India’s New Labour Codes Take Effect Nov 21, 2025: Higher Costs, Stronger Protections

India’s New Labour Codes Take Effect Nov 21, 2025: Higher Costs, Stronger Protections

On November 21, 2025, India’s labour landscape changed overnight. Four sweeping Labour Codes replaced 29 outdated laws, forcing employers to rethink pay structures, safety protocols, and how they treat gig workers — all while giving millions of informal workers new rights they never had before. It’s not just a legal update. It’s a social reset.

What’s Actually Changing?

The Government of India consolidated four landmark codes: 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. These aren’t minor tweaks. They redefine everything from minimum wages to night shifts for women.

Here’s the punchline: basic salary must now make up at least 50% of an employee’s total cost-to-company (CTC). That means companies can’t hide pay in allowances anymore. If your CTC is ₹60,000, at least ₹30,000 must be basic pay. And because Provident Fund (PF) and gratuity are calculated on basic salary, those contributions are going up — even if your take-home pay shrinks.

Who Wins? Who Pays?

For workers, especially those in the informal economy, this is historic. For the first time, minimum wages apply to everyone — not just those in "scheduled employments" (which covered only about 30% of workers). Now, street vendors, domestic helpers, construction labourers — all are covered. A statutory floor wage, set by the central government based on living costs, can’t be undercut by any state. That’s a game-changer for rural and semi-urban workers.

Gig workers — the delivery riders, app-based drivers, freelance designers — now get social security. JSA Advocates and Solicitors confirmed that aggregators like Swiggy, Zomato, and Ola must contribute 1-2% of their annual turnover (but no more than 5% of what they pay gig workers) into a social security fund. That means PF, ESIC, insurance, maternity benefits, and pensions are now legally required for platform workers.

Women can now work night shifts in any job — if they consent and safety measures are in place. That’s not just about flexibility; it’s about dignity. And gratuity? Reduced from five years to just one. If you leave after 14 months, you still get it.

The Hidden Cost: Paychecks May Shrink

Don’t be fooled. These aren’t free gifts. Employers aren’t suddenly spending more money — they’re redistributing it. Suchita Dutta, executive director of the Indian Staffing Federation, warned that while PF and gratuity payouts will rise, take-home pay may drop. Why? Because if basic salary increases, allowances (like HRA, conveyance, medical) get squeezed to keep the CTC the same. A ₹50,000 CTC might now pay ₹28,000 in hand instead of ₹35,000 — not because wages fell, but because more is being diverted to mandatory savings.

Companies are already scrambling. BDO India has advised clients to reclassify employees under the new definitions. HR departments are rewriting offer letters. Payroll systems are being upgraded. And many small businesses? They’re still figuring out how to comply.

Why This Matters Beyond Pay Slips

This isn’t just about money. It’s about formalizing India’s massive informal economy — home to over 90% of workers. For decades, they’ve been invisible to the system: no PF, no insurance, no legal recourse. Now, they get appointment letters. They get timely wages. They get protection from arbitrary deductions. And they get the right to overtime pay at double the rate.

The Suhail Nathani, Managing Partner of Economic Laws Practice, called this "the most significant shift in India’s labour framework in decades." He’s right. It aligns India with global norms on worker rights. It brings human rights into the workplace. And it forces a culture shift — from exploitation to accountability.

What Comes Next?

The rollout is phased. Most states have issued draft rules as of November 2025, but enforcement will vary. The central government will monitor compliance. Non-compliant firms risk penalties, inspections, and reputational damage. Expect audits. Expect lawsuits. Expect workers to start asking for their rights.

The real test? Will this actually improve lives? Or will employers find loopholes? Will gig workers ever see their contributions paid out? Will the floor wage keep up with inflation?

One thing’s certain: November 21, 2025, wasn’t just a legal deadline. It was the day India began treating its workers like people — not just costs on a balance sheet.