New labour codes to formalise workforce, ease compliance: TeamLease's Narayanan shares key checks for employees
Effective 21 November, the reforms aim to boost worker protection, expand social security and significantly reduce compliance burden -- especially for micro, small and medium enterprises (MSMEs).
- Nov 24, 2025,
- Updated Nov 24, 2025 6:57 PM IST
Balasubramanian Narayanan, Senior Vice-President and Business Head at TeamLease Services, explained how the Centre's new labour codes mark a complete restructuring of the regulatory framework, replacing 29 laws with four unified codes.
Effective 21 November, the reforms aim to boost worker protection, expand social security and significantly reduce compliance burden -- especially for micro, small and medium enterprises (MSMEs).
Narayanan told Business Today on Monday that India has a very high share of informal workers -- around 47 crore out of 55 crore -- which is why such consolidation is needed.
"The degree of informality in our workforce is extremely high. These workers do not receive any social security -- no health cover, no life cover, no retirement benefits," he said. Only about 8 crore workers, mostly full-time employees and contract staff, currently have full social security protection.
He argued that complex and voluminous compliance requirements have historically discouraged employers, particularly MSMEs, from formalising their workforce. "There were 1,436 provisions, 31 returns, 181 forms and 84 registers," he said. "If this can be unified and digitalised -- even if 31 returns become one digital return -- the relief for employers is significant."
From the employee perspective, Narayanan underlined a persistent lack of awareness about statutory benefits. For example, he said, the Employee State Insurance (ESI) scheme provides unlimited cashless medical cover for workers and up to seven dependents for a contribution as low as 4 per cent of wages. "How many people even know this?" he asked, noting that better awareness is essential to prevent exploitation.
Impact on PF, Gratuity & Wage Structure
A major change under the new codes is the recalibration of provident fund (PF) wages. PF contribution will now be calculated on at least 50 per cent of the cost-to-company (CTC) instead of 50 per cent of gross salary. For employees earning below Rs 15,000 per month -- typically those whose earlier PF contribution was less than Rs 1,800 -- this may marginally increase deductions and reduce take-home pay if employers keep CTC unchanged.
Narayanan recommended that companies protect employee net pay and, where possible, absorb the incremental burden, especially since employers benefit from reduced compliance pressure.
Gratuity norms have also been overhauled. The benefit, earlier restricted to employees completing a minimum of four years and 8 months (240 days), will now be payable after just one year of service. "This gives relief to employees who work only 12–18 months in an organisation," Narayanan said. Gratuity is calculated as 15 days of salary for every completed year of service and is a significant addition to net earnings.
The government is expected to release further operational details, including clarity on retrospective or prospective applicability, within a week.
Gig Workers Get Social Security for the First Time
For the first time, India's gig and platform workers -- estimated at over one crore -- are formally defined and covered under social security. Employers are required to contribute up to 5 per cent of dues payable to gig workers into a welfare corpus. Although specific benefit structures are awaited, Narayanan said this inclusion is the most transformative aspect of the new codes.
He noted that gig workers, especially in logistics, mobility and last-mile delivery, face high occupational risks with little to no social protection. Government-led coverage, he said, will make gig roles more secure and attractive as the segment continues to expand toward an estimated 3 crore workers by decade-end.
Other Notable Changes
Mandatory appointment letters are now legally enforceable, bringing transparency to employment terms such as notice periods and grounds for termination. Full-and-final settlements must also be completed within a tighter timeline to prevent liquidity stress for employees moving between jobs.
Work-hour rules have been redefined with a weekly cap of 48 hours. Employers may structure shifts as 8 hours over 6 days or 12 hours over 4 days without overtime, but overtime beyond weekly limits must be paid at double the rate.
Women workers are assured equal pay for equal work -- a practice widely followed in organised sectors but now explicitly codified in law.
What Employees Should Check
Narayanan urged workers to verify five key elements under the new codes:
* wages aligned with state-level minimum wages,
* PF contribution calculated on at least 50 per cent of CTC,
* gratuity eligibility after one year,
* valid ESI card where applicable, and
* a proper appointment letter with compliant terms.
"The government has opened a plethora of benefits," he said. "Employees must educate and arm themselves to ensure they don't miss out."
Meanwhile, Indian equity benchmarks ended lower today after a highly volatile session, weighed down by losses in consumer, chemical, energy and realty stocks.
Balasubramanian Narayanan, Senior Vice-President and Business Head at TeamLease Services, explained how the Centre's new labour codes mark a complete restructuring of the regulatory framework, replacing 29 laws with four unified codes.
Effective 21 November, the reforms aim to boost worker protection, expand social security and significantly reduce compliance burden -- especially for micro, small and medium enterprises (MSMEs).
Narayanan told Business Today on Monday that India has a very high share of informal workers -- around 47 crore out of 55 crore -- which is why such consolidation is needed.
"The degree of informality in our workforce is extremely high. These workers do not receive any social security -- no health cover, no life cover, no retirement benefits," he said. Only about 8 crore workers, mostly full-time employees and contract staff, currently have full social security protection.
He argued that complex and voluminous compliance requirements have historically discouraged employers, particularly MSMEs, from formalising their workforce. "There were 1,436 provisions, 31 returns, 181 forms and 84 registers," he said. "If this can be unified and digitalised -- even if 31 returns become one digital return -- the relief for employers is significant."
From the employee perspective, Narayanan underlined a persistent lack of awareness about statutory benefits. For example, he said, the Employee State Insurance (ESI) scheme provides unlimited cashless medical cover for workers and up to seven dependents for a contribution as low as 4 per cent of wages. "How many people even know this?" he asked, noting that better awareness is essential to prevent exploitation.
Impact on PF, Gratuity & Wage Structure
A major change under the new codes is the recalibration of provident fund (PF) wages. PF contribution will now be calculated on at least 50 per cent of the cost-to-company (CTC) instead of 50 per cent of gross salary. For employees earning below Rs 15,000 per month -- typically those whose earlier PF contribution was less than Rs 1,800 -- this may marginally increase deductions and reduce take-home pay if employers keep CTC unchanged.
Narayanan recommended that companies protect employee net pay and, where possible, absorb the incremental burden, especially since employers benefit from reduced compliance pressure.
Gratuity norms have also been overhauled. The benefit, earlier restricted to employees completing a minimum of four years and 8 months (240 days), will now be payable after just one year of service. "This gives relief to employees who work only 12–18 months in an organisation," Narayanan said. Gratuity is calculated as 15 days of salary for every completed year of service and is a significant addition to net earnings.
The government is expected to release further operational details, including clarity on retrospective or prospective applicability, within a week.
Gig Workers Get Social Security for the First Time
For the first time, India's gig and platform workers -- estimated at over one crore -- are formally defined and covered under social security. Employers are required to contribute up to 5 per cent of dues payable to gig workers into a welfare corpus. Although specific benefit structures are awaited, Narayanan said this inclusion is the most transformative aspect of the new codes.
He noted that gig workers, especially in logistics, mobility and last-mile delivery, face high occupational risks with little to no social protection. Government-led coverage, he said, will make gig roles more secure and attractive as the segment continues to expand toward an estimated 3 crore workers by decade-end.
Other Notable Changes
Mandatory appointment letters are now legally enforceable, bringing transparency to employment terms such as notice periods and grounds for termination. Full-and-final settlements must also be completed within a tighter timeline to prevent liquidity stress for employees moving between jobs.
Work-hour rules have been redefined with a weekly cap of 48 hours. Employers may structure shifts as 8 hours over 6 days or 12 hours over 4 days without overtime, but overtime beyond weekly limits must be paid at double the rate.
Women workers are assured equal pay for equal work -- a practice widely followed in organised sectors but now explicitly codified in law.
What Employees Should Check
Narayanan urged workers to verify five key elements under the new codes:
* wages aligned with state-level minimum wages,
* PF contribution calculated on at least 50 per cent of CTC,
* gratuity eligibility after one year,
* valid ESI card where applicable, and
* a proper appointment letter with compliant terms.
"The government has opened a plethora of benefits," he said. "Employees must educate and arm themselves to ensure they don't miss out."
Meanwhile, Indian equity benchmarks ended lower today after a highly volatile session, weighed down by losses in consumer, chemical, energy and realty stocks.