Crisp summary of Changes in Labour Code

Summary of Key Changes Between the erstwhile labour laws and the New Labour Code are given below:

1. Consolidation

   Prior to the new labour code coming into force, there were 29 fragmented laws.
   Now they have been consolidated into 4 comprehensive Codes, which are:

   1. Code on Wages 2019
   2. Industrial Relations Code 2020
   3. Code on Social Security 2020 and
   4. Occupational Safety, Health and Working Conditions Code 2020.
   The laws were notified as coming into effect w.e.f 21st November 2025.

2. Minimum Wages

   The concept of ‘statutory right to minimum wages’ that protects the interest of labourers was previously applied only to specific ‘scheduled’ industries.
   Under new labour code, it shall be applicable for all workers across all sectors.

3. Basic pay:

   Previously, often the salaries were structured in such a way that there is this small basic pay and large allowances component, thereby reducing PF and gratuity liability.
   The new labour code prescribes that basic pay must constitute at least 50% of total salary ---> thereby increasing PF/gratuity contributions and stronger retirement benefits.

4. Wage definition:

   Earlier, the definition of ‘wages’ varied across different laws.
   The new labour code lays down uniform definition of wages,intended to standardize calculations across all four Labour Codes.

5. Leave Eligibility:

   At present, to qualify for annual paid leave, the employee is required to work for at least 240 working days in that year.
   Under the New labour code, the requirement is reduced to 180 days. Meaning, workers earn 1 day of paid leave for every 20 days worked once they cross the 180-day threshold.

6. Appointment letters:

   Previously, employers were not statutorily required to issue appointment letters on new appointments made.
   Under the new labour code, providing written appointment letters to all workers has been made mandatory.

7. Social Security benefits:

   Social Security benefits like provident fund (PF), gratuity, pension, maternity benefit, ESI and disability or survivor benefits were limited to certain category of establishments (based on their size, nature of employment, or wage ceilings).
   Through this new labour code, the scope of social security benefits (SSB) are expanded to cover all workers, including those in unorganised sectors, gig/platform workers.

8. Gratuity for fixed-term employee:

   Under Payment of Gratuity Act 1972, all category of employees are requited to complete 5 years of continuous service to qualify for Gratuity.
   Under the new labour code, fixed-term employees become entitled to gratuity after completing just 1 year of service. For non–fixed-term employees, the rule remains the same as before.

9. Compliance and Penalties:

   Earlier, employers are required to comply with multiple labour laws, each requiring separate registrations, multiple licenses and multiple returns under each law.
   The new labour code streamlines this by prescribing single registration, single license, and a consolidated return.

10. Health and Safety:

    Before the introduction of new Labour Codes, labour laws required medical examinations only in limited circumstances, such as for workers exposed to hazardous processes, dangerous operations, or specific industries likes mines etc.
    The new labour code mandates free annual health check-ups for workers over 40 years old.

11. Layoff/Closure Threshold:

    Under the old Industrial Disputes Act,1947, establishments with 100 or more workers needed prior government approval for layoffs or closures.
    However, with the Industrial Relations Code 2020 this threshold has been raised to 300 workers.

12. Women in Workforce:

    Under erstwhile laws, there were restrictions on women in workforce in night shifts and certain occupations.
    The new labour code permits women to work night shifts in all sectors with consent and mandatory safety measures.

13. Commuting Accidents:

    Under Employee Compensation Act and Employee State Insurance Act that governed workplace accidents, coverage for compensation was limited to accidents arising out of and in the course of employment.
    The new labour code covers even the accidents during travel between home and workplace.