What Happened
- India's four labour codes, which consolidate 29 central labour laws, have come into full operational effect, fundamentally reshaping the employment framework.
- The new codes expand worker benefits, enhance financial inclusion, and strengthen long-term social security coverage.
- The revised wage definition increases statutory benefits like gratuity, overtime, bonuses, and leave encashment for workers.
- Gig and platform workers are formally recognised for the first time, with provisions for social security coverage.
- The codes became effective on November 21, 2025, with final rules expected to be fully notified by April 1, 2026.
Static Topic Bridges
The Four Labour Codes -- Consolidation of 29 Laws
India's labour law reform consolidated 29 central labour laws into four comprehensive codes: the Code on Wages (2019), the Industrial Relations Code (2020), the Code on Social Security (2020), and the Occupational Safety, Health and Working Conditions Code (2020). The fragmentation of 29 laws across multiple ministries -- some dating back to the colonial era (Factories Act, 1948; Payment of Wages Act, 1936; Trade Unions Act, 1926) -- created compliance complexity, overlapping jurisdictions, and regulatory burden. Labour falls under the Concurrent List (Schedule VII, Entry 22-24), meaning both Centre and states can legislate on it.
- Code on Wages, 2019: consolidates 4 laws (Payment of Wages 1936, Minimum Wages 1948, Payment of Bonus 1965, Equal Remuneration 1976)
- Industrial Relations Code, 2020: consolidates 3 laws (Trade Unions Act 1926, Industrial Employment (Standing Orders) Act 1946, Industrial Disputes Act 1947)
- Code on Social Security, 2020: consolidates 9 laws (EPF Act 1952, ESI Act 1948, Maternity Benefit Act 1961, Gratuity Act 1972, etc.)
- OSH Code, 2020: consolidates 13 laws (Factories Act 1948, Mines Act 1952, Building Workers Act 1996, etc.)
- Labour is a Concurrent List subject: both Centre and states must frame rules; state rules required for implementation
Connection to this news: The consolidation simplifies the regulatory landscape from 29 separate laws to 4 codes, reducing the compliance burden on employers while standardising worker protections across sectors and establishment sizes.
Revised Wage Definition and Its Impact
The Code on Wages (2019) introduces a uniform definition of "wages" across all labour laws. Wages include basic pay, dearness allowance (DA), and retaining allowance. Exclusions include house rent allowance, overtime allowance, employer PF/gratuity contributions, commission, conveyance allowance, and bonuses. Crucially, if the excluded components exceed 50% of total remuneration, the excess is added back to "wages" for statutory calculations. This prevents employers from keeping basic pay artificially low to reduce statutory liabilities.
- 50% rule: excluded allowances cannot exceed 50% of total remuneration; excess counts as "wages"
- Impact on PF: employer and employee PF contributions (12% each) calculated on higher wage base
- Impact on gratuity: calculated as (last drawn wages x 15 x years of service) / 26; higher wages = higher gratuity
- Floor wage: Centre sets a national floor wage; states' minimum wage cannot be below this floor
- Equal remuneration: no gender discrimination in wages for same or similar work (replacing Equal Remuneration Act 1976)
- Bonus eligibility: employees earning up to Rs 21,000/month; bonus calculation ceiling: Rs 7,000/month
Connection to this news: The revised wage definition increases the effective statutory benefits for millions of workers, as employers can no longer structure salaries with a minimal basic pay and inflated allowances to reduce PF, gratuity, and bonus obligations.
Social Security for Gig and Platform Workers
The Code on Social Security (2020) is the first Indian law to formally recognise gig workers (working outside traditional employer-employee relationships) and platform workers (employed through online platforms like ride-hailing, food delivery, e-commerce logistics). The Code mandates the creation of a Social Security Fund, financed through contributions from aggregators (1-2% of annual turnover) and government. The Code also establishes a National Social Security Board and State Social Security Boards to formulate schemes for unorganised, gig, and platform workers.
- Gig worker definition (Section 2(35)): earns from activities outside traditional employer-employee relationship
- Platform worker definition (Section 2(61)): works through an online platform
- Social Security Fund: aggregator contribution of 1-2% of annual turnover; government contribution from general revenues
- Benefits proposed: life and disability cover, health and maternity benefits, old age protection, education (provident fund), gratuity
- India's gig economy: approximately 7.7 million gig workers (2020-21); projected 23.5 million by 2029-30 (NITI Aayog)
- National Social Security Board: chaired by Union Minister; includes state representatives, worker/employer representatives
Connection to this news: The formal recognition of gig and platform workers under the Social Security Code addresses a critical gap -- millions of workers in India's rapidly growing platform economy (food delivery, ride-hailing, e-commerce) previously had zero statutory social security coverage.
Key Facts & Data
- Laws consolidated: 29 central labour laws into 4 codes
- Effective date: November 21, 2025; full rules by April 1, 2026
- 50% wage rule: excluded allowances cannot exceed 50% of total remuneration
- Gig workers in India: approximately 7.7 million (2020-21); projected 23.5 million by 2029-30
- Social Security Fund: aggregator contribution of 1-2% of annual turnover
- Concurrent List: both Centre and states frame rules for labour codes
- Key predecessor laws: Payment of Wages Act 1936 (oldest consolidated), Factories Act 1948