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Labour Codes 2025: A Practical Guide for HR Leaders
On 21 November 2025,
India’s four Labour Codes came into effect, replacing 29 older legislations. This marks the most significant transformation of employment law in decades. The Codes are grouped into four pillars: Wages, Industrial Relations, Social Security, and Occupational Safety and Working Conditions.
For HR leaders, the Codes demand a recalibration of payroll structures, contracts, benefits, and compliance systems. This Guide provides context, detailed analysis, and actionable steps to help organizations transition smoothly.
Quick Summary for HR Leaders
Four Codes (Wages, Industrial Relations, Social Security, OSHWC) replace 29 older laws.
Wages: Allowances capped at 50% of CTC; PF and gratuity bases rise.
Industrial Relations: Retrenchment threshold raised to 300 workers; fixed‑term employment formalised.
Social Security: Coverage expands to gig/platform workers, gratuity eligibility shortened, commuting accidents now covered.
OSHWC: Mandatory appointment letters, 48‑hour weekly cap, flexible shifts (including WFH), gender-neutral crèche facilities, and free health checks for employees aged 40+, and women allowed night shifts with safeguards.
HR Imperative: Audit payroll, standardise contracts, digitise compliance, communicate changes clearly.
KLP HR : Already automates wage definitions, PF/ESI, appointment letters, and compliance registers; gearing up for new rules.
Why the Labour Codes Were Introduced India’s earlier labour framework was fragmented, with overlapping definitions and multiple compliance authorities. The new Codes simplify this through the Ministry of Labour’s “3S” framework: Simplification, Security, and Sustainable Growth.
They consolidate 29 laws into four Codes, introduce a unified wage definition, and digitise compliance through single registration, single annual return, and risk‑based inspections.
Equally important, the inspection system shifts from a punitive model to an “Inspector‑cum‑Facilitator” approach, emphasizing guidance and support before penalties. This change signals a move towards collaborative compliance, where HR leaders are expected to embed discipline into systems rather than rely on ad‑hoc fixes.
The official also explained that the government intends to enforce the rules for ..
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HRD priorities:
Audit salary structures to ensure compliance with the 50 percent rule
Communicate changes transparently to employees
Align payroll engines to the new wage definition
Industrial Relations Code: Flexibility with Responsibility
The IR Code raises the threshold for government approval of retrenchment, lay‑offs, and closures from 100 to 300 workers. This provides mid‑sized organizations with greater flexibility, but notice periods and compensation formulas remain mandatory.
Key Financial & Legal Updates:
Reskilling Fund: Employers must now contribute 15 days' wages per retrenched worker to a worker reskilling fund.
Faster Disputes: Parties can now approach Industrial Tribunals directly if conciliation fails, bypassing government referral delays
Fixed‑term employment is formally recognized. FTEs are entitled to parity with permanent employees and gratuity after one year of service. HR must design contracts carefully and manage exits without litigation.
HR priorities:
Standardize appointment and exit letters.
Establish Grievance Redressal Committees with mandatory women representation.
Ensure fixed‑term contracts reflect statutory parity.
Social Security Code:
Expanding Coverage
The Social Security Code consolidates nine laws and extends coverage to gig and platform workers. Aggregators must contribute 1–2 percent of turnover to a social security fund, capped at 5 percent of payouts to workers.
PF and ESI bases now follow the Wage Code definition, increasing liabilities. Gratuity eligibility is shortened from five years to just one year for fixed‑term employees.
Additionally, injuries occurring during the commute between home and workplace are now deemed employment-related for compensation.
New for HR Operations:
The definition of “family” for female employees has been expanded to include dependent parents‑in‑law. This requires updates to medical insurance policies and statutory nomination forms (such as Gratuity Form F).
HR Priorities:
Classify worker categories correctly (gig vs. permanent) in HR systems
Update nomination forms to include parents‑in‑law for female staff
Configure PF, ESI, and gratuity rules for fixed‑term and gig workers
Maintain clean master data for inspections and reconciliations
OSHWC Code:
Modernising Work Conditions
The OSHWC Code retains the 48‑hour weekly cap but allows daily shifts up to 12 hours, enabling compressed schedules such as a four‑day week. Overtime must be paid at twice the ordinary wage rate.
New Mandates:
Mandatory Appointment Letters: Employers must issue formal appointment letters to every employee (including contract, migrant, and gig workers), ensuring formalisation and transparency
Gender-Neutral Crèches:
Establishments with 50+ workers must provide crèche facilities, which are now gender-neutral and accessible to all employees, not just women.
Free Health Checks:
Employers must provide free annual health check-ups for all employees aged 40 and above. (Note: This typically covers all workers in hazardous sectors, but applies to the 40+ age group in general establishments).
Work From Home (WFH):
The Code formally recognises WFH options in service sectors, subject to mutual consent. Women can now work night shifts with consent, provided employers ensure safety, transport, and facilities. Leave eligibility is also relaxed from 240 to 180 days, benefiting seasonal and contract workers.
HR priorities:
Issue formal appointment letters to all employees.
Ensure crèche facilities are gender-neutral (if 50+ employees)
Budget for mandatory health check-ups (employees aged 40+).
Document safeguards and consents for women on night shifts
Configure attendance and overtime rules in HRMS
FAQ'S
Q1. How should HR redesign salary structures under the Wage Code?
HR must ensure basic pay is at least 50 percent of CTC. Payroll templates should be re‑engineered, and PF/gratuity bases recalculated.
Q2. What policies must HR update for fixed‑term employment?
Contracts must reflect parity with permanent employees. Gratuity eligibility begins after one year. HR should standardize templates and exit processes.
Q3. How do the Codes affect HR’s handling of gig and platform workers?
HR must classify gig workers separately, track aggregator contributions, and ensure eligibility for social security schemes.
Q4. What compliance documents are mandatory for HR under the new regime?
Appointment letters, wage registers, PF/ESI records, overtime logs, safety documentation, and a single annual return must be digitized and inspection‑ready.
Q5. How should HR manage women’s night shifts?
HR must obtain written consent, provide safe transport, security, and POSH‑compliant facilities. Policies and records must be documented.
Q6. What is HR’s role in implementing the National Floor Wage?
HR must benchmark salary bands against both state minimum wages and the central floor wage, ensuring no worker is paid below the threshold.
Q7. How does overtime calculation change for HR payroll teams?
Overtime must be calculated on the revised wage base, increasing hourly rates. HR must configure payroll systems to apply double‑rate OT consistently.
Q8. What should HR do about contract labour licensing?
Licensing now applies at 50 or more workers. HR must track contractor workforce sizes, ensure vendor compliance, and maintain records.
Q9. How do the Codes affect HR audits and inspections?
Inspections are now web‑based and risk‑driven. HR must maintain clean digital records and be prepared for algorithmic inspection triggers.
Q10. How should HR communicate Labour Code changes to employees?
Prepare explanatory notes, FAQs, and townhalls to clarify impacts on take‑home pay, PF, gratuity, and working hours. Transparent communication builds trust.
The HR Imperative
The Labour Codes demand structure, transparency, and traceability. For HR leaders, the immediate priority is to embed compliance into systems rather than rely on manual checklists. Salary templates, appointment letters, PF/ESI mapping, overtime policies, and safety documentation must all be standardized and digitized.
Transition Strategy:
While the Codes are effective, many State rules are still being finalized. The government advice is to follow existing rules during this transition period while preparing digital systems for the new regime.