What is the New Labour Law India 2025?

The New Labour Law India 2025 consolidates 29 older labour statutes into four codes (Code on Wages, Industrial Relations Code, Code on Social Security, and OSH Code) to simplify compliance, expand social security, and modernize labour regulations.

When did the Four Labour Codes come into effect?

The central government notified the implementation of the four labour codes on 21 November 2025.

How does the new definition of wages affect payroll?

The new wage definition requires employers to re-evaluate salary structures — basic pay may need adjustment and statutory contributions (such as PF and gratuity) may increase. Payroll systems must be updated to correctly compute contributions and benefits.

Are gig and contract workers covered under the new codes?

Yes. The Social Security Code expands coverage to include gig, platform, contract and previously unprotected workers, bringing them under social security and welfare benefits.

Do employers need to change their HR systems now?

Yes. Employers using manual payroll or outdated systems should migrate to modern HRMS platforms that support the new wage rules, statutory computations, digital registers and audit-ready reporting to avoid compliance risks.

What are the key highlights employers should note?

Key highlights include aggregator welfare cess (1–5% for digital platforms), career centres replacing employment exchanges, mandatory electronic registration, shared transfer liability limited to transferred assets, a five-year EPF/ESI limitation period (pending inquiries to finish within two years), compounding rules for first-time offences, and stricter penalties for repeat non-payment of contributions (up to 3 years imprisonment and fines up to ₹3,00,000).

New Labour Law India 2025: Complete Guide for HR, Payroll & Employers

Somnath banerjee
Dec 11, 2025
6 min read

Updated: Dec 15, 2025

The New Labour Law India 2025 introduces standardized wages, updated gratuity rules, enhanced social security, simplified compliance, and new HR responsibilities. Learn how these labour codes affect payroll, salary structure, working hours, and why HRMS automation is now essential.

What Changed: Overview of the Reform

On 21 November 2025 India introduced New Labour Law India 2025, the Ministry of Labour & Employment of India rolled out a landmark reform — enacting four consolidated labour codes, replacing 29 older labour laws. [Press Information Bureau+2SCC Online]

The four codes are:

Code on Wages, 2019
Industrial Relations Code, 2020
Code on Social Security, 2020
Occupational Safety, Health and Working Conditions Code, 2020 [Herbert Smith Freehills+2Drishti IAS]

This overhaul was intended to simplify labour legislation, make compliance uniform across India, and bring outdated laws in line with contemporary labour and employment practices. [Ministry of Labour & Employment+2Simpliance]

Key Provisions & What’s New

Uniform Definition of Wages & Minimum Wage Rights

The Code on Wages now ensures a uniform definition of “wages” — basic pay, allowances, dearness allowance, etc. This prevents manipulation of pay structure to avoid statutory benefits. [SCC Online+2Drishti IAS]
A new minimum wage floor across India is mandated — meaning all workers, regardless of sector, are guaranteed minimum wages. [www.ndtv.com+2SCC Online]
Wage protection and timely payment rules now apply to all employees — improving fairness and worker protection. [cleartax+2The Indian Express]

Implication: For employers and payroll teams, this likely means a re-evaluation of pay structure — basic pay may need adjustment; allowances may be capped or redistributed. Payroll systems must adapt to compute statutory benefits correctly.

Social Security & Gratuity — Broader Worker Coverage

Under the Social Security Code, benefits such as provident fund (PF), social security, insurance, and welfare coverage extend more broadly — including gig workers, contract staff, and previously unprotected categories. [Press Information Bureau+2cleartax]
The new definitions affect gratuity calculations and other benefits, since “wages” are redefined under law. [The Times of India+2Vajiram & Ravi]

Implication: Employers must update payroll and HRMS systems to handle contributions, social security, gratuity, and compliance for wider employee categories (full-time, part-time, fixed-term, contract, gig).

Standardised Working Conditions, Safety & Compliance Framework

The OSH Code enforces standardized working hours (8 hours/day, 48 hours/week), overtime rules, safety norms, welfare standards, and better protections for workers, including for hazardous workplaces. [SCC Online+2Bar and Bench - Indian Legal news]
Compliance burden is simplified: instead of multiple registrations and overlapping laws, companies now follow one unified registration-return framework. [DLA Piper GENIE+2Herbert Smith Freehills]

Implication: Organizations must audit their existing safety, attendance, and shift-management policies — updating processes, documentation, and safety compliance. HRMS platforms should be configured to reflect the new compliance requirements.

Industrial Relations, Employment, Contract Work & Flexibility

The Industrial Relations Code updates rules on trade unions, layoffs, retrenchment, and industrial disputes. [SCC Online+2India Briefing]
Fixed-term, contract, gig, and platform workers gain clearer definitions, benefits, and social security protections under the new codes — aiming to formalize previously informal work relationships. [Herbert Smith Freehills+2Vajiram & Ravi]

Implication: Employers using contract staff or gig workers must re-evaluate employment agreements. Payroll and HR systems must be capable of handling diverse employee types with different entitlements.

What This Means for Employers & HR Teams — Challenges & Risks

Salary Structure Overhaul & Payroll Compliance

Because of the new wage definition and social security norms:

The basic pay component may need adjustment (especially if previously basic pay was kept low).
PF, gratuity, and social security contributions for employees may increase — impacting take-home pay and employer costs. [The Times of India+2The Economic Times]
Payroll systems, payslips, and salary breakup formats need updating immediately, to ensure compliance.

Need for Updated HRMS & Payroll Automation

Manual payroll or outdated systems will struggle under the new compliance burden. For consistent and error-free compliance, companies must adopt modern HRMS platforms that support:

Updated wage structure rules
Social security & benefits computation
Attendance, overtime & working hours tracking
Safety and compliance record-keeping

Without automation, companies risk payroll errors, compliance lapses, and legal penalties.

Increased Employer Liabilities & Long-Term Costs

With expanded social security, gratuity benefits (even for fixed-term and contract workers), mandatory compliance and safety — employer liabilities increase. Companies must budget for higher PF, gratuity, and benefits.

Communication, Employee Trust & Transparency

Employees will have questions: about salary structure changes, take-home pay, benefits, social security, and compliance. Transparent communication is essential to manage expectations and maintain trust.

Recommended Action Plan for Businesses & HR Using ZFour HRMS

If you are using — or planning to use — a modern HRMS like ZFour HRMS, here is a checklist to adapt to the new law:

Audit existing salary structures & contracts — map allowances vs basic pay vs CTC.
Update HRMS wage & payroll configuration — ensure the basic pay % rule, social security computations, gratuity logic, statutory benefits, and variable pay handling are correct.
Digitize compliance documentation — wage registers, attendance records, safety logs, employment letters, contract worker records.
Update pay-slip and salary breakup formats — clearly communicate new breakdown to employees.
Train HR & payroll staff — on new law requirements, compliance, audits, documentation, social security obligations.
Communicate with employees — inform about changes, benefits, deductions, compliance measures.
Use HRMS analytics & reporting — to track compliance, benefit costs, workforce distribution, contract vs permanent staff, liabilities.

With ZFour HRMS or similar tools, businesses can simplify compliance, avoid manual errors, and manage payroll & HR operations seamlessly under the new labour framework.

Benefits & Opportunities — Why This Reform Can Be Positive

Despite increased compliance demands, the new labour law offers several benefits:

Uniform, predictable wage & compliance structure — easier to manage across states and locations. [cleartax+2The Indian Express]
Better social security, gratuity and benefits especially for contract, gig, and informal workers — increasing workforce stability and loyalty. [Press Information Bureau+2Vajiram & Ravi]
Reduced legal complexity — with one code instead of 29, easier to maintain compliance if systems are updated. [Ministry of Labour & Employment+2DLA Piper GENIE]
Clearer rules for employers — helps in planning workforce, payroll, costs, and benefits.

Key Highlights of the New Labour Law India 2025

Aggregator Welfare Cess: Digital platforms (ride-sharing, delivery, logistics, marketplaces) must contribute 1–5% of turnover toward gig-worker social security.

Career Centres Introduced: Employment exchanges replaced with modern career centres offering job listings and vocational guidance.

Mandatory E-Registration: All establishments must complete electronic registration under the new labour codes.

Shared Liability on Business Transfer: Both old and new owners are responsible for unpaid dues; the transferee’s liability is limited to the value of assets acquired.

EPF/ESI Limitation Period: Proceedings capped at five years; pending inquiries must finish within two years of the Social Security Code coming into effect.

Compounding of Offences:

First-time fine-only offences: 50% compounding
First-time offences with up to 1-year imprisonment: 75% compounding

Stricter Penalties: Non-payment of contributions can lead to up to 3 years imprisonment and fines up to ₹3,00,000for repeat violations.

Frequently Asked Questions (FAQ)

Q1. What triggered the labour law reform in India?

The government consolidated 29 outdated labour laws into four comprehensive codes to simplify and modernize India’s labour regulations, improve compliance, and better protect workers under a uniform national framework. [Ministry of Labour & Employment+2India Briefing]

Q2. When did the new laws come into force?

The four labour codes officially became effective on 21 November 2025. [Press Information Bureau+2SCC Online]

Q3. How does the new definition of wages affect my company’s payroll?

Under the new wage code, “wages” are redefined — basic pay, allowances, dearness allowance, etc. Payroll structure must align. This may increase PF, gratuity, and social security contributions, impacting both employer liability and employee take-home pay. [SCC Online+2The Times of India]

Q4. Are gig, contract, and part-time workers covered under new law?

Yes. The Social Security Code extends benefits and protections to gig workers, contract staff, and previously unprotected categories, offering social security, welfare, and statutory protections. [Press Information Bureau+2Vajiram & Ravi]

Q5. Do I need to update payroll and HR systems now?

Absolutely. Manual payroll or outdated systems may not support the new definitions, compliance rules, and benefit computations. Using a modern HRMS is now almost mandatory for compliance and smooth payroll processing.

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