In a landmark move hailed as the most significant workforce overhaul since Independence, the Indian government has announced the immediate implementation of the four comprehensive Labour Codes. This action, effective from today, consolidates and rationalises 29 fragmented, decades-old labour laws into a modern, unified framework, promising a new era of protection and dignity for millions of workers across the country.
The four codesโthe Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020โare set to redefine the employer-employee relationship, focusing on universal rights, enhanced benefits, and simplified compliance.
๐ต Better Wages & Higher Gratuity for All Workers
The reforms introduce key changes that directly impact the financial security and take-home benefits of employees:
Universal Minimum Wage: The Code on Wages now guarantees a statutory minimum wage for all workers across all sectors, replacing the earlier system that was limited to specific scheduled industries. The government is expected to notify a National Floor Level Minimum Wage to ensure parity across states.
Redefined ‘Wages’ for Higher Benefits: The new definition of ‘wages’ mandates that allowances cannot exceed 50% of the total compensation. This means that at least 50% of the total remuneration must be basic salary, which will form the base for calculating Provident Fund (PF) and Gratuity contributions. While this may slightly reduce the immediate take-home salary for some, it guarantees a substantial increase in long-term social security savings.
Gratuity Eligibility Slashed to 1 Year: In a huge win for employees, particularly those in high-attrition sectors like IT and start-ups, the eligibility for gratuity for fixed-term employees has been reduced from five years to just one year of continuous service. This provides financial security even for shorter tenures.
Universal Social Security for the Gig Economy
One of the most radical changes is the formal recognition and inclusion of the country’s booming unorganised sector workforce:
Recognition of Gig and Platform Workers: The Codes, for the first time, legally define and recognise โGig Workersโ (like ride-hailing drivers) and โPlatform Workersโ (like food delivery partners).
Aggregator Contribution: Aggregator platforms are now mandated to contribute a share of their annual turnover (up to 5% of the amount paid to workers) towards a Social Security Fund dedicated to the welfare of these workers.
Portable Benefits: This provision ensures that gig and platform workers will have access to crucial social security benefits, such as insurance, accident compensation, and other welfare schemes, that are portable and accessible across states.
๐ก๏ธ Enhanced Safety, Health, and Gender Equality
The new framework places a strong emphasis on providing a safer and more inclusive workplace:
Mandatory Appointment Letters: All workers, regardless of their employment type, must now be issued a formal appointment letter, a key step towards formalising the workforce and ensuring legal clarity.
Worker Safety Norms: The Occupational Safety, Health and Working Conditions Code introduces a provision for free annual health check-ups for all workers above 40 years of age in hazardous establishments. It also prescribes national safety standards and mandates the formation of safety committees.
Gender Parity: The Codes explicitly prohibit gender-based discrimination and mandate equal pay for equal work. Women workers are now permitted to work night shifts across all sectors, including underground mining and hazardous sites, subject to their consent and the provision of adequate safety and protection measures by the employer.
The Road Ahead
While the Acts have been notified, the transition requires state governments to finalise their corresponding rules. The government has reassured that existing rules under previous laws will remain in force until new rules are fully operational.