The consolidated labour reform project was rolled out on November 21 with the enforcement of the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020, and the Occupational Safety, Health and Working Conditions (OSHWC) Code 2020. Together, they subsume 29 earlier laws. The Ministry of Labour and Employment describes the shift as a move to a “future-ready workforce” through measures such as single registration, a unified annual return and digital systems, including the Shram Suvidha portal.
Suchita Dutta, executive director of the Indian Staffing Federation (ISF), calls this “a primary challenge” because “allowances cannot exceed 50 percent of total remuneration, compelling firms to restructure salaries”. She adds that the provision that “basic pay must now constitute at least 50 percent of gross salary”, up from typical 30 to 40 percent structures, affects provident fund calculations, gratuity and bonuses, and “experts estimate a 10 to 15 percent rise in employer contributions to EPF”.
Staffing firms, which employ 7.23 million contract workers, are particularly exposed. Dutta says the changes could result in “a 10 to 15 percent overall CTC escalation” for firms that have not yet overhauled pay structures.
Legal advisers echo this concern. Pooja Ramchandani, partner at Shardul Amarchand Mangaldas and Co, says the new wage definition will have “a far-reaching impact on gratuity payments”. She adds that employers can no longer rely on low basic pay and must be prepared for increases in PF and other statutory costs. “Any excluded allowances in excess of 50 percent of remuneration must be ploughed back to wages for statutory calculations,” she says.
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HR teams are also navigating considerable employee communication challenges. Partha Neog, CEO and co-founder of Vantage Circle—an employee engagement SaaS-platform—says early conversations with clients regarding the new labour code are about helping employees understand changes in their take-home pay. “One of the key requests we are receiving from HR teams is guidance on how to explain changes in take-home pay in a way that is transparent and reassuring,” he says. Non-monetary benefits are becoming more important. “Employee recognition and rewards, wellness initiatives and experience-driven benefits” are being used to maintain morale, he adds.
HR tech adoption is accelerating as well. Neog says, “The new labour codes are encouraging HR teams to adopt platforms and tools that provide structure, visibility and predictability, including digital record-keeping and automated compliance systems.”
On November 27, Kerala announced that it does not plan to implement the Codes. After a meeting with trade union representatives in Thiruvananthapuram, Labour Minister V Sivankutty said the state has “no intention” of moving to the new framework. The meeting passed a resolution calling for the Codes to be withdrawn, arguing that they were drafted without sufficient consultation and dilute worker protections.
Kerala’s position highlights the broader challenge around uneven state alignment. Dutta notes that “state-level variations persist” and warns that inconsistent adoption can create dual compliance burdens for companies operating across jurisdictions.
Sectors with complex workforce structures will feel the strain most. Gig and platform companies must account for new aggregator contribution requirements, while manufacturing, construction and logistics firms face tighter rules for contract labour and wider welfare mandates.
Government data shows that the share of women ineligible for specified social security climbed from 55.7 percent in 2021-22 to 58 percent in 2023-24—outpacing men (51.8 percent) and the overall average (53.4 percent). This trend bucks national gains, where coverage has improved.
The most striking contradiction lies in India’s work ethic versus its economic output. International Labour Organisation (ILO) data show that average Indian employees work 46 hours a week on an average, longer compared to peers in advanced economies like the United States (37.6 hours) or those in the Brazil, Russia, China and South Africa (BRICS) grouping (South Africa: 42.4 hours).
However, long hours are not translating into high-value output as India’s productivity remains lowest among all countries under consideration. Output per worker stands at about $25,400 (at constant 2021 PPP), less than half of the global average. In fact, government data reveals acute pressure points, with regular wage employees in states like Gujarat (53 hours) and Delhi (52.3 hours) averaging well over the 48-hour statutory weekly limit set by the new codes.
Overall, in India, between 2018 and 2024, while the weekly hours clocked by employees have dropped from 53 to 42, salaried employees still work over 48 hours a week. While those in casual labour work an average of 39.7 hours a week, self-employed work slightly lower at 39.6 hours.
First Published: Dec 01, 2025, 12:19
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