Greater flexibility may indeed encourage firms to hire more workers on the assurance that they can respond quickly to changing demand. Yet for workers, especially in the absence of a robust unemployment insurance framework, the fear of precarious employment is real. In this sense, the codes replicate a familiar policy dilemma: how to stimulate job creation without pushing workers into vulnerability.

The Code on Wages is perhaps the most universally acknowledged as a positive step. One may disagree with the politics of labour reform, but it is hard to deny the logic of replacing four overlapping wage statutes with a single code applicable across industries and states. For workers, the most immediate impact is the guarantee of a national floor wage, designed to prevent states from setting unreasonably low minimum wages. That matters deeply in a country where the same worker might earn vastly different wages across neighbouring states, not because of productivity differences but because of administrative inconsistency. By giving the central government authority to set a uniform floor, the code ensures that no state can undercut labour standards in the race to attract investment. At the same time, the code preserves state autonomy in setting sector-specific minimum wages, recognising India’s economic diversity. The simplification of wage definitions is another major win. Employers will no longer face the labyrinth of allowances and exclusions that made calculating statutory contributions a compliance nightmare. With the new rule that basic wages must constitute at least 50% of total remuneration, companies can no longer rely on manipulating allowances to reduce provident fund contributions. This clarity benefits both compliance departments and workers, who gain greater long-term social security through higher PF deposits.

The Social Security Code, too, brings long overdue recognition to gig workers and platform workers. These are groups that barely existed when most Indian labour laws were drafted. Delivery partners, ride-hailing drivers, app-based service providers, and freelance digital workers now form one of the most visible segments of the urban labour force, yet until recently, they were officially invisible. The new code does not magically transform them into employees. They remain outside the traditional employer–employee relationship. However, it establishes a framework for their social security through government-backed schemes funded by aggregators and the state. Whether this leads to meaningful benefits depends on implementation, but it marks an important philosophical shift. India is finally acknowledging that the future of work cannot be governed by twentieth-century definitions. As technology reshapes employment, regulation must adapt or risk leaving millions without even a basic safety net.

Perhaps the most complex of the reforms is the Occupational Safety, Health and Working Conditions Code (OSH Code), which consolidates 13 laws relating to workplace safety, health standards, women’s working hours, contract labour, and migrant workers. Employers will need to overhaul compliance frameworks, update registers, modify shift structures, and re-evaluate contractual relationships. The code allows women to work night shifts with their consent, subject to safety safeguards. This is an overdue reform in an economy where women’s labour force participation remains surprisingly low. Many multinational companies have already internalised such norms. The code simply formalises them. The OSH Code also standardizes safety rules, mandates annual health checkups for certain categories of workers, and introduces more transparent licensing systems. But critics warn that the code’s provisions on contract labour may enable greater casualisation if implementation is not carefully monitored. What this reveals is a deeper truth. Labour law, however progressive on paper, achieves meaningful change only when enforcement is credible and properly resourced.

The strongest argument for the codes is simplification. For decades, navigating labour compliance in India required an encyclopaedic understanding of state-specific rules, hundreds of registers, and an army of consultants. It is hardly surprising that as many as 90% of small businesses remained outside the formal framework, choosing informality to avoid compliance risk. When laws are too complex to follow, they invite avoidance. By consolidating and standardizing rules, the codes promise to reduce compliance costs and make formalisation more attractive. A Bengaluru-based startup founder described the shift candidly: “Earlier, complying with labour laws felt like landing a spacecraft. Now at least it feels like driving a car.” The metaphor may be exaggerated, but the sentiment captures the relief felt by many employers. For HR departments, the codes present a rare opportunity. They can rework policies from the ground up instead of layering one modification upon another. Uniform wage definitions, streamlined registers, and digitized compliance make day-to-day administration significantly easier.

Yet simplification alone does not guarantee fairness. The new regime’s detractors argue that by prioritising ease of doing business, the government risks replicating a model that benefits capital more than labour. They point to the 300-worker threshold, fixed-term employment provisions, and increased discretionary powers of the government to suspend labour protections during public emergencies. These fears cannot be dismissed lightly. Indian workers lack strong unemployment benefits, and collective bargaining remains weak outside unionized sectors. If the state loosens employment protections without building robust social security buffers, workers may bear the burden of flexibility without enjoying its benefits. The Social Security Code’s provisions for gig workers are promising, but operational details remain unclear. Many unions fear that contributions from aggregators will be too low and that benefits will be minimal. In their view, the codes commodify labour at a time when workers need stability.

A meaningful way to evaluate these concerns is to look beyond India’s borders. Countries like Vietnam, Indonesia, and Mexico have all reformed their labour laws in recent years in order to attract investment and boost manufacturing. In each case, reforms balanced flexibility with strengthened social protection. Denmark’s “flexicurity” model, flexible hiring combined with generous unemployment benefits, is often cited as an example. India, however, has adopted flexibility without parallel social support. An unemployment allowance exists under the ESIC framework, but its coverage is limited. A broad-based unemployment insurance scheme remains absent. This asymmetry may become more pronounced as firms adopt fixed-term contracts, which allow defined-duration employment without the traditional retrenchment protections. If the government’s goal is to build an internationally competitive labour market, it must also invest in cushioning workers against economic shocks. Without this, labour reform risks becoming socially unsustainable.

Despite these tensions, the codes offer enormous potential for improving workers’ everyday experiences if implemented correctly. Take the example of minimum wages. For years, wage inspections were inconsistent and often ineffective. Workers in informal manufacturing clusters routinely earned less than statutory minimums, yet enforcement remained sporadic. Under the new system, digital inspections and centralised wage norms could transform monitoring. Similarly, the OSH Code’s provisions on safety could reduce India’s troubling record of industrial accidents, especially in hazardous sectors. Employers may complain about the cost of compliance, but the long-term benefits of safer workplaces are universally acknowledged. After all, as the political philosopher Amartya Sen once observed, “Development is freedom.” Safe workplaces, fair wages, and predictable protections are essential freedoms for workers, enabling them not only to earn a living but to build a life.

Real-world examples illustrate both the promise and pitfalls of this reform. In the garment hubs of Tiruppur and Noida, manufacturers have long struggled to scale operations due to rigid retrenchment rules. Many businesses deliberately kept their workforce under 100 to avoid triggering Chapter V-B of the Industrial Disputes Act. With the new 300-worker threshold, these firms may finally expand. That expansion could create thousands of new jobs, particularly for women. But whether those jobs offer stability is another question. A study in the electronics sector found that employers increasingly prefer fixed-term contracts, which provide flexibility but little continuity. If such patterns intensify, India may witness growing segmentation between secure and precarious workers. The codes alone cannot solve this. Broader policy architecture must evolve.

On the other hand, consider gig workers in Bengaluru who rallied earlier this year demanding accident insurance, maternity benefits, and pension schemes. Their stories reveal a workforce caught between entrepreneurial independence and structural vulnerability. Many app-based workers earn enough during peak seasons but struggle during slow periods. The Social Security Code gives them recognition and promises schemes, but recognition without quick implementation may feel hollow. States will need to create social security boards, design benefit structures, collect contributions from aggregators, and distribute benefits. All of this requires capacity, coordination, and political will. Without strong execution, gig workers may remain in the same limbo they have occupied for years.

Where does this leave employers, HR managers, and workers navigating the new regime? For companies, the next year will be one of transition. Payroll structures must be recalibrated to align with the new wage definition. Shops and establishments will need to update registers and maintain digital compliance. Factories may need to re-evaluate shift schedules, especially if women are employed in night shifts. Employee handbooks, contracts, and HR policies will require comprehensive revision. All of this demands planning, not panic but planning nonetheless. The good news is that the codes, by design, are meant to reduce ambiguity. Companies that embrace the reform proactively will find compliance smoother than in the past.

For workers, the changes are more mixed. They gain uniform wage protections, stronger safety safeguards, and potential access to new social security schemes. But they also face greater employment flexibility that may challenge long-term job stability. Navigating this landscape will require awareness, collective voice, and a stronger culture of worker representation. Many workers remain unaware of their basic rights even under existing laws. The introduction of new codes only heightens the need for awareness campaigns, legal literacy, and accessible grievance mechanisms.

Ultimately, the success of this reform depends not on its text but on its practice. Legislating consolidation is easy. Operationalising fairness is not. A labour inspectorate that is understaffed cannot enforce safety standards. Social security boards that lack coordination cannot deliver benefits. And companies that treat the law as a formality rather than an obligation will inevitably undermine worker protections. That said, India cannot afford to cling to a legal framework shaped for an industrial economy that no longer exists. The codes acknowledge this reality and attempt to push India toward a more rational and modern labour system.

The deeper question, however, is whether India wants to build a labour market defined primarily by flexibility or one anchored in fairness. Most successful economies do not choose between the two. They reconcile them. Flexibility supports entrepreneurship and investment. Fairness sustains social cohesion and long-term productivity. India’s challenge is to achieve both in a context of immense diversity, widespread informality, and rapid technological disruption. The four labour codes are a necessary beginning, but they are not the final answer.

As the country embarks on this new chapter in labour regulation, it is worth remembering why such reforms matter. Laws shape the rhythm of work, affect the dignity of labour, and influence the balance between economic ambition and social justice. They determine whether workers feel secure enough to invest in their futures, whether companies feel confident enough to expand, and whether India can build a workforce ready for the next decades of growth. The coming months will test the codes’ promise and expose their gaps. But one thing is certain. This reform marks a turning point. Whether it becomes a foundation for equitable growth or a source of new fractures depends on the choices employers, governments, and workers make from here.

In the end, the labour codes are not merely an administrative exercise. They are a statement of intent about the kind of economy India aspires to be. Their implementation signals a country attempting to modernize without abandoning its commitment to worker welfare, even if the balance remains imperfect. The transition will not be smooth, and the debates will not fade quickly. But if the reforms are carried out with sensitivity, clarity, and responsibility, India has a chance to build a labour landscape that is not only more efficient but more humane. That possibility alone makes this overhaul historic, and its success imperative.