Fixed-term employment is formally recognised as a category of employment. Such employees engaged for a pre-determined period will be entitled to the same wages as drawn by permanent workers, including statutory benefits, including gratuity if they complete one year of service. Discontinuance after expiry of employment will not be termed as retrenchment.
On 21 November 2025, the Government of India brought into effect four major labour codes – the Code on Wages, 2019 (“Wages Code”), the Industrial Relations Code, 2020 (“IR Code”), the Code on Social Security, 2020 (“Social Security Code”) and the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”). These codes replace 29 central labour laws and represent perhaps the most sweeping labour-law reform in independent India.
With respect to rules, States are expected to notify their respective rules under the codes at the earliest to make the operational aspect smooth. However, till that time, old rules will be effective to the extent that they are not inconsistent with the provisions of the codes.
For HR practitioners, industry leaders and compliance teams, these codes signal a new era – more streamlined regulation, but also elevated expectations and responsibilities. This report outlines the major changes in each code, followed by their combined impact on industries, and practical take-aways for HR functions.
1. Code on Wages 2019
Key changes:
- The Wages Code introduces a uniform definition of “wages” across different sectors, subsuming the earlier laws on minimum wages, payment of wages, bonus and equal remuneration.
- It mandates a floor wage applicable throughout India, thereby reducing regional disparities in wage-levels.
- It covers all “workers” including organised and unorganised sectors, including contract labour.
- It reinforces the principle of equal remuneration for equal work without gender discrimination.
- For employers, the revised definition means many allowances (HRA, travel allowance, overtime, etc) may now be counted within “wages” subject to ceilings (for instance, only those allowances up to 50% may be excluded) – thereby raising the “basic pay” component and its cascading impact on PF, gratuity, bonus, etc.
Implications for industry:
- Payroll structures will need review: basic pay, allowances, bonus eligibility, gratuity and PF base may all shift.
Wage costs may rise in the short-term (if basic pay is uplifted or allowances are re-characterised). - Enhanced compliance risk: failure to adhere can trigger penalties and disputes around “what constitutes wages”.
- For contract labour and unorganised-sector workers, employers will need to ensure the revised wage treatment is applied.
- HR and payroll teams must collaborate to map legacy pay structures and align with the unified definition.
- Communication to employees and unions becomes critical to explain the changed pay-mix and perhaps modest shifts in net pay.
2. Industrial Relations Code 2020
Key changes:
The IR Code consolidates central laws on trade unions, industrial disputes and standing orders.
- Fixed-term employment is formally recognised as a category of employment. Such employees engaged for a pre-determined period will be entitled to the same wages as drawn by permanent workers, including statutory benefits, including gratuity if they complete one year of service. Discontinuance after expiry of employment will not be termed as retrenchment.
- It raises the threshold for certain regulatory approvals: for example, prior government permission for lay-offs, retrenchment and closure is now required only for establishments employing more than 300 workers (previously the threshold was 100 in ID Act , though most states have already increased it to 300).
- Recognises mechanisms of collective bargaining and industrial peace; introduces a “conciliation” requirement before strikes/lockouts.
- Automatic recognition of trade union is in if only one union exists. In case of more than one, negotiating council will be constituted.
- The definition of a “worker” is expanded in some cases to include supervisory employees (earning up to a prescribed ceiling) for certain protections.
Implications for industry:
- For mid-sized manufacturing units (say employing 150-300 persons), the increased threshold means greater flexibility in workforce management (e.g., lay-offs, retrenchments) – this may accelerate restructuring initiatives.
- However, the emphasis on conciliation and trade-union practices means HR must prepare for more formal?industrial-relations processes: union recognition, settlement procedures, dispute-handling.
- HR must revise workforce planning, especially in establishments approaching the 300-worker threshold.
- Some unions view these changes as diluting worker rights – proactive engagement will workers and Unions will reduce the risk of industrial action and unrest.
- Understanding the local state rules remains important: many industrial-relations provisions remain state-administered. HR needs to take note of state rules framed under the code.
3. Code on Social Security 2020
Key changes:
- This Code extends social security to organised, unorganised, gig and platform workers, a notable inclusion.
- It subsumes earlier laws such as the Employees’ Provident Funds Act, Employees’ State Insurance Act, Maternity Benefit Act, Building Construction Workers’ Act, Employees’ Compensation Act, among others.
- ESI will be applicable if even one worker is employed in the case of an industry having a hazardous process. Establishments having less than 10 employees may opt for ESI coverage voluntarily.
- It introduces new schemes: e-registration of beneficiaries (including via Aadhaar), portable social security benefits across states, a “National Social Security Fund” for unorganised workers, etc.
- Principal employer is now liable to pay bonus and gratuity to contract labour.
Implications for industry:
- Employers with gig-platform workers or contractors must assess whether such workers now fall under social-security coverage; this may increase cost or administrative burden.
- HR and finance must review existing contributions (PF, ESI) and compliance frameworks – the rules of eligibility and contributions may change.
- Companies with multi-state operations will benefit from portability of benefits, but must ensure their systems capture this.
- Worker classifications (employee vs contractor) become crucial: misclassification may result in social-security liability.
- For small enterprises, especially (and unorganised?sector units), the expanded ambit of social security may raise cost burdens; planning in budgets is essential.
4. Occupational Safety, Health & Working Conditions Code 2020
Key changes:
- The OSH Code replaces/merges many older statutes regulating factories, mines, plantations, dock-workers, building workers, etc.
- It broadens the scope from just “factories” to “establishments” (including commercial, service sectors) for safety, health and working conditions.
- Introduces new mandates: all workers must have formal appointment letters; employers must ensure free annual health check-ups for employees above 40 years of age; increased welfare measures; simplified license/registration regime; strict safety reporting and worker welfare-rights.
- Sets standardised working-hours/flexibility rules: for instance, maximum weekly hours, overtime, night-work (including women’s night-work under safe conditions).
Implications for industry:
- Manufacturing, construction, mining and services (including large office campuses) all face higher safety/health compliance obligations. Safety audits, health-check protocols, and formal contracts will need to be upgraded.
- HR, in collaboration with operations safety teams, must review appointment letters, welfare facilities (e.g., restrooms, drinking water, medical amenities) and health-check processes.
- For industries operating night shifts or across multiple states, the uniform code means revisiting shift rosters, ensuring gender-sensitive safety protocols (especially for women working night shifts).
- Insurance, worker-injury reporting, and incident management must be aligned with the new code.
- While the code aims at simplification, the scale of establishments newly covered may increase cost and administrative burden – smaller firms may feel the strain initially.
Overall impact on industries:
- The labour-governance ecosystem in India has entered a new phase: Digital compliance, Regulator-friendly (uniform codes), easier-to-navigate (consolidation) and more transparent (unified definitions and rules) – all of which bode well for large-scale industry and investment.
- For workers, the codes signal improved rights: minimum wage floor, social-security inclusion, safer working conditions and formal contracts.
- For employers, especially those in manufacturing, construction, large services or multi-state operations, the changes present both opportunity (flexibility in worker threshold, clearer rules) and challenge (compliance, cost, transition).
Smaller firms, unorganised-sector units or those with heavy contract labour usage may face higher transition costs and initial compliance burden. Economists expect some short-term strain for small firms but long?term benefits via better wages, higher consumption and workforce stability. - HR functions now have a central strategic role: aligning pay structures, revisiting workforce classification, upgrading safety/health & contracts, mapping social-security obligations, and communicating changes to employees and unions.
Strategic considerations for HR & business leadership:
- Audit existing practices: Pay structures, contract labour arrangements, safety/health infrastructure, employment letters, social?security registration.
- Revise payroll architecture: Basic pay, allowances, bonus, incentives, CTC, formulae – map to new “wages” definition.
Revamp HR policies: Appointment letters, classification of workers (employee vs contractor), fixed-term vs permanent, grievance & industrial-relations processes. - State-level variation awareness: While the central codes apply, implementing rules may vary by state – HR must track state regulations and notifications.
- Stakeholder communication: Employees, unions, contractors and service-providers need to be informed of changes. A transparent rationale for pay-mix changes is critical.
- Budget and cost-planning: Transition cost (upgraded pay, social security contributions, safety investments) must be budgeted; potential productivity gains and better retention may offset in the medium term.
- Technology & data-systems upgrade: Many codes envisage digital registers, unified portal filings, and easier compliance-HRIS and payroll systems may need upgrades.
For HR leaders, the codes present a unique opportunity to strengthen workforce governance, enhance employer-brand (by demonstrating commitment to worker welfare) and build future-ready HR infrastructure. The next 12-18 months will be critical in embedding these changes across the enterprise – those who act early will gain both compliance assurance and competitive advantage.
This article provides an overview for informational purposes only and does not constitute legal advice. Organisations should obtain specialised legal counsel for implementation.
