India’s labour codes and new realities for workers

The announcement of the implementation of the four new labour codes on November 21 is a historic move towards promoting a transformational change in the labour regulation framework of the country. As India embarks on its journey towards Vision Viksit Bharat 2047, the economic empowerment and promotion of the well-being of workers remain central and a key driver of the nation's progress. The vision also envisages closing the gender gaps in women's economic participation and improving India's position across global indicators. These codes have simplified 29 labour legislations into four codes, namely: The Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions (OSH) Code, 2020, aimed at better labour regulation, promoting decent work, and ensuring social protection for workers.

The Economic Survey 2025-26 has made an optimistic projection that the implementation of India's new labour codes shall bring about a major transformative reform with the creation of 77 lakh jobs. But in order to understand what this really means, one has to look at the reality in which these reforms are being rolled out. Over 90 per cent of India's workforce remains trapped in informality, with limited access to social security or regular incomes, along with low female labour force participation. Evidence from the Periodic Labour Force Survey 2025 reflects this challenge: while the overall labour force participation rate (LFPR) for those aged 15 and above stands at 59.3 per cent, there is a stark gender divide, with male participation at 79.1 per cent as compared to just 40 per cent for women. Equally concerning has been the imbalance in the nature of employment, with 52 per cent of workers engaged in self-employment and only 23.6 per cent in regular salaried jobs, reflecting a dominance of precarious employment and limited access to social security. Assessing the labour codes amidst these challenges is critical to understand the reforms not merely as legislative changes but as an attempt to shift India's workforce to more secure, inclusive, and productive employment - an essential step if the country is to move meaningfully towards the vision of Viksit Bharat. While balancing worker protection and flexibility, the new codes will boost formalisation through the creation of fixed-term employment; enhance social security coverage through portability of benefits; increase female labour force participation; promote ease of doing business with the introduction of single registration, single return, and single licence; and expand employment.

The regularisation of employment contracts through the introduction of Fixed Term Employment (FTE) under the IR Code provides all benefits to FTEs at par with permanent employees, including gratuity after continuous service of one year. Though these provisions can address informality to a large extent and enhance workers' access to social security.

However, the labour codes have extended their purview to both organized and unorganized workers while extending universal minimum wage across employments in these sectors. The Code on Wages 2019 prohibits any kind of wage discrimination and proscribes gender discrimination by promoting equal pay for equal work.  This provision is aligned with the ILO’s Equal Remuneration Convention No 100 to which India has been a signatory. At the same time, the fixation of floor wages based on local living standards in different regions will contribute in addressing inequality. Drawing inspiration from various gender equality Conventions of the ILO, the labour codes offer a unique opportunity for women and can act as a powerful mechanism in unlocking women’s economic potential towards realizing the goals of Viksit Bharat 2047. Enhanced maternity protection of 26 weeks maternity leave under the Social Security Code, surpasses ILO’s Maternity Protection Convention 183, 2000, which had stipulated 14 weeks of maternity leave. Several gender sensitive provisions like mandatory creche facilities for establishments with 50 or more employees, work from home and leave provisions extended to surrogate as well as adoptive mothers are important for encouraging women to sustain in the labour force. The extension of social security benefits for Gig and Platform workers had remained central to the G20 deliberations under India’s G20 Presidency in 2023. It had reflected on collecting and sharing information on relevant and up-to-date policy, good practices, and administrative approaches undertaken in G20 countries and beyond towards strengthening social protection for gig and platform workers. Building on this commitment, the Union Budget 2025-26 has announced several key measures for the welfare of gig and platform workers, viz., their registration in the E-shram portal, issuing identity cards and extending health coverage. Under the SS Code, aggregators are now required to contribute 1-2per cent of their annual turnover to a Social Security Fund, which would finance a range of welfare schemes for these workers who were previously left without protection.

The Reskilling Fund under the IR Code for retrenched workers provides a financial grant equal to 15 days of their last drawn wages. This provides an opportunity for the workers to upskill, improve their employability and prepare themselves for the future labour market by learning new technologies. The OSH Code has extended protection to a large group of migrant workers by widening the definition of migrant workers to include both who have come through contractors and on their own. Practical measures like a toll-free helpline and the portability of the public distribution system can address the vulnerability of these workers who are away from support networks. At the same time, the code opens up employment opportunities for women workers by promoting night shifts for women with their consent, along with provisions of transportation facility and protection against workplace harassment.  Under the new labour codes, compliance is ensured through simplification, digital interventions and increased accountability.

While the codes are envisioned at reshaping India’s labour landscape through promoting economic growth and strengthening workers welfare, their real impact will unfold in the coming years. Much will depend on how effectively the Centre and States co-ordinate in the implementation of these codes. As the States are finalising the rules, the challenge is now to ensure that the reform translates into transformative changes in the lives of workers as envisioned in the ideals of Viksit Bharat.

The Economic Survey 2025-26 has made an optimistic projection that the implementation of India’s new labour codes shall bring about a major transformative reform with the creation of 77 lakh jobs!

Key changes

50 per cent Wage Rule

An employee’s basic pay must now comprise at least 50 per cent of their total CTC. This will increase higher Provident Fund and Gratuity

48-Hour Full & Final Settlement

Employers are now mandated to complete the full and final settlement of wages within 48 hours of an employee’s resignation, dismissal, or retrenchment

Standard Working Hours

Normal working hours remain capped at 8 to 9 hours per day and 48 hours per week, with overtime paid at twice the normal wage rate

FORMALISATION

Appointment letters are now mandatory for all workers, ensuring written proof of employment and social security eligibility

The emerging trends

• Recruiters are increasingly using AI to screen resumes (60 per cent of recruiters), making AI literacy a mandatory skill for job seekers across all domains.
• Hiring is decentralising as Global Capability Centres (GCCs) expand beyond metros.
• There is a significant shift toward skills-based hiring. Certifications in niche areas like DGCA-certified drone piloting command higher premiums than traditional degrees.
• Fixed-term employment provides more formal protections than contract labour.
• Female Labour Force Participation reached 41.7 per cent in 2023-24, though a gender gap persists in top executive positions.

Fellow, V.V. Giri National Labour Institute, Ministry of Labour, Government of India; Views presented are personal.