India has introduced one of the most far-reaching labour law reforms in its modern history. The new framework consolidates 29 legacy labour statutes into four comprehensive labour codes, reshaping how employers manage wages, workforce relations, social security, and workplace safety.

For multinational companies employing staff in India — either directly or through local partners — these reforms significantly change compliance obligations and operational practices.

Why This Reform Matters

The new labour codes aim to modernise India’s employment framework by:

• Simplifying historically fragmented labour legislation
• Expanding protections to previously unregulated worker categories
• Improving ease of doing business while maintaining worker safeguards
• Introducing greater transparency and consistency in employment practices

While the framework is national, practical implementation depends on individual state regulations, making local expertise essential.

The Four Labour Codes — Key Changes Explained

1. Wages & Pay Structures

• Single statutory definition of “wages” now applies across all labour laws
• Introduction of a national floor wage, which states must consider when setting minimum wages
• Reinforced equal pay principles across all genders
• Minor non-compliance has been largely decriminalised, shifting enforcement towards monetary penalties rather than imprisonment

Employer impact:
Payroll structures may need revision, as the new wage definition can increase contributions for provident fund, gratuity and bonuses.

2. Social Security Expansion

• Social security coverage now extends to:
  • Gig and platform workers
  • Fixed-term employees
  • Migrant and unorganised workers
• Gratuity eligibility for fixed-term workers now applies after one year of service
• Benefits are designed to be portable, allowing continuity when employees change roles or employers

Employer impact:
Businesses must reassess benefit eligibility, contribution calculations and workforce classifications.

3. Industrial Relations & Workforce Flexibility

• Employers with up to 300 employees can implement layoffs, retrenchment or closures without prior government approval
• Remote and work-from-home arrangements are formally recognised under Model Standing Orders
• A clearer framework for trade union recognition and collective bargaining

Employer impact:
Greater flexibility in workforce planning, but with increased expectations around documentation and internal policies.

4. Health, Safety & Working Conditions

• Modernised safety and welfare standards across industries
• Enhanced obligations for:
  • Workplace medical examinations
  • Welfare facilities
  • Safety reporting
• Women may work night shifts subject to consent and mandated safety safeguards
• Faster dispute resolution via streamlined industrial tribunals

Employer impact:
Health & safety policies and workplace procedures must be aligned with the updated statutory requirements.

What Employers Should Do Now

To remain compliant and operationally secure, businesses should:

• Review payroll and compensation models
  The revised wage definition may affect statutory contributions and total employment cost.
• Update HR documentation and employment contracts
  Including appointment letters, standing orders, and remote work policies.
• Monitor state-level implementation rules
  Compliance obligations will differ depending on where employees are located.
• Engage local payroll, legal and compliance experts
  Phased implementation and regulatory interpretation require ongoing professional support.

Let Access Financial be your trusted local employer, ensuring you expand your business compliantly, confidently, and efficiently.

Speak to our team to learn how our services in India can support your global growth.