The New Labour Codes 2025 are among the most significant reforms in India’s employment landscape. Designed to simplify and modernize existing labour laws, these labour codes aim to bring transparency, improve worker welfare, and streamline compliance for businesses. With changes in gratuity, salary structure, leaves, and working hours, both employees and employers need to understand how these rules will reshape the workplace.
In this article, we break down the important features, benefits, and impact of the new labour codes in a clear and SEO-friendly format.
What Are the New Labour Codes?
The Government of India consolidated 29 labour laws into four major labour codes:
- Code on Wages
- Industrial Relations Code
- Social Security Code
- Occupational Safety, Health & Working Conditions Code
The aim is to simplify compliance and offer improved social security to workers across all sectors.
The new labour code 2025 is expected to roll out with revised salary structures, social security rules, and employee protection measures.
Key Highlights of the New Labour Codes 2025
1. Change in Salary Structure
The new labour codes mandate that basic salary must be at least 50% of total CTC.
This change affects:
- Take-home salary
- PF contribution
- Gratuity payout
- Employer contribution to social security
While take-home pay may reduce, long-term benefits like retirement savings and gratuity increase.
2. New Gratuity Rules Under Labour Codes
One of the most talked-about changes is in gratuity.
Under the new regulations:
- Employees may become eligible for gratuity even before 5 years in some cases (like fixed-term employees).
- Gratuity will be calculated on the increased basic salary, resulting in higher gratuity payouts.
- Contract and gig workers may also receive certain gratuity benefits depending on final rules.
This is a major improvement for employee welfare.
3. Working Hours & Overtime Changes
Under the new labour codes:
- Working hours may be capped at 48 hours per week.
- Companies can adopt 4-day workweeks, provided total weekly hours remain the same.
- Overtime rates and conditions will be standardized.
This provides more flexibility for employees and employers.
4. Leaves & Holidays
The new labour code 2025 may include:
- More uniform rules for annual leave
- Carry-forward benefits
- Leave encashment clarity
This ensures employees across India receive more consistent leave benefits.
5. Social Security for All Workers
The Social Security Code expands coverage to:
- Gig workers
- Platform workers
- Contract workers
- Fixed-term employees
They will receive better access to:
- Insurance
- Provident Fund
- Gratuity
- Pension benefits
This is one of the biggest expansions of labour protection in India’s history.
Impact of New Labour Codes on Employees
✔ Higher retirement benefits
With PF and gratuity linked to a larger basic salary, retirement savings naturally increase.
✔ Better work-life balance
Options for shorter workweeks and standardized working hours improve employee well-being.
✔ Improved job protection
Clearer rules on layoffs, notice periods, and industrial disputes strengthen worker rights.
Impact of New Labour Codes on Employers
✔ Simplified compliance
Replacing 29 laws with 4 codes reduces paperwork and confusion.
✔ Higher payroll costs
Because of increased PF and gratuity contributions.
✔ Better workforce satisfaction
Modern rules help organizations attract and retain talent.
Gratuity Calculation Under New Labour Codes
The formula stays the same but is now applied to a higher basic wage:
Gratuity = (Basic Salary + DA) × 15/26 × Years of Service
Since the basic salary portion increases, gratuity becomes significantly higher for long-term employees.
New Labour Code 2025: Who Will Benefit the Most?
- Full-time employees
- Contract and fixed-term employees
- Gig and platform workers
- Startups adopting flexible workweeks
- Workers seeking greater social protection
Employees working in private companies will see the biggest improvements in social security and financial protection.
Conclusion: Are the New Labour Codes Good for Employees?
Yes—overall, the new labour codes bring a positive transformation to India’s workforce. Employees gain stronger social security, higher gratuity, better working conditions, and more clarity on work hours. While take-home salary may slightly reduce, long-term financial benefits make these changes largely favourable.
As the government moves toward implementing the new labour code 2025, both employees and employers should prepare for revised salary structures and updated compliance requirements.
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