Taxmann's Analysis | Comprehensive Shift in Labour Regulation – New Labour Code Regime in India
The Ministry of Labour and Employment has notified the new Labour Codes regime w.e.f. November 21, 2025, formally transitioning from a fragmented system of 29 central labour laws to a simplified, consolidated framework aimed at improving transparency, ensuring ease of doing business, while strengthening the rights and welfare of workers.
The four Labour Codes represent the most comprehensive labour reform undertaken in India. These Codes rationalise and merge multiple statutes into a modernised legal framework aligned with current industry realities, technology-driven compliance systems, and emerging categories of employment, including platform and gig workers.
The New Labour Regime, consolidates the 29 Central labour laws into 4 labour codes as under:
1. Industrial Relations Code, 2020
The Code repealed the following 3 legislations:
(a) The Industrial Disputes Act, 1946
(b) The Trade Unions Act, 1926
(c) The Industrial Employment (Standing Orders) Act, 1946
2. Occupational Safety, Health and Working Conditions Code, 2020
3. Code on Social Security, 2020
The Code consolidates 13 existing Labour Laws including:
(a) Factories Act, 1948
(b) Mines Act, 1952
(c) Contract Labour (Regulation and Abolition) Act, 1970
(d) The Plantations Labour Act, 1951
(e) Motor Transport Workers Act, 1961
(f) The Sales Promotion Employees (Conditions of Service) Act, 1976
Consolidates 9 labour laws:
(a) The Employee’s Compensation Act, 1923
(b) The Employees’ State Insurance Act, 1948
(c) The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(d) The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
(e) The Maternity Benefit Act, 1961
(f) The Payment of Gratuity Act, 1972
(g) The Cine-Workers Welfare Fund Act, 1981
(h) The Building and Other Construction Workers’ Welfare Cess Act, 1996
(i) The Unorganised Workers’ Social Security Act, 2008
4. Code on Wages, 2019 The Code repealed the following 3 legislations:
(a) The Payment of Wages Act, 1936
(b) The Minimum Wages Act, 1948
(c) The Payment of Bonus Act, 1965
(d) The Equal Remuneration Act, 1976
Key Highlights of the New Labour Codes are summarised below
1. The Industrial Relations Code, 2020
The Ministry of Labour and Employment vide Notification No. S.O. 5320(E) has notified November 21, 2025 as the effective date for the enforcement of all the provisions of the Industrial Relations Code, 2020. The objective of this Code is to promote industrial peace and harmony by balancing the rights of employers and employees and to provide a more streamlined process for resolving disputes. Further, the Industrial Relations Code aims to simplify compliance and promote ease of doing business within an establishment.
The new Code has repealed the following three legislations:
(a) The Industrial Disputes Act, 1947,
(b) The Industrial Employment (Standing Orders) Act, 1946, and
(c) The Trade Unions Act, 1926.
1.1 Applicability of The Industrial Relations Code, 2020
The Code applies to establishments as per the formation of committees and unions:
(a) Industrial Establishments with 100 or more workers employed or have been employed on any day in the preceding 12 months (IEs must have a Works Committee, consisting of representatives of employers and workers engaged in the establishment).
(b) Industrial Establishments (IE) with 20 or more workers (IEs must have one or more Grievance Redressal Committees to resolve disputes arising from individual grievances).
(c) Any trade union having 7 or more members may register under the Code.
(d) Industrial establishment with 300 or more workers employed or were employed on any day of the preceding 12 months.
1.2 Key Highlights of The Industrial Relations Code, 2020
The Key highlights are as follows:
(a) The term ‘workmen’ is replaced with ‘worker’ in the Code-[Section 2(zr)].
(b) Definition of ‘wages’ has been elaborated. It has been provided that if allowances paid to employee exceed 50% of basic pay plus DA plus retaining allowance, the excess will be treated as part of ‘wages’. [Section 2(zq)].
(c) ‘Labour Court’ replaced by ‘Tribunal’. [Section 44]
(d) Definition of the term ‘strike’ revised to include ‘mass casual leave’ on a given day by 50% or more workers employed in an industry. [Section 2(zk)]
(e) The Code provides that a worker cannot go on strikes and lockouts in breach of contract without giving the employer notice of strike/lockout within 60 days before striking. [Section 62]
(f) A ‘Worker re-skilling fund’ shall be created, consisting of contributions from the employer and the Appropriate Government for the employees laid off.[Section 83]
(g) The provisions of lay-off and retrenchment under the Code do not apply to industrial establishments in which less than 50 workers on an average per working day have been employed in the preceding calendar month or to establishments which are of a seasonal character. – [Section 65]
(h) Now, the disputes related to discharge, dismissal, retrenchment or termination of the services of an individual worker will fall under the definition of ‘Industrial Dispute’. Defined under section 2(q) of the Code.
(i) The standing orders applied only to thresholds of 100 or more workers as per the Industrial Establishments Standing Orders Act, 1946. The threshold has now been increased from 100 to 300 workers. - [Section 28]
(j) Any industrial establishment employing 20 or more workers must have one or more Grievance Redressal Committees for the resolution of disputes arising out of individual grievances. – [Section 4]
(k) The Code establishes that when there is more than one trade union in an establishment, the trade union having 51% or more workers on the muster roll of the establishment shall be recognised by the employer as the ‘sole negotiating union’ of workers. – [Section 14]
2. The Occupational Safety, Health and Working Conditions Code, 2020
The Ministry of Labour and Employment vide Notification No. S.O. 5321(E) has notified November 21, 2025, as the effective date for the enforcement of the provisions of the Occupational Safety, Health & Working Conditions Code, 2020.
The Code consolidates 13 existing Labour Laws (the Factories Act, the Mines Act, the Contract Labour (Regulation and Abolition) Act, the Motor Transport Workers Act, etc.) into a single unified Code. The objective of this Code is to improve the health, safety & welfare of workers across various sectors. The Code aims to achieve these objectives by providing a safe working environment, ensuring fair working hours, and giving workers the rights & information they need to safeguard their safety.
2.1 Applicability of Code:
The Code on Occupational Safety, Health and Working Conditions seeks to regulate
workers’ health and safety conditions in establishments with 10 or more workers and all mines and docks. It will apply to:
(a) a place where any industry, trade, business, manufacturing or occupation is carried on in which 10 or more workers are employed; or
(b) motor transport undertaking, newspaper establishment, audio-video production, building and other construction work or plantation, in which 10 or more workers are employed; or
(c) factory, in which 10 or more workers are employed
(d) a mine or port or vicinity of port where dock work is carried out
Further, specific provisions of the Code, such as health and working conditions, apply to Contract labour and interstate migrant workers. - [Section 3]
2.2 Key Highlights of Code:
The Key highlights are as follows:
(a) The Code prescribes sector-specific rules for transport, journalism and sales workers on working hours and leave, including leave encashment on discharge, dismissal, death or superannuation.
(b) The term ‘Establishment’ would include a place where hazardous or lifethreatening activity is carried out, irrespective of the number of workers. [Section 2(1)(v)]
(c) The definition of factory is amended to 20 workers for premises where the process uses power and 40 workers where the process uses no power. [Section 2(1)(w)]
(d) Applicability of contract labour provisions only when 50 or more contract labour are employed on any day of the preceding 12 months. [Section 45]
(e) Hotels, restaurants and eating places have been specifically excluded from the definition of ‘factory’. [Section 2(1)(w)]
(f) Employers must conduct annual health check-ups for employees at their own cost to support early identification of occupational health issues [Section 6(1) (g)]
(g) Issuance of appointment letters is mandatory for all employees to promote formalisation and ensure transparency in employment terms [Section 6(1)(f)]
(h) Establishments must provide separate washrooms, bathing facilities and locker rooms for male, female and transgender employees to ensure hygiene and dignity [Section 23]
(i) Number of working hours restricted to a maximum of 8 Hours in a day, with certain riders [Section 25]
(j) Overtime requires prior written consent and must be paid at twice the ordinary wage rate [Section 27]
(k) Unavailed leave may be carried forward up to 30 days, while refused leave with wages may be carried forward without limit, ensuring protection for denied entitlements [Section 32]
(l) Inspector-cum-Facilitators replace traditional inspectors, third-party audits introduced [Section 34]
(m) Women may work between 7 PM–6 AM, subject to their consent and required safety safeguards; additional measures must be implemented if the work poses health or safety risks [Section 43]
(n) Contract labour is prohibited in core activities except where the activity is ordinarily outsourced, does not require full-time workers, or where there is a temporary surge in workload [Section 57]
(o) Inter-State migrant workers and are entitled to ration portability, construction cess benefits, and PF/insurance benefits available to other workers [Section 60 &62]
(p) In most cases, the offense can be compounded. Thus, the offender can pay a compounding fee and get away, instead of facing trial in criminal court. [Section 114]
(q) Remuneration in kind up to 15% will be part of ‘wages’. This is faulty drafting. The words ‘does not exceed’ should have been ‘exceeds’. [Section 2(1)(zzj)]
3. The Code on Social Security, 2020
Social security primarily refers to social welfare services concerned with social protection, or protection against socially recognised conditions, including poverty, old age, disability, unemployment and others.
The Ministry of Labour and Employment vide Notification No. S.O. 5319(E) has brought into force the principal benefit and governance provisions of the Code on Social Security, 2020, including Chapter III on Employees’ Provident Fund, Chapter IV on Employees’ State Insurance, Chapters V & VI on gratuity and maternity benefits, and Chapter IX on social security for unorganised workers. Accordingly, the appointed date for sections 1 to 14, 15(1)–(2), 16(1)(c), 17 to 141, 143, 144 to 163 & the specified parts of section 164 shall be 21.11.2025.
3.1 Applicability of Code
The Code shall apply to any establishment by notification of the Central Government subject to the threshold specified. The Code on Social Security, 2020, consolidates the following nine labour laws.
(a) The Employee’s Compensation Act, 1923
(b) The Employees’ State Insurance Act, 1948
(c) The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(d) The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
(e) The Maternity Benefit Act, 1961
(f) The Payment of Gratuity Act, 1972
(g) The Cine-Workers Welfare Fund Act, 1981
(h) The Building and Other Construction Workers’ Welfare Cess Act, 1996
(i) The Unorganised Workers’ Social Security Act, 2008
3.2 Key Highlights of Code
The Key highlights of Code are as follows:
(a) The definition of wages has been elaborated. It has been provided that if allowances paid to an employee exceed 50% of basic pay plus DA plus retaining allowance, the excess will be treated as part of ‘wages’. This will discourage tendency of manipulating salary package to reduce liability of PF, ESIC, bonus, gratuity etc. However, the definition is faulty and will lead to litigation and harassment. [Section 2(88)]
(b) Remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen percent of the total wages payable to him, shall be deemed to form part of the wages of such employee. [Explanation to Section 2(89)]
(c) Definition of employees expanded to include more workers like inter-State migrant workers, platform workers, gig workers, film industry workers and construction workers. [Section 2(26)]
(d) The scope of ESIC increased. A provision has been made to extend its coverage to all 740 districts of the country. In addition, the option of ESIC will also be for plantation workers, unorganised sector workers, gig and platform workers, and institutions with less than 10 workers. If there is risky work in an institute, that institute will inevitably be brought under the purview of ESIC, even if it is a sole labourer. [Section 2(21), Section 3]
(e) The provisions of ESIC would be applicable to an establishment employing even one worker if the establishment is engaged in hazardous and life-threatening activities. [Section 2(21), Section 3]
(f) To increase the scope of EPFO, the schedule of the institutions has been removed all institutions which have 20 or more workers will come under the ambit of the EPF. The option of EPFO for institutions with less than 20 workers and self-employed workers is also given. [Section 3(1) read with First Schedule]
(g) Provision made for social security funds for unorganised workers. [Section 141]
(h) The Central government may defer or reduce the employer’s or employee’s contributions (under PF and EST) for a period of up to three months in the
case of a pandemic, endemic, or national disaster. Randomised selection of inspection of establishment to reduce inspector raj-no surprise inspection. [Section 144]
(i) In many offences, instead of imprisonment, provision of imposing fines has been made. Imprisonment is mostly provided for repeat offense. In some cases, imprisonment has been provided, but the period of imprisonment has been reduced. [Section 133 and Section 134]
(j) Fixed Term Employees’ service conditions, salary, leave and social security will be at par with the Regular Employee. In addition, the Fixed Term Employee has also been given the right to pro rata Gratuity. [Section 53]
(k) In most cases, the offense can be compounded. Thus, the offender can pay a compounding fee and get away, instead of facing trial in criminal court. Thus, now, cases will be filed in criminal court very rarely. The jurisdiction of the civil court is barred. [Section 138]
4. The Code on Wages, 2019
The Ministry of Labour and Employment vide Notification No. S.O. 5322(E) has notified November 21, 2025, as the date on which the principal provisions of the Code on Wages, 2019, shall come into force. The Code seeks to consolidate and simplify the laws relating to wages, bonus, and remuneration, with an objective of ensuring timely payment of wages and universal minimum wage coverage across employments.
The new Code has repealed the following three legislations:
(a) The Payment of Wages Act, 1936,
(b) The Minimum Wages Act, 1948,
(c) The Payment of Bonus Act, 1965, and
(d) The Equal Remuneration Act, 1976
4.1 Applicability of Code:
The Code on Wages, 2019 applies to all employees and all establishments across India, irrespective of industry type, size or nature of work. It covers every place where any business, trade, industry, manufacture or occupation is carried on, including Government establishments. Certain provision of the Code however, shall not apply to employees of the Govt. establishments.
4.2 Key Highlights of Code:
The key highlights of Code are as follows:
(a) The definition of ‘establishment’ has been significantly expanded. It now covers any place where any industry, trade, business, manufacture or even an occupation is carried on, and this includes all Government establishments as well. Even an establishment employing a single worker falls within the scope. [Section 2(m)]
(k) Penalties can be imposed by the officer of the State Government not below the rank of Under Secretary. [Section 53]
(l) In most cases, the offense can be compounded. Thus, an offender can pay a compounding fee and get away, instead of facing trial in criminal court. [Section 56]
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