New Labour Codes India 2025 — What Every HR Professional Must Know Now

Why the New Labour Codes Are the Biggest HR Compliance Shift in 30 Years

India's New Labour Codes represent the most significant overhaul of employment law in the country in over three decades. The government has consolidated 29 central labour laws into four Codes — and the changes affect everything from how you define "wages" to when you need to pay a resigned employee their Full and Final settlement.

The four Codes are: The Code on Wages 2019, The Industrial Relations Code 2020, The Code on Social Security 2020, and The Occupational Safety, Health and Working Conditions Code 2020. All four have received Presidential assent. Several states have published their draft rules. Implementation is happening in stages across states.

If you are an HR professional in India and you have not studied what these Codes mean for your daily work, you are already behind. More importantly, your company may already be non-compliant in some areas without knowing it. This article gives you the practical picture — what is changing, what it means for you, and what to do about it.

Code on Wages 2019 — What Changes for HR

The Code on Wages is arguably the most immediately impactful for day-to-day HR and payroll work. Here is what changes:

• Universal wage definition — the Code introduces a uniform definition of "wages" across all labour laws. Under the new definition, wages include basic pay plus allowances but specifically exclude HRA, conveyance above prescribed limits, and certain other components. This changes how PF, gratuity, and bonus are calculated.
• PF impact — many companies have historically kept basic salary low (sometimes as low as 30–40% of CTC) to reduce PF liability. Under the new wage definition, if certain allowances are deemed part of wages, the PF base increases. This increases employer cost.
• Bonus applicability — the Code revises the wage ceiling for bonus eligibility. HR teams need to recalculate bonus applicability across their workforce.
• Full and Final settlement timeline — this is a major operational change. Under the new Code, FnF must be settled within two working days of an employee's last working day. Currently, most companies take 30–45 days. Systems, processes, and approvals need to be redesigned to make this timeline possible.
• Pay slip and transparency requirements — enhanced requirements for wage transparency, record-keeping, and employee access to wage information.

Industrial Relations Code 2020 — Key Changes

The IR Code consolidates the Industrial Disputes Act, Trade Unions Act, and Industrial Employment (Standing Orders) Act. Key changes for HR:

• Standing Orders threshold changes — the threshold for mandatory standing orders has been raised from 100 to 300 employees. Smaller organisations now have more flexibility in employment conditions.
• Retrenchment and closure thresholds — the threshold for needing government permission before retrenchment or closure has increased from 100 to 300 workers. Significant for manufacturing HR teams.
• Fixed-term employment — fixed-term employees are now entitled to all the benefits of permanent employees on a pro-rata basis, including gratuity if they complete one year. This changes how companies structure contract and project-based staffing.
• Negotiating union requirements — changes to how trade union recognition works, with a single negotiating union concept replacing fragmented multi-union situations.

Code on Social Security 2020 — PF, ESI, Gratuity Changes

This Code consolidates nine social security laws including EPF, ESI, Gratuity, Maternity Benefit and others. Changes that directly affect HR and payroll teams:

• Gig and platform workers — for the first time, gig workers (Zomato, Ola, Swiggy drivers and similar) are brought under a social security framework. If your company uses gig workers, this is directly relevant.
• Gratuity for fixed-term employees — as mentioned above, fixed-term employees completing one year (or the contract period, whichever is less) become eligible for gratuity. Currently, the 5-year continuous service requirement means fixed-term employees rarely get gratuity.
• Maternity benefit expansion — expanded definitions and coverage for maternity benefits including for commissioning mothers and adoptive mothers.
• ESIC expansion — the Code enables ESIC coverage to be extended to establishments and workers currently outside the scheme, including in new geographies and sectors.

Occupational Safety, Health and Working Conditions Code 2020

This Code consolidates 13 laws including the Factories Act, Mines Act, and several sector-specific safety laws. For most HR professionals in offices and IT companies, the most relevant changes are:

• Working hours and overtime — changes to maximum hours, overtime rates, and record-keeping requirements
• Safety committees — revised thresholds and composition requirements for workplace safety committees
• Female employees in factories — changes to permitted working hours and conditions, including night shifts with proper safeguards
• Contract labour — enhanced protections and record-keeping requirements for contract workers

POSH Act — Compliance Every HR Professional Must Get Right

The Prevention of Sexual Harassment Act 2013 (POSH) is not part of the New Labour Codes but deserves attention here because compliance failures are increasingly resulting in regulatory action. Every company with 10 or more employees must have:

• A properly constituted Internal Committee (IC) with the correct composition — minimum 50% women members, one external member
• A written anti-sexual harassment policy that meets the minimum legal requirements
• Annual awareness training for all employees
• Annual report submitted to the District Officer

Common POSH compliance failures we see in companies: IC not constituted at all, IC constitution expired (members change jobs but IC is not updated), external member appointment not documented, annual report never filed. Each of these is a compliance violation.

Practical Compliance Calendar for HR Teams — 2025

What HR Professionals Should Do Right Now

Given where the Labour Codes implementation stands, here are the most important practical actions for HR teams in Pune and Bangalore:

1. Audit your wage definition and CTC structures — check whether your current salary structures will be compliant under the new wage definition. If your basic salary is below 50% of CTC and allowances are significant, get a compliance review done.
2. Redesign your FnF process — start preparing for the two-working-day FnF timeline even if it is not yet notified in your state. The process redesign alone takes months. Get ahead of it.
3. Update fixed-term employment contracts — if you use FTCs, update them to reflect gratuity entitlement and ensure you are tracking service periods correctly.
4. Check your POSH compliance — do you have a valid IC? Is your policy current? Was your last annual training documented? Was the annual report filed?
5. Build a compliance calendar — a simple monthly tracker with all statutory deadlines prevents the missed-filing situations that result in penalties.