The Government of India has introduced major reforms through the Four Labour Codes, aiming to simplify, consolidate, and modernize the country’s labour laws. These codes replace 29 existing labour legislations and bring significant changes for employers, HR teams, and employees.
The Four Labour Codes include:
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Code on Wages, 2019
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Industrial Relations Code, 2020
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Social Security Code, 2020
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Occupational Safety, Health and Working Conditions (OSH) Code, 2020
This article explains the new changes in the four labour codes in India, their impact, compliance requirements, and practical examples.
1. Code on Wages, 2019
The Wage Code consolidates four previous wage-related laws and introduces uniformity in wage definitions and payment standards.
Key Changes Under the Wage Code
Standard Definition of ‘Wage’
A uniform definition of “wage” is introduced across all laws.
Important rule: Allowances cannot exceed 50% of total salary.
If they do, the excess amount is added back to wages for PF/Gratuity calculation.
Example:
If an employee earns ₹40,000/month and allowances are ₹25,000 (>50%), PF must be calculated on at least ₹20,000.
Timely Payment of Wages
Employers must pay wages:
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Daily workers – end of shift
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Weekly workers – last day of the week
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Monthly workers – within 7 days of the next month
Universal Minimum Wages
Minimum wages apply to all employees, not just scheduled industries.
Floor Wage
Central Government will fix a national floor wage.
States must set their minimum wages not below the floor wage.
2. Industrial Relations Code, 2020
This code impacts trade unions, employer–employee relations, and dispute resolution.
Key Changes Under the IR Code
Higher Threshold for Layoff/Closure Permission
The requirement to seek government permission now applies only if:
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Establishment has 300 or more employees
(Earlier threshold was 100)
This increases flexibility for businesses.
Standing Orders Mandatory for 300+ Employees
Companies with 300+ employees must issue standing orders mentioning:
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Work rules
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Conduct
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Leave
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Grievance redressal
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Termination rules
Recognition of Negotiating Union
A trade union with 51% votes will be treated as the sole negotiating union.
Strikes & Lockouts
No strike can be conducted without:
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14 days’ notice
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Not within 60 days of the notice
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Not during conciliation
3. Social Security Code, 2020
This code consolidates 9 social security laws like EPF, ESI, Gratuity, Maternity Benefit, etc.
Key Changes Under the Social Security Code
Gig & Platform Workers Included
For the first time, gig-workers (Swiggy, Zomato, Uber, freelancers) are included under social security schemes.
Universal Social Security
Government may frame schemes for:
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Unorganised workers
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Gig workers
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Platform workers
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Contract employees
Gratuity Eligibility Relaxed
Fixed-term employees become eligible for gratuity without completing 5 years, if they complete the contract duration.
Employer Compliance Through Digital Platforms
All registrations, returns, and contributions shift to an online unified system.
4. Occupational Safety, Health and Working Conditions (OSH) Code, 2020
This code consolidates regulations on working conditions, safety standards, and employee well-being.
Key Changes Under the OSH Code
Single License for Multiple States
Businesses can apply for a single national licence instead of separate state permissions.
Working Hours – 48 Hours/Week
Weekly working limit stays at 48 hours, but employers may structure:
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4-day week (12 hours/day)
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5-day week
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6-day week
Only if:
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Daily limit does not exceed 12 hours
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Overtime is paid accordingly
Mandatory Free Health Checkups
For certain categories of employees—especially in hazardous industries.
Women Allowed in All Shifts
Women can work in night shifts (7 PM to 6 AM) subject to:
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Consent
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Safety measures
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Transport arrangements
Impact of New Labour Codes on Employers
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Increased compliance due to revised wage structure
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Higher PF/Gratuity liabilities
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Structured HR policies needed
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Digital record-keeping becomes mandatory
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More flexibility in workforce management
Impact on Employees
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Higher social security and benefits
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More predictable wages
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Greater safety and working condition standards
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Improved protection in organised and unorganised sectors
FAQs – New Labour Codes in India
1. Are the new labour codes implemented?
Implementation is pending; states must finalise rules. Many states have prepared draft rules.
2. Will take-home salary reduce under the new wage code?
Yes, if allowances exceed 50%, contributions to PF/Gratuity increase, reducing take-home.
3. Can companies adopt a 4-day work week?
Yes, but maximum working hours per week must not exceed 48 hours, and OT rules apply.
4. Are gig workers eligible for social security benefits?
Yes, the Social Security Code includes provisions for gig and platform workers.
5. Do labour codes apply to small businesses?
Yes, but thresholds vary by code (e.g., IR Code applies certain provisions only to 300+ employees).
6. Are women allowed to work night shifts?
Yes, with consent and safety measures under OSH code.
7. Will all companies need to reissue employment letters?
Yes, many HR and payroll structures need revision due to the uniform definition of wages.
Call to Action – Need Help with Labour Law or Compliance?
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JLNR & CO. Chartered Accountants
www.jlnrco.com
support@jlnrco.com +91-76766 15955
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