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India has entered a new era of employment governance.
With the implementation of the four new Labour Codes, 29 old and fragmented labour laws have been consolidated into a unified framework. These reforms have far-reaching consequences for employees, employers, HR managers, business owners, and the rapidly growing gig workforce. This blog is your complete 2500-word guide to the Labour Codes — explaining their structure, changes, industry impact, salary restructuring, compliance requirements, and practical steps companies must take. Whether you are an employer, HR leader, founder, or employee, this guide will help you understand exactly what has changed and what it means for your business or career.
India’s labour laws were historically complicated—spread across 29 acts, multiple ministries, outdated definitions, unclear enforcement, and state-wise variations. Business owners often struggled with compliance. Employees lacked consistent protections, especially gig and unorganized workers.
These codes modernise India’s labour landscape by:
In essence, the codes aim to create a balanced and transparent labour ecosystem.
Let’s understand each code in simple language.
This code replaces:
Why this matters:
Companies can no longer manipulate salary structures to reduce PF, bonus, or gratuity liabilities. Employees get fairer compensation.
This code merges:
Why this matters:
Millions of workers will now have access to PF, pension schemes, insurance, and maternity benefits.
This code replaces:
Why this matters:
Industries get more agility, while workers get clearer rights and dispute mechanisms.
D. OSH & Working Conditions Code (OSHWC), 2020
This code merges laws across:
Why this matters:
Workplaces become safer, healthier, and more accountable.
One of the most impactful reforms is the new definition of wages, which requires:
Basic Salary + Dearness Allowance = At least 50% of total CTC.
This has multiple implications:
Impact on Employees
Impact on Employers
Example Salary Breakdown Before vs After
Before Labour Codes
PF only on Basic → lower PF
➡ Lower gratuity
After Labour Codes
➡ Higher PF
➡ Higher gratuity
➡ Slightly lower take-home
This ensures fair pay and long-term financial security.
The new Labour Codes introduce structural changes:
These rules aim to balance flexibility for employers and protection for employees.
The impact varies across industries. Here’s a detailed breakdown.
A. Manufacturing Sector
B. IT & IT Enabled Services
C. Gig Economy & E-Commerce
D. Retail & Hospitality
F. Construction Sector
The risk is very real.If employers fail to align with the Labour Codes, penalties include:
Compliance is no longer optional — it’s essential.
These methods are safe, legal, and recommended:
Step 1: Salary Structure Audit
Step 2: Workforce Classification Audit
Step 3: Review All Employment Documents
Step 4: Update HR Policies
Step 5: Align Payroll & HRMS Systems
Step 6: Contractor & Vendor Compliance Review
Step 7: Training HR & Supervisors
The New Labour Codes represent a foundational shift in India’s employment landscape. They aim to balance employee protection, business flexibility, and compliance simplification.
Companies that adapt early will:
Companies that delay face:
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