India’s New Labour Codes: Employees Who Benefit Most, and the Shifting Responsibilities of HR in 2025

When the conversation around India’s labour reforms first heated up a few years ago, many dismissed it as another policy idea that would take time to settle. Yet, as 2025 unfolds, it has become evident that the country is standing at the edge of a genuine structural transformation. With decades-old labour laws finally giving way to a streamlined framework, both employers and employees are preparing for a new operational reality.

In boardrooms, HR managers are reviewing salary structures that have gone unchanged for years. Across industries, employees are trying to understand what the reforms mean for their take-home pay, retirement benefits, and social security. And at the policy level, the government is reshaping how India’s workforce is protected and compensated in a rapidly evolving economy.

At the heart of all this activity lies the Government of India’s decision to consolidate 29 separate labour laws into four modern Labour Codes. While the shift may appear administrative on the surface, its impact is anything but.

This article brings together the essentials: what each of the four codes aims to achieve, the ten categories of employees who stand to gain the most (as highlighted by the Economic Times), and how HR teams must prepare for the compliance landscape of 2025.

The Four Labour Codes: A Modern Framework for a Changing Workforce

The purpose of merging older laws into four consolidated codes was not simply to rewrite policy but to make labour regulation more relevant to the modern Indian workplace. Many of the previous laws were written in a pre-digital, pre-platform era. Today’s workplace—distributed teams, gig workers, contract labour, growing SMEs—needed a framework that reflected present-day employment patterns.

Below is a clear look at what each code brings to the table.

1. The Code on Wages, 2019

This code replaces older, fragmented wage laws with a uniform system that applies across the country. Its most widely discussed reform is the standard definition of “wages”, which introduces the 50% rule—allowances cannot exceed half of an employee’s total compensation.

This single change affects almost every employer in the country. It influences provident fund contributions, gratuity calculations, and, in several cases, may even alter take-home pay. For employees, it strengthens long-term financial security. For companies, it calls for a complete reassessment of existing salary structures.

2. The Industrial Relations Code, 2020

The Industrial Relations Code addresses the way employers and employees interact during disputes, restructuring, and union activities. It is designed to reduce uncertainty and promote smoother negotiations during times of transition.

Industries where manpower fluctuates—manufacturing, industrial production, logistics, and textiles—will feel its impact most directly. The code attempts to create a more predictable environment, allowing organisations to plan while safeguarding employees’ rights.

3. The Social Security Code, 2020

Of all the codes, this one represents the most significant shift in mindset. For the first time, the government formally acknowledges gig workers, platform workers, and workers in the unorganised sector within its legal structure.

The code expands access to social welfare by providing:

• Insurance coverage
• PF and pension access
• Aggregator contributions for gig workers
• Integration with national welfare schemes

In a country where platform work and informal labour fuel large sections of the economy, the Social Security Code marks a historic milestone.

4. The Occupational Safety, Health & Working Conditions (OSHWC) Code, 2020

This code brings uniformity to workplace safety standards, working hours, and welfare requirements. It defines what organisations owe their workers in terms of health, safety, and overall well-being.

The code sets clearer rules on:

• Daily working hours
• Overtime calculations
• Facilities in establishments
• Safety in hazardous roles

Whether a company operates a factory, warehouse, or even a large office, compliance with these standards becomes essential.

The 10 Employee Groups Who Benefit the Most: An In-Depth Look

The Economic Times report identifies the workforce categories that gain the most under the new codes. But the true impact becomes clearer when we examine how each group’s working life changes in practice.

1. Employees With Low Basic Pay and High Allowances
2. Gig Workers and Platform Workers
3. Contract Workers and Casual Employees
4. Women Employees
5. Employees Working in SMEs
6. Factory and Manufacturing Workers
7. Journalists and Media Professionals
8. Unorganised Sector Workers
9. Employees Approaching Retirement
10. Employees Who Switch Jobs Frequently

What HR & Payroll Must Prepare For in 2025

The Labour Codes do not merely update paperwork—they reshape core HR operations.
Several major organisational responsibilities emerge from this shift.

1. Salary Structure Redesign

The 50% wage rule requires companies to rethink:

• Basic-to-allowance ratios
• PF and gratuity forecasting
• CTC templates
• Statutory deduction strategies

Legacy salary formats will need to be rebuilt from the ground up.

2. Comprehensive Policy Revisions

HR teams must revise:

• Offer letters
• Leave policies
• Working-hour rules
• Overtime and holiday calculations
• Contractor agreements
• Safety and welfare documents

For many companies, this means rewriting nearly every HR policy in circulation.

3. Digital Recordkeeping and Audit Trails

The new codes demand:

• Digital attendance
• Overtime logs
• Inspection records
• Safety compliance documentation
• Payroll proofs

Manual systems cannot keep up with these requirements.

4. Tracking State Notifications

While the codes are central, implementation is state-driven.
This means HR must stay updated on:

• State rules
• Thresholds
• Compliance deadlines

Businesses operating in multiple states will require a reliable compliance monitoring system.

5. Managing Gig and Contract Worker Compliance

For organisations employing gig or contract labour, new responsibilities include:

• Registering eligible workers
• Maintaining compliance records
• Contributing to welfare schemes

This adds a fresh dimension to HR operations that did not exist earlier.

Why Modern HR Technology Becomes Essential

With fundamental changes to wage definitions, compliance expectations, and documentation, businesses must automate their HR and payroll processes. Attempting to navigate the new codes manually increases both risk and administrative burden.

A platform like DigiSME HRMS supports organisations by:

• Automatically recalculating wages, PF, and gratuity
• Maintaining state-wise compliance updates
• Tracking attendance and overtime digitally
• Managing both regular and gig workers
• Offering audit-ready documentation
• Standardising policies and workflows

As compliance becomes more demanding, automation becomes the only sustainable approach.

Conclusion

India’s Labour Codes represent more than legislative reform—they signal a shift toward fairness, transparency, and stability in the country’s employment landscape. Employees across diverse sectors stand to gain, whether through stronger wage protection, retirement benefits, safer workplaces, or access to long-awaited social security.

For organisations, this is a moment to modernise. Those who adapt early—by restructuring wages, updating policies, and embracing automated HR systems—will not only remain compliant but build healthier, more resilient workplaces.

The future of work in India is being rewritten, and readiness will determine who leads in this new chapter.

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