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India’s Four New Labour Codes Reshape Work and Business Landscape in 2025
India’s 2025 labour reforms introduce four consolidated codes altering employment contracts, social security, occupational safety, and dispute mechanisms, reshaping work culture and business compliance.
New Delhi, India — On November 18, 2025, the Indian government enacted four sweeping labour codes aimed at overhauling the country’s complex employment framework. These codes—consolidating 29 previous laws—address wages, occupational safety, social security, and industrial relations, impacting millions of workers and thousands of businesses across India’s diverse economic sectors. The reforms seek to streamline labour regulations, improve workers’ protections, and foster a more business-friendly environment. They also respond to mounting criticism from both employers and labour unions about outdated laws that hindered ease of doing business and worker welfare simultaneously. As India positions itself as a global manufacturing and services hub, these codes mark a critical juncture in balancing growth with labour rights.
Why These Labour Codes Matter Now
India’s labour market, with over 500 million workers, has long been fragmented under a maze of laws dating back to colonial times. This regulatory complexity discouraged formal hiring and compliance, contributing to a large informal sector estimated to cover nearly 90% of the workforce, according to the Centre for Monitoring Indian Economy (CMIE). The four new codes—the Code on Wages, Occupational Safety, Social Security, and Industrial Relations—are designed to unify and modernize these provisions. For workers, they promise better wage transparency, expanded social security coverage, and clearer dispute resolution channels. For businesses, especially small and medium enterprises (SMEs), the codes simplify compliance and reduce litigation risks. With India’s labour reforms closely watched by international investors and multinationals eyeing India as a manufacturing alternative to China, the timing is strategic. The government aims to attract $100 billion in foreign direct investment into manufacturing by 2030, a target that hinges on predictable labour laws.
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Read More →Why These Labour Codes Matter Now India’s labour market, with over 500 million workers, has long been fragmented under a maze of laws dating back to colonial times.
Context and Background of the Labour Reform
The labour codes were first proposed in 2019 and underwent extensive parliamentary debate and stakeholder consultations. Their passage in late 2025 concludes a six-year legislative process initiated under Prime Minister Narendra Modi’s administration to consolidate and rationalize labour laws. Previously, India’s labour regulation consisted of multiple overlapping laws such as the Payment of Wages Act (1936), the Employees’ State Insurance Act (1948), and the Industrial Disputes Act (1947). This patchwork created compliance challenges and frequent legal disputes, especially for SMEs and startups. The Code on Wages, for instance, now standardizes minimum wages across sectors and prohibits wage discrimination. The Occupational Safety Code mandates stricter safety protocols and reporting requirements, responding to high-profile industrial accidents in recent years. The Social Security Code extends benefits such as provident fund and health insurance to informal and gig workers, a first in India’s labour framework.
Breaking Down the Four Labour Codes
Code on Wages: It unifies laws related to minimum wages, timely payment, and equal remuneration. The government has introduced a national minimum wage floor, with states allowed to set higher standards. This aims to reduce wage disparities and ensure timely payments across formal and informal sectors. Occupational Safety, Health and Working Conditions Code: This code consolidates 13 laws to enforce workplace safety, health standards, and working conditions. It mandates risk assessments, safety audits, and enhanced penalties for violations. Critical sectors such as construction, mining, and manufacturing will see more rigorous oversight. Social Security Code: Perhaps the most transformative, this code extends social security benefits to gig and platform workers, a rapidly growing segment of India’s workforce. It also merges schemes like provident fund, employee state insurance, and maternity benefits under a single umbrella, aiming to increase coverage from the current 10% of the workforce to an estimated 40% over the next five years. Industrial Relations Code: This code streamlines dispute resolution mechanisms, simplifies the process of strikes and lockouts, and mandates pre-emptive consultation between employers and workers. It introduces provisions for fixed-term employment and eases regulations on layoffs and retrenchments for firms with fewer than 300 employees.
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Read More →Multiple Perspectives and Industry Impact
Labour unions have expressed cautious optimism, welcoming the expanded social security but voicing concerns over eased layoff norms and fixed-term contracts potentially undermining job security. The All India Trade Union Congress (AITUC) has demanded additional safeguards for vulnerable workers and stronger enforcement mechanisms. Business chambers such as the Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce & Industry (FICCI) have largely praised the reforms for reducing regulatory burden and promoting ease of doing business. They argue that clearer labour laws will boost formal employment and attract investment. Experts note the implementation challenge lies in effective enforcement across India’s federal system, where states retain significant labour regulatory powers. States like Maharashtra, Tamil Nadu, and Karnataka, with large industrial bases, will be critical testing grounds. Digital platforms for compliance reporting, launched alongside the codes, aim to improve transparency but require robust infrastructure and training.
Looking Ahead: Implications for Workers and Employers
For professionals and workers, the new labour codes signal a gradual shift toward more formalized employment and social protection. Gig workers, in particular, stand to gain from social security inclusion, though awareness and access remain hurdles. Employers must adapt quickly to the new compliance landscape, investing in HR systems and safety protocols. SMEs, which employ over 40% of India’s workforce, will need support in navigating these changes. The government has promised capacity-building initiatives and incentives to smooth this transition. Policymakers will closely monitor the codes’ impact on employment generation and labour relations. The success of these reforms could serve as a model for other emerging economies grappling with informal labour markets and regulatory complexity. As India accelerates its economic ambitions, these codes are more than legislative instruments—they are foundational to shaping a labour ecosystem that balances growth, equity, and protection in a rapidly evolving world of work.
