The labour laws reset: India’s ongoing reckoning with work

As we entered 2026, amidst a flurry of geopolitical developments, India moved a step closer to making labour reforms a reality. The Ministry of Labour released draft rules under the four consolidated Labour Codes (notified on 21 Nov 2025) and is now inviting public comments.

The Government is hoping that the new version of the labour laws is reformative and will address workforce demands, facilitate ease of doing business, drive fair and equal opportunities, and ultimately accelerate job creation and economic growth. If Viksit Bharat is the long-term goal for India’s economy, then Make in India is certainly the road to get there. And in that context, labour laws will determine the pace and smoothness of India’s journey to the Viksit Bharat goal.

If implemented well, the labour laws can strengthen not just Make In India but also the growth trajectory of the economy and provide structural support for a broader reform agenda for decades to come.

Until now, India’s labour law resembled a sprawling archive rather than a framework. 44 Central labour statutes, layered one upon another since the 1930s, ended up creating a maze that few could navigate with confidence—including the 400 million workers they are supposedly drafted to safeguard.

On 21 November 2025, India began a new chapter. The four Labour Codes on Wages, Industrial Relations, Social Security, and Occupational Safety consolidate 29 fragmented statutes into a unified architecture.

The older regime was prescriptive; basically, it told employers precisely what they must do, in how many ways, and according to which of 44 overlapping statutes. The new Codes, by contrast, propose a framework of principles and functional definitions.

Consider the change in how ‘wages’ are now de-ned and articulated. Rather than varying definitions across the Minimum Wages Act, Provident Fund Act,

Gratuity Act, and bonus legislation, the Codes establish a unified principle for wage computation. The definition itself ensures better social security and welfare coverage of employees, especially workers at lower pay levels, as evidenced by increased workforce cost-related accounting provisions in the December 2025 quarter end results.

This shift extends to the employer-employee relationship as well. The Codes dissolve the binary of permanent versus casual employment by formally recognising fixed-term contracts with equal protections.

For instance, a worker hired for a year must receive wages, benefits, and prorated gratuity on the same terms as permanent staff. This re-defines contractual freedom: Employers gain flexibility in hiring duration; workers gain dignity and statutory coverage.

Similarly, the Codes extend social security to gig workers and platform worker groups, who are entirely absent from the old legislation.

Yet, like most regulations in India, execution will remain key to the reform.

Just like other regulations, Central and state government equations will come into play, yet again.

While the new Labour Codes are union-level legislation, states retain vast rule-making power. Every state has its own sub-set of regulation and guidelines around minimum wage rates, standing orders, inspection cadres, and sectoral exemptions.

Till April this year, when the final rules are expected to be rolled out, there is some ambiguity that organisations may have to deal with. The transition is complex and requires structural changes, wherein organisations must navigate dual compliance till new rules, processes, and administrative systems are fully implemented across the Centre and states.

Also, wide reforms like labour law changes that impact all sectors (e.g. services, manufacturing, construction, e-commerce, banking) may create unintended interpretation issues and implementation challenges. This is understandable, as workforce requirements, regional dynamics, industry practices, or business context can be so varied that the regulation may not necessarily envisage and address all these dynamics in the first place.

In the context of the Labour Codes, this is already being felt with respect to workforce classification (worker or erstwhile ‘workmen’), permissible engagement of contingent and contract workforce, etc. Progressive legislation, thus, provides a directional framework and policy guidance, allowing business and stakeholders to duly represent their concerns and ensure a consultative process and collaborative mindset to address the same.

Employers may treat the next few months as a managed migration, not a ‘big bang’ rewrite. Until final Central/state rules are notified, they would need to ensure dual compliance—that is continue maintaining legacy registers or policies where they don’t conflict with the Codes while mapping each item to the new requirement (this is expressly what the Government’s FAQ and parliamentary clarifications envisage).

Below are some steps organisations will need to take to prepare themselves while the new rules come into effect:

1. Start with a wage definition review, so that at least 50% of total remuneration is considered as wage for statutory purposes. Also document your methodology for payroll, PF, gratuity, leave encashment calculations etc. —this is the single biggest downstream change touching every payslip.

2. Where you cross the threshold, adopt the Model Standing Orders (MSOs) for your sector to obtain deemed certification and avoid bespoke drafting in year one; then localise only what’s essential.

3. Consolidate filings by obtaining/confirming your Labour Identification Number (LIN) and shifting to Shram Suvidha for single window e returns and inspection correspondence. Digitise registers and wage slips so you’re ready for inspector cum facilitator interactions under the Codes’ web based, risk led inspection scheme.

4. For equal pay, anchor decisions in a simple, documented job evaluation grid (skill, effort, responsibility, conditions) and keep the working papers. It’s pragmatic, defensible, and consistent with the Code on Wages’ equal remuneration architecture.

5. Phase the tricky pieces to de risk adoption. If you use fixed term contracts, configure your human resources information system (HRIS)/payroll to auto accrue pro rata gratuity (eligibility without the five year condition is now explicit) and roll out standardised appointment letters and exit checklists.

6. If you operate across multiple locations, maintain a state by state tracker (which Codes/rules are final, which are still drafts) and read and apply the Codes in line with existing state rules where they’re not in conflict. This is the cleanest way to avoid gaps while states finish rule making.

7. Finally, publish an internal transition SOP (who does what, by when), run one mock digital inspection, and brief key internal stakeholders on proactive and anticipated changes.

These are low cost steps that create immediate certainty for employers while preserving the Codes’ spirit of simplification and transparency.