New Labour Codes 2025 in India – A Complete Compliance Guide f

or Businesses

India is preparing for its most significant labour reform in decades. With the introduction of the New Labour Codes, 29 existing labour laws are being consolidated into four simplified codes aimed at improving compliance, transparency, social security, and ease of doing business.

For HR teams, employers, startups, factory owners and Labour Law Consultants, this transition brings both opportunity and responsibility.

This detailed guide by Lawcify Consulting LLP explains everything you need to know to prepare for implementation in 2025, including compliance impacts, payroll restructuring, cost implications, and readiness checklist.

🔹 What Are the New Labour Codes?

The Government seeks to modernize labour regulation through four comprehensive labour codes:

1. Code on Wages, 2019

2. Industrial Relations Code, 2020

3. Social Security Code, 2020

4. Occupational Safety, Health & Working Conditions (OSH) Code, 2020

They will apply to startups, MSMEs, factories, service sector companies, contractors, platforms and gig employers.

lawcify has observed a growing demand for clarity from both employers and employees on how these reforms will reshape HR and payroll structures.

🔹 Why Were Labour Codes Introduced?

The reform intends to:

✔ Simplify regulations
✔ Standardise definitions across laws
✔ Strengthen social security
✔ Improve employer compliance
✔ Modernise workforce safety and governance

This is why companies increasingly seek professional assistance from Labour Law Advisors such as Lawcify Consulting LLP.

Key Changes Under New Labour Codes 2025

1. New Unified Definition of “Wages”

One of the most impactful reforms is defining wages as basic salary + DA + retaining allowance, while limiting allowances to max 50% of total CTC.

➡️ HR teams must restructure salary models
➡️ Payroll cost calculations will change

Businesses frequently engage Labour Law Consultants to ensure compliance-correct structuring.

2. Higher PF and Gratuity Liability

Since wages form 50% of CTC, employers must increase contribution to:

• PF (Provident Fund)

• Gratuity

• Bonus

• Leave encashment values

✔ Employees gain long-term social benefits
✘ Take-home salary may decrease

3. Work Hours Re-Engineering

• Weekly threshold remains 48 hours

• Flexible options possible:

  • 4-day working week (12 hours/day)

  • 5-day or 6-day alternatives

This flexibility will require HR policy revision — an area where www.lawcify.com regularly assists businesses.

4. Leave Rules Adjustment

The OSH Code includes:

• Earned leave entitlement of 1 day for every 20 working days

• Carry-forward enhancements

Companies need to revise employee handbooks accordingly.

5. Gratuity Eligibility for Fixed-Term & Gig Workers

The New Codes expand gratuity benefits to:

• Fixed-term employees

• Gig workers

• Platform workers

India’s gig economy will gain formal protection and benefit eligibility.

6. Industrial Relations & Layoff Rules Liberalised

Companies with up to 300 employees can undertake:

✔ layoffs
✔ retrenchment
✔ closure

without prior government approval (subject to compensation norms).

This is a major relief for employers operating high-turnover sectors.

Who Will Be Impacted?

✔ Employers

Need to restructure payroll, employment contracts and incentive systems.

✔ Employees

Lower take-home but higher retirement benefits = long-term wealth gain.

✔ Contractors / Gig Platforms

Must contribute to social security pools, which is where expert Labour Law Advisors help in compliance planning.

Salary Structure Example Under New Labour Codes

➡️ More statutory deduction → higher social security entitlement.

Businesses consult Lawcify Consulting LLP to design compliant compensation frameworks.

What Companies Must Update Before Implementation

✔ Revised offer letters & employment contracts
✔ Updated HR and payroll software
✔ New leave & working hour policies
✔ PF & gratuity recalculations
✔ Social security contribution applicability for gig/contract workers

Many organisations now prefer retaining Labour Law Consultants for transition audits, which is a core service offered at www.lawcify.com.

Compliance Checklist for HR & Employers

✔ Salary breakup aligned with wage definition
✔ Revised employee handbook
✔ Gig worker compliance mapping
✔ Standing Orders (where applicable)
✔ Payroll computation models updated
✔ Employee communication strategy prepared

Lawcify Consulting LLP supports companies in executing these changes seamlessly.

Benefits of New Labour Codes

✔ Simplified interpretation
✔ Improved social protection
✔ Uniform wage treatment
✔ More flexible working system
✔ Higher labour law compliance credibility

These reforms align India with global labour norms, making compliance advisory firms like Lawcify Consulting LLPinvaluable partners.

Challenges Businesses Should Prepare For

✘ Higher employment cost
✘ Lower in-hand payout affecting employee sentiment
✘ State implementation delays
✘ Interpretation gaps in gig worker rules

This highlights the need for expert Labour Law Advisors to avoid disputes and penalties.

When Will the New Codes Take Effect?

All Codes are passed and draft state rules are largely ready.
A rollout is expected during 2025, with phase-wise enforcement depending on state readiness.

Businesses should not wait for the formal notification.
www.lawcify.com recommends proactive restructuring to avoid last-minute compliance rush.

Conclusion

The New Labour Codes 2025 are poised to:

✔ Reshape payroll frameworks
✔ Elevate statutory compliance
✔ Increase employee benefits

Whether you are a startup, MSME, factory, technology provider, gig employer, or large enterprise — planning early is crucial.

For professional compliance support,
Lawcify Consulting LLP, one of India’s emerging Labour Law Consultants, offers:

📌 HR policy updates
📌 payroll structuring
📌 contract redrafting
📌 compliance transition consulting

Visit www.lawcify.com to speak with experienced Labour Law Advisors and implementation partners.