New Delhi: India has ushered in one of its biggest labour reforms in decades by replacing 29 existing labour laws with four consolidated labour codes. Aimed at modernising India’s workforce regulations and aligning them with a fast-evolving digital and gig economy, the new framework promises simpler compliance for employers and wider protection for workers.
What Has the Centre Changed?
The government has merged several outdated and overlapping laws — many enacted between the 1930s and 1950s — into four codes. The objective is to remove ambiguity, streamline regulations, and extend social and economic security across both formal and informal sectors.
Which Codes Are Now Operational?
Reforms under the Code on Wages (2019), Industrial Relations Code (2020), Social Security Code (2020) and Occupational Safety, Health and Working Conditions (OSH) Code (2020) have been notified.
A preliminary notification was issued on November 21, while the detailed implementation roadmap is expected within 45 days.
What Do the New Codes Aim to Achieve?
The new framework intends to support emerging work models while ensuring minimum wages, social security and workplace safety. For the first time, uniform protections extend to gig workers, contract employees, platform workers, MSME staff, white-collar professionals and women employees.
While labour unions have criticised the codes, several analyses show that the reforms broaden labour welfare coverage.
Impact on Different Categories of Workers:
Contract Workers: Contractual staff stand to gain significantly through:
- Gratuity after one year of service (earlier 5 years mandatory)
- Equal pay with permanent workers
- Annual free health check-up for those above 40
- Mandatory insurance and social-security benefits
This marks a major shift in industries that heavily depend on fixed-term employment.
Gig and Platform Workers: In a landmark move, gig workers have been formally recognised in labour law. They will now receive:
- A Universal Account Number (UAN) enabling portability
- Mandatory minimum wages
- Eligibility for social security schemes
- Official registration through digital platforms
This ensures consistent protection across ride-sharing, food delivery, e-commerce and freelance platforms.
MSME Workers: Employees in the MSME sector will now be entitled to:
- Floor-level minimum wages
- Clean drinking water, restroom facilities
- Double pay for overtime
- Paid leave for extended work hours
Social-security benefits will be scaled based on the size of the enterprise.
Beedi and Cigarette Industry Workers: Workers in this largely unorganised sector will see improved working conditions:
- Work capped at 8–12 hours a day, 48 hours a week
- Double overtime wages
- Annual bonus for anyone who works at least 30 days a year
- Mandatory on-time salary payments
White-Collar Professionals: Corporate and office employees see gains through:
- Salaries to be paid by the 7th of every month
- Women allowed night shifts with safety protocols
- Mandatory appointment letters for all hires
- Basic pay must be at least 50% of total CTC
This brings more transparency to compensation structures and prevents excessive variable pay components.
Why Take-Home Pay May Come Down
Higher mandatory employer–employee contributions towards PF and gratuity will reduce take-home salary but enhance long-term savings.
Example:
For a monthly salary of ₹30,000 (with 50% as basic pay):
- Employee PF: ₹1,800
- Professional tax: ₹200
- Take-home drops to ₹28,000
But the employer also contributes:
- PF: ₹1,800
- Gratuity: ₹722
- PF earns 8.25% annual interest, boosting retirement corpus significantly.
Additional Benefits Across Sectors
- All contract workers across industries receive PF, ESIC, maternity benefits, pension and insurance
- A single digital portal simplifies licensing and compliance
- A national floor wage ensures minimum income equality across states
- Gig and platform companies must contribute 1–2% of their annual turnover to worker welfare
- Journalists, artists and dubbing professionals become eligible for social security schemes