Executive Summary

Replacing 29 Central laws, this new framework aims to modernise labour regulation, expand social protection, and streamline compliance for businesses.

The Codes introduce a Universal minimum wage, a national floor wage, and a uniform definition of wages while mandating double overtime pay and timely wage payments.  For highly dangerous or hazardous jobs, the Occupational Safety, Health and Working Conditions Code (OSHWC) strengthens safety requirements by mandating stricter protective measures, periodic medical check-ups, enhanced workplace safety standards, and immediate compensation in case of accidents or occupational injuries.

Social security coverage is extended to gig and platform workers, with aggregators required to contribute to schemes such as PF and ESIC. Fixed-term employees now qualify for gratuity.

The businesses may adopt flexible 8 to12 hour shifts, capped at 48 hours per week, and must issue formal appointment letters to all workers. Women are permitted night shifts with safety measures, and eligible workers will receive free annual health check-ups.The reforms aim to bolster formal employment, improve worker welfare, and simplify compliance.

This article lists down the key initiatives that may be applicable for you

1. Overview of the Reform

The Labour Codes aim to streamline the regulatory environment, reduce legal fragmentation, and strengthen worker protections. The reforms also reflect evolving work models such as gig work, platform-based operations, fixed-term employment, and flexible working arrangements.

Key objectives include:

• Consolidation of multiple laws into a simplified framework with less ambiguity
• Alignment with contemporary labour market realities
• Provision of enhanced social security and working conditions
• Reduction of compliance burden through unified systems

2. Key Regulatory Changes

A. Wages and Compensation

• Introduction of a universal minimum wage across sectors and establishment of a national floor wage to reduce regional disparities. A national floor wage is the minimum wage level set by the Central Government below which no state in India is allowed to fix its minimum wages. It acts as a baseline safety net for workers across the country, ensuring that wages do not fall below a nationally determined threshold, while states remain free to set higher minimum wages based on local conditions.
• Uniform definition of wages requiring at least 50% of total remuneration to be classified as wages. Earlier, different labour laws used different definitions of wages allowing employers to minimise statutory liabilities by keeping basic pay low and loading salaries with allowances.
• Overtime payable at a minimum of twice the standard rate
• Mandatory timely payment of wages to all workers

B. Social Security Expansion

• Formal recognition of gig and platform workers within the social security framework.Gig workers are individuals who perform short-term, flexible, task-based work.
  Platform workers are gig workers who receive and perform jobs through digital platforms or apps, such as ride-hailing, delivery, or home services.
• Obligatory social security contributions by aggregator platforms
• Universalisation of provident fund, insurance, and ESIC coverage. It means PF, insurance, and ESIC benefits are now extended to a much wider set of workers including contract, gig and platform workers ensuring broader social security coverage.
• Fixed-term employees are now eligible for gratuity and other benefits on par with permanent staff

C. Industrial Relations & Employment Management

• Increase in threshold for government approval for layoffs/retrenchment from 100 to 300 employees
• Greater clarity and formalisation of fixed-term employment contracts
• Strengthened mechanisms for dispute resolution. It ensures quicker, fairer and more transparent resolution of workplace disputes.
• Under the Industrial Relations Code workers must give 14 days’ notice before striking, allowing time for negotiation and dispute resolution.

D. Working Conditions & Occupational Safety

• Flexible scheduling: up to 12 hours per day, within a 48 hour weekly limit
• Permission for women to work night shifts, with mandatory safety arrangements
• Mandatory issuance of appointment letters for all categories of workers including gig, contract and platform employees.
• Free annual medical check-ups for eligible workers
• Reinforcement of equal pay for equal work and anti-discrimination norms

E. Compliance & Governance

• Unified registrations, standardised definitions, and digitised inspections
• Shift to an inspector-cum-facilitator approach
• Many state-level rules under the four Labour Codes are still pending notification, requiring ongoing monitoring to ensure compliance.

3. Implications for Organisations

A. Management teams must evaluate the financial implications of:

• Revised wage structures under the new definition of wages
• Higher social security contributions, including for gig and fixed-term workers
• Changes in gratuity, PF, overtime, leave encashment, and maternity benefit liabilities

These adjustments may materially influence annual budgets, cost-to-company structures, and long-term workforce planning.

B. Organisations will be required to review and update:

• Working hours, overtime policies, and leave entitlements
• Health and welfare benefits
• Contracting and engagement models (including gig and platform workers)
• Appointment letter formats and full-and-final settlement procedures
• Internal grievance redressal frameworks

New-age businesses relying on gig or platform models must now incorporate structured social security provisions for these workforces.

C. A proactive compliance strategy is essential. Companies should:

• Identify all new or modified compliance requirements under the Codes
• Invest in employee training and capacity-building for compliance teams
• Establish robust monitoring and documentation processes
• Enhance internal controls to ensure timely and accurate reporting

D. Alignment of IT and HRMS Systems

• Updates to payroll systems to comply with wage definitions and overtime norms
• Modifications to HRMS platforms for record-keeping, benefits administration, and reporting
• Strengthening data governance to ensure accurate compliance tracking

4. Tax Implications for Employers

• Higher PF and gratuity bases increase long-term tax-deductible expense.
• Allowance restructuring to maintain tax efficiency becomes limited due to the 50% wage rule.
• Misclassification risks between contractor’s vs permanent employees may trigger TDS, GST, PF and ESIC disputes.
• Overtime at double rate can impact TDS computation cycles

5. Tax Implications on Employees

• Higher taxable income due to increased basic wages under the new 50% wage definition.
• Higher PF/ESIC contributions, reducing take-home pay but increasing tax-deductible savings.
• Reduced scope for tax-efficient allowances, potentially lowering overall tax optimisation.

6. CFO Focus Areas:

• Budget Impact: Assessing the financial implications of new labour codes on overall organizational budgets.
• Workforce Modelling: Analysing staffing structures and costs under a higher fixed wage base to optimize resource allocation.
• Social Security Cost Provisioning: Planning for expanded PF, ESIC, and gratuity contributions for all eligible employees, including fixed-term and gig workers.
• End-of-Service Benefits & Actuarial Valuations: Calculating gratuity, leave encashment, and other terminal benefits accurately using actuarial methods.
• Costing Models for Gig Worker-Dependent Operations: Developing financial models to forecast and manage costs for operations relying on gig and platform workers.

WAYCA’ s View

The Labour Codes represent a transformative shift in India’s employment landscape. For organisations readiness will require a proactive, structured, and multi-disciplinary approach. By anticipating the operational and financial implications, updating internal policies and systems and building compliance capacity companies can ensure a smooth transition while safeguarding business continuity and workforce well-being.

How WAYCA can help