Dr.

Suhita Mukhopadhyay
CS, LLB, LLM

A NOTE ON LABOUR CODES

Areas covered

1. Introduction
2. Which Acts Stand Repealed?
3. Scope of Notifications and Applicability
4. Structural Change: What do the New Labour Codes Provide?
(Summary of Provisions and Employer/Employee Impact)
5. Enforcement Under the New Labour Code
6. Key Preparation Areas
 Dr. Suhita Mukhopadhyay
CS, LLB, LLM

INTRODUCTION
(W.E.F 21ST NOVEMBER 2025)

Four Labour Codes have been implemented

• Code on Wages (2019),

• The Industrial Relations Code (2020),
• The Occupational Safety, Health and Working Conditions (OSHWC) Code (2019)
• The Code on Social Security (2020)

(Repealing 29 Central Labour Acts.)

✓ With the repeal of 29 Acts, the labour system now runs on four Codes that unify wage
regulation, workplace safety, social security and industrial relations.
✓ They impose new duties on employers in terms of documentation, record-keeping,
registration, social-security contributions and safety standards.
✓ The final rules under the Labour Codes by the Central and State Governments are still
to be notified but are expected to follow shortly. During transition, the relevant
provisions of the existing labour Acts and their respective rules, regulations,
notifications, standards, schemes, etc. will continue to remain in force.

WHICH ACTS STAND REPEALED?

A. Wages Acts repealed (4):

Payment of Wages Act 1936; Minimum Wages Act 1948; Payment of Bonus Act 1965; Equal
Remuneration Act 1976. ( Subsumed to The Code on Wages, 2019)

B. Industrial-relations Acts repealed (3):

Industrial Disputes Act 1947; Trade Unions Act 1926; Industrial Employment (Standing Orders)
Act 1946. ( Subsumed to The Industrial Relations Code, 2020)

C. Safety and Working Conditions Acts repealed (13):

Factories Act 1948; Mines Act 1952; Dock Workers Act 1986; Building and Other Construction
Workers Act 1996; Contract Labour Act 1970; Inter-State Migrant Workmen Act 1979;
Plantations Labour Act 1951; Working Journalists Act 1955; Working Journalists (Rates of
Wages) Act 1958; Beedi and Cigar Workers Act 1966; Motor Transport Workers Act 1961; Sales
Promotion Employees Act 1976; Cine Workers & Cinema Theatre Workers Act
1981.(Subsumed to The Occupational Safety, Health and Working Conditions Code, 2020)
 Dr. Suhita Mukhopadhyay
CS, LLB, LLM

D. Social Security Acts repealed (9):

Employees’ Compensation Act 1923; ESI Act 1948; EPF Act 1952; Employment Exchanges Act
1959; Maternity Benefit Act 1961; Payment of Gratuity Act 1972; Cine Workers Welfare Fund
Act 1981; Construction Workers’ Welfare Cess Act 1996; Unorganised Workers Social Security
Act 2008 (Subsumed to The Code on Social Security, 2020)

SCOPE OF NOTIFICATIONS AND APPLICABILITY

Code Status as of 21 Notes
Nov 2025

Code on Wages, 2019 Partially notified Multiple sections relating to definitions,

wage & bonus entitlements, payment
timelines, and enforcement are effective.

Code on Social Security, Partially notified Provisions relating to Employee State

2020 Insurance (ESI), maternity, gratuity, and
governance bodies are now active.

Mechanical provisions relating to EPF are

also active, helping the Government to form
rules and the new scheme, while continuing
with the current EPF Scheme.

Industrial Relations Code, Fully notified All provisions relating to trade unions,
2020 standing orders, dispute resolution, and
retrenchment requirements are effective.

Occupational Safety, Fully notified Mandates on working hours, health &

Health and Working safety, registers, and employer obligations
Conditions Code, 2020 are effective.

Implementation burden during transition: Migrating from 29 repealed Acts to four Codes requires
reclassification, new documentation, fresh registrations and changes to HR/payroll systems,
increasing administrative load for both employers and inspectors.
Dr. Suhita Mukhopadhyay
CS, LLB, LLM

STRUCTURAL CHANGE: WHAT DO THE NEW LABOUR

CODES PROVIDE?
A. CODE ON WAGES, 2019

i. New statutory classifications of workforce, notably “worker”, “employee”,

“platform worker”, “gig worker”, and “inter-state migrant worker” will now
determine eligibility for various entitlements such as overtime, social security,
workplace safety protections, and dispute mechanisms

Employee covers all irrespective of role/level/nature of duties/salary

Worker Covers manual, unskilled, skilled, technical, operational, clerical or

supervisory work, excludes managerial or administrative role, excludes
supervisory role with wages exceeding INR 18,000 per month

ii. Uniform, Code-wide definition of “wages” with inclusion–exclusion formula.

Impact: Removes ambiguity and litigation over what counts as “wages.”

Covers all salary components expressed in terms of money or capable of being so

expressed, and includes: Basic pay, Dearness allowance, and Retaining
Allowance
Excludes: Bonus payable under any law, Conveyance allowance, House rent
allowance, Overtime allowance, Commission, Provident fund/pension
contribution, Remuneration payable under any award or settlement, Gratuity /
Retrenchment compensation

(Total permissible exclusions: 50% of total remuneration)

Remuneration in Kind to be excluded; However, to the extent it does not exceed 15%
of total wages shall be included in wages

House-accommodation, Light, water, medical attendance, Value of travel

concession, Amenity/service excluded by general or special order of
Appropriate Government, Sum paid to defray special expenses
Impact: The uniform definition of “wages” across all Codes is prescribed to calculate various statutory
entitlements, such as minimum wages, overtime, gratuity, leave encashment, ESI, statutory bonus, etc.
This may provide consistency but may also increase the cost of employment. Employers are required
to revamp salary structures to align it with the new definition and ensure compliance. Employers can no
Dr. Suhita Mukhopadhyay
CS, LLB, LLM

longer inflate allowances to reduce benefit payouts; statutory benefits will be calculated on a larger
base. Increased payroll costs and compliance requirements.

iii. Minimum wages extended to all employees, So all workers to receive a statutory right
minimum wage payment. not just scheduled employment.

iv. Standardized working-day norms; overtime at twice the normal wage.

v. Employee Benefits

The New wage definition significantly impacts gratuity, provident fund, leave
encashment, and overtime.

- Gratuity eligibility now extends to fixed-term employees after one year,

Employers may need to recalculate gratuity liabilities for past service if
wages were structured differently.
- Leave encashment applies to workers annually (Encashment allowed at
the end of the calendar year) and is calculated based on the new wage
definition, which may increase payouts compared to earlier structures.
- Provident fund coverage is broadened but the ₹15,000 wage ceiling is
under review.
- overtime applies to workers payable for work beyond 8 hours/day or 48
hours/week, which shall be computed based on the new wage
definition, which may increase overtime rates.
(Impact:
✓ The new wage definition (basic + DA + retaining allowance, minimum 50% of total pay)
increases liabilities for employers but boosts worker benefits.
✓ Gratuity becomes more inclusive, especially for fixed-term employees.
✓ Provident Fund may expand coverage, but clarity on the ₹15,000 ceiling is awaited.
✓ Overtime and leave encashment payouts will likely rise due to the broader wage base.)

✓ As allowances and variable components fluctuate month to month, the rule can trigger
repeated wage recalculations, affecting PF, ESI, bonus and gratuity computation
simultaneously.

✓ As this single definition applies across all four Codes, any error or misclassification creates
multi-statute non-compliance risks, making the wage formula one of the most contentious and
operationally complex parts of the new regime.

Employer vs Employee Impact

Provision Impact on Employers Impact on Employees

Dr. Suhita Mukhopadhyay
CS, LLB, LLM

Uniform definition Must restructure salary packages to comply Benefits (PF, gratuity, overtime, leave
of “wages with the inclusion-exclusion formula. encashment) are calculated on a
Higher liabilities for gratuity, PF, overtime, larger wage base. Greater
leave encashment, bonus, etc. transparency and fairness in wage
Reduced ability to minimize statutory calculation. Reduced disputes over
payouts by inflating allowances. allowances and exclusions. Higher
Increased compliance and payroll take-home statutory entitlements.
complexity
Minimum wages Must ensure every worker, regardless of Universal statutory right to a
extended to all industry or role, receives at least the minimum wage.
employees statutory minimum wage. Increased wage Protection for vulnerable workers in
bill, especially in informal/unorganized unorganized sectors.
sectors. Compliance monitoring across all Reduced exploitation and wage
categories of employment inequality.

vi. Employment models regularized:

o Fixed-term employment is formally recognized, entitling such employees to

gratuity after one year of continuous service.-now enjoy parity with permanent
staff. Impact: Encourages flexible hiring , protects employee rights, increases employer
liability for benefits.

o Contract labour engagement is restricted for core activities of business,

subject to specified exceptions. Impact: may raise costs and reduce flexibility for
employers.

o Expanded provisions for women at work, including night shift permissions with
prescribed safeguards. Impact: Promotes gender inclusivity and workforce participation,
but requires employers to invest in compliance and safety infrastructure.

o Mandatory wage slips, registers, and strict payment timelines (monthly wages
before the expiry of the seventh day of the succeeding month; final wages upon
termination within two working days). Impact: Enhances transparency, reduces wage
disputes, and enforces accountability.

vii. Failure to pay wages is punishable with a fine up to ₹50,000 (first offence) and
imprisonment up to 3 months or ₹1 lakh fine for repeat offences. Impact: Strong deterrent
against wage delays; ensures timely payment and compliance.
 Dr. Suhita Mukhopadhyay
CS, LLB, LLM

Employer vs Employee Impact

Provision Impact on Employers Impact on Employees

Fixed-term employment Must provide gratuity after 1 Gain parity with permanent
recognized year, increasing benefit liability. staff. Eligible for gratuity after 1
Enables flexible hiring but with year, improving job security.
added costs.
Contract labour restricted for Limited ability to outsource Greater protection from
core activities core functions, raising exploitation; more chances of
compliance and operational direct employment in core roles
costs.
Expanded provisions for Must ensure safety measures, More opportunities in diverse
women at work transport, and compliance for roles and shifts; improved
night shifts. inclusivity and workplace
equality.
Mandatory wage slips, Increased compliance burden; Transparency in pay; timely
registers, strict timelines need for robust payroll systems. wages (by 7th of next month,
final settlement within 2 days).
Penalties for non-payment of Risk of fines (₹50,000 first Assurance of timely payment;
wages offence, ₹1 lakh repeat) and legal protection against wage
imprisonment. Strong incentive delays.
to comply.

B. OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE, 2019

i. Single registration for all establishments employing ten or more workers (except mines
and docks).

ii. Accident and dangerous-occurrence reporting made mandatory.

iii. Working journalists expressly included in the definition of “worker,” bringing newsroom
employees under safety and working conditions regulation.

iv. Women allowed to work in all establishments, including beyond 7 PM, subject to
consent and safety measures.

v. Free annual health check-ups required in prescribed categories, including hazardous

process workplaces.

vi. Safety committees may be mandated in specified establishments.

Dr. Suhita Mukhopadhyay
CS, LLB, LLM

vii. Mandatory appointment letters for every employee on appointment.

viii. Work-from-home expressly applies as a workplace. Employer's duties (including

ergonomic guidelines and safety maintenance) extend to remote work locations under
the general mandate to ensure a "workplace is free from hazards".

ix. National database for unorganised workers, including gig, platform and migrant
workers, to enable uniform registration. The portal is designed to create a
comprehensive National Database of Unorganised Workers (NDUW), linked with
Aadhaar, to enable the delivery of targeted welfare schemes and social security
benefits.

x. New Definition of Contract Labour- Prohibition to engage contract labour in core

activities (subject to exceptions), To be offered the same wages/benefits as
permanent employees, Principal employer liable for all statutory benefits,
Establishment to pay to contractor before the date of payment of wages

xi. Fixed term employees- Gets Formal recognition under labour codes, to be offered the
same wages/benefits as permanent employees, Eligible for gratuity after 1 year of
service, no restriction on the number of or period for which fixed term employees can
be engaged

Employer vs Employee Impact

Provision Impact on Employers Impact on Employees

Single registration, PAN-India Simplifies compliance by Ensures establishments are formally

single license, and single replacing multiple registrations registered, improving accountability
return. Single registration for but requires accurate record- and enforcement of safety standards.
establishments (≥10 workers) keeping.
Mandatory accident & Must implement robust Greater transparency and quicker
dangerous-occurrence reporting incident tracking and reporting response to workplace hazards,
systems improving safety culture.
Working journalists included as News organizations must Journalists gain statutory protection
“workers comply with safety and working under OSH Code, ensuring regulated
condition regulations hours, safety, and welfare.
Women allowed to work beyond Must provide transport, safety Expands opportunities for women in
7 PM with safeguards measures, and obtain consent. diverse industries and shifts,
promoting inclusivity.
Free annual health check-ups Additional cost and logistical Early detection of occupational
(hazardous workplaces) responsibility to provide health issues, improved well-being.
medical examinations.
Safety committees in specified Need to constitute committees, Workers gain representation in
establishments train members, and implement safety governance, strengthening
recommendations. workplace democracy
 Dr. Suhita Mukhopadhyay
CS, LLB, LLM

Mandatory appointment letters Formalization of hiring practices, Written proof of employment

for all employees reducing informal employment terms, reducing disputes and
exploitation
Work-from-home recognised as Duties extend to remote work Remote workers gain protection
workplace locations (ergonomics, hazard- under OSH Code, ensuring safe
free environment). working conditions even outside
There are no safeguards for office premises.
working hours, cost sharing,
ergonomics or data-security
obligations, leaving wide
discretion to employers.
National Database for Must facilitate worker registration, Access to welfare schemes and
Unorganised Workers (NDUW especially for social security benefits via
gig/platform/migrant workers. Aadhaar-linked database.

The OSH Code represents a major step toward workforce formalization and safety culture in
India.

C. INDUSTRIAL RELATIONS CODE, 2020

i. Statutory recognition of Trade Unions through a Negotiating Union or Negotiating

Council.

ii. Fund for training retrenched employees (worker re-skilling fund) established with
employer contribution of 15 days' wages, payable within 45 days of retrenchment.

iii. Definition of “strike” now includes mass casual leave when fifty per cent or more
workers employed in an industry abstain.

iv. Lay-off, retrenchment and closure thresholds reset for prior government permission
requirements (for establishments with 300 or more workers).

Employer vs Employee Impact

Provision Impact on Employers Impact on Employees

Recognition of Trade Unions Must negotiate formally with Stronger collective bargaining rights;
unions/councils; structured improved representation.
bargaining may slow
decisions.
Worker re-skilling fund Financial liability of 15 Access to funds for retraining and
days’ wages per re-employment opportunities.
retrenched worker.
Definition of “strike” Mass casual leave now Requires prior notice for all strikes,
expanded regulated as strike; expands the definition of strike to
include mass casual leave and
 Dr. Suhita Mukhopadhyay
CS, LLB, LLM

reduces sudden extends prohibition periods,

absenteeism. significantly tightening the ability
of workers to organise collective
action. Legal clarity and protection
when striking; limits spontaneous
protests.
Lay- Since prior government Stronger job security in large
off/retrenchment/closure permission is required only establishments; protection against
threshold (300 workers) beyond the 300-worker arbitrary closures.
threshold, establishments
below that size can
retrench or close units with
reduced oversight.
So Greater flexibility for
establishments <300
workers; stricter
compliance for larger
firms.

Overall Impact

Employers gain greater flexibility in workforce management but face higher obligations in
retrenchment and union negotiations. Employees benefit from enhanced protections,
structured bargaining, and re-skilling support, though spontaneous collective action is more
restricted. The Code aims to balance industrial harmony with economic flexibility,
encouraging formalization and reducing disputes.

D. CODE ON SOCIAL SECURITY, 2020

1. Consolidates PF, ESI, gratuity, maternity benefits and welfare board schemes.

2. Definition of “dependents” expanded for social-security entitlement (The definition of

"family" is expanded in the OSHWC Code, a companion to this Code, to include
dependent grand-parents).

3. National database for unorganised workers, including gig, platform and migrant
workers, to enable uniform registration.

4. Statutory recognition of gig and platform workers; aggregator contribution obligations.

5. Gratuity payable to fixed-term employees after one year instead of five.

Dr. Suhita Mukhopadhyay
CS, LLB, LLM

6. Work-from-home expressly recognized in service conditions for women returning after

maternity leave, subject to mutual agreement.

7. Defines “home-based worker” as a person engaged in the production of goods or

services for an employer in his home or other premises of his choice, other than the
employer’s workplace, for remuneration, regardless of whether the employer provides
equipment or materials.

Employer vs Employee Impact

Provision Impact on Employers Impact on Employees

Consolidation of schemes Simplifies compliance but Easier access to comprehensive

broadens obligations. benefits.
Expanded dependents Larger liability for benefits. More family members are covered
under Social Security.
National database (NDUW) Must support worker Access to welfare schemes and
registration. portability of benefits.
Recognition of gig/platform Aggregators must Gig/platform workers gain formal
workers contribute to social benefits.
security.
Gratuity for fixed-term Liability after 1 year of Fixed-term employees gain parity
employees service. with permanent staff.
Work-from-home for women Must allow flexible Women gain flexibility and
post-maternity arrangements. continued protection.
Home-based worker Obligations extend beyond Recognition and protection for
definition workplace premises home-based workers.

Overall Impact

For Employers: Broader compliance obligations, higher costs, and responsibility for diverse
worker categories (gig, fixed-term, home-based). For Employees: Stronger social security
net, expanded family coverage, recognition of new work models, and enhanced inclusivity.
Generally moves India toward universal social security, covering formal, informal, and gig
economy workers under one umbrella.
Dr. Suhita Mukhopadhyay
CS, LLB, LLM

ENFORCEMENT UNDER THE NEW LABOUR CODE

Online Inspection Scheme

A. Inspector-cum-Facilitator Role
• Labour Codes will be less punitive and more focused on guidance and support.
Inspectors act as facilitators to guide employers and employees on compliance.
• Responsible for conducting online inspections using digital platforms.
Impact: Moves enforcement toward transparency and advisory support rather than
surprise raids.
B. Burden of Proof on Employers
• Employers must demonstrate compliance when inspected.
• Documentation, wage slips, registers, and digital records become critical.
Impact: Shifts responsibility squarely onto employers to maintain accurate records and
systems.
C. Online Inspection Notifications

• Inspections scheduled and notified through an online system.

• Reduces arbitrariness, increases predictability, and ensures accountability.
• Digitalization of inspections builds transparency, accountability, and trust in labour law
enforcement.

Impact: Employers can prepare in advance, but cannot avoid compliance since records
are digital and traceable.
Overall Impact
Employers: Higher responsibility for documentation and compliance, but reduced
harassment through arbitrary inspections.
Employees: Stronger enforcement of rights, more consistent monitoring, and improved
workplace standards.

D. Several first-time offences have been decriminalized

• First-time offences are no longer punishable with imprisonment.

• Instead, they attract monetary fines or administrative penalties.
• Moves enforcement toward civil regulation and digital transparency, reserving criminal
penalties for serious or repeated violations.

Employer impact: Reduced fear of criminal prosecution for minor or inadvertent violations.
Gain breathing space to correct mistakes without criminal liability, but must maintain
compliance to avoid repeat penalties.
Employee impact: Faster resolution of disputes but may reduce deterrence against repeat
violations.
Dr. Suhita Mukhopadhyay
CS, LLB, LLM

KEY PREPARATION AREAS

I. Classification of employees
➢ Evaluate all employee roles to identify who qualifies as “workers” under the Codes.
➢ Conduct a role-based audit and update HR records accordingly.
Impact: Determines the applicability of provisions like overtime, leave encashment,
and minimum wages.

II. Employee salary structure

➢ Realign salary packages to comply with the new definition of “wages” (basic + DA +
retaining allowance ≥ 50% of total remuneration).
➢ Redesign pay structures to balance compliance with cost optimization.
Impact: Increases liabilities for PF, gratuity, overtime, and leave encashment.

III. Employee benefits

➢ Analyze impact on P&L for recurring and retrospective costs (gratuity, PF, leave
encashment).
➢ Run financial simulations to estimate liabilities and adjust budgets. (Requires
financial planning and budgeting).
Impact: Higher benefit payouts may affect profitability.

IV. Flexi hiring models

➢ Reassess alternate hiring models — fixed-term employment is now a viable option
with gratuity eligibility after 1 year.
➢ Incorporate fixed-term contracts into the manpower strategy for seasonal or project-
based needs.
Impact: Provides flexibility in workforce planning while ensuring compliance. Fixed-
term employees gain parity with permanent staff, improving job security and benefits.

V. Policies & Processes

➢ Review and update HR, payroll, and employment policies to reflect provisions of the
Codes. Payroll processes need realignment to ensure compliance with timelines
(monthly wages by 7th, final settlement within 2 days).
Dr. Suhita Mukhopadhyay
CS, LLB, LLM

➢ Align appointment letters, wage slips, leave policies, overtime rules, and
retrenchment procedures. Have to main documentation like accident reports, health
check records

Impact: Compliance costs rise due to system upgrades, audits, and governance frameworks. Greater
accountability as the burden of proof lies on employers during inspections.

VI. Health, safety & working conditions

Accident & Hazard Reporting

• Establish systems for mandatory reporting of accidents and dangerous occurrences.
• Train supervisors and managers on incident documentation and timely submission.
Annual Health Check-ups
• Arrange free annual medical examinations for employees in hazardous process workplaces.
• Partner with certified medical practitioners and maintain health records for compliance.
Safety Committees
• Constitute safety committees in establishments where mandated.
• Ensure representation of both employer and employee representatives for balanced
governance.
Workplace Safety Standards
• Implement hazard-free workplace measures, including fire safety, ventilation, ergonomics,
and sanitation.
• Extend safety obligations to remote/work-from-home setups, ensuring ergonomic guidelines
and hazard-free environments.
Women Employees – Night Shifts
• Put in place transport facilities, security measures, and consent protocols for women working
beyond 7 PM.
• Update HR policies to reflect inclusivity and compliance with safeguards.

Training & Awareness

• Conduct regular safety training and awareness programs for employees.
• Include modules on workplace hazards, emergency response, and rights under the Codes.

Impact: Expanded obligations of the Organization/ Increase in compliance costs / reduces long-term
risks of accidents, disputes, and attrition /Safer work place / Inclusivity & equity

VII. Employee relations

• Establish structured collective bargaining processes to reduce disputes.
Dr. Suhita Mukhopadhyay
CS, LLB, LLM

• Grievance Redressal Mechanism: Create clear, documented procedures for handling

employee complaints and disputes. Train HR and line managers in conflict resolution and
compliance with Industrial Relations Code provisions.
• Retrenchment & Lay-off Compliance: Ensure retrenchment processes comply with
thresholds (government permission required for establishments with 300+ workers).Budget
for worker re-skilling fund contributions (15 days’ wages per retrenched employee within 45
days). Maintain transparent communication with employees during retrenchment or closure.
• Strike & Dispute Management: Update policies to reflect the expanded definition of “strike”
(including mass casual leave). Implement protocols for strike notices, dispute resolution, and
negotiation timelines.

Impact: Employers: Gain structured processes for disputes and retrenchment, reducing litigation
risks but increasing compliance costs. Promotes industrial harmony by balancing economic flexibility
with worker welfare.

VIII. Compliance framework

• Build Internal Controls-Establish robust HR and payroll controls, Digitize registers,

appointment letters, wage slips, and accident reports for transparency.
• Conduct regular compliance audits (quarterly/bi-annual) to identify gaps in wage
structures, benefits, and safety obligations.
• Form a compliance committee involving HR, finance, and legal teams to oversee labour
code implementation.
• Train HR, payroll, and operations teams on new compliance obligations.
• Conduct awareness sessions for employees on their rights and entitlements under the
Codes.
• Implement dashboards for real-time compliance monitoring and reporting.

Impact: Strong internal controls and periodic reviews lower the chances of penalties, litigation, and
reputational damage. Streamlined payroll, HR, and documentation processes improve accuracy and
reduce duplication. Digital records and governance structures make online inspections smoother,
with employers better prepared to demonstrate compliance. Initial investment in systems, audits, and
training increases compliance costs, but long-term savings arise from reduced disputes and
penalties.