Introduction
The New Labour Code 2025 is a landmark reform in India’s labour law framework that consolidates 29 existing laws into four comprehensive codes. This reform aims to modernize and simplify labour regulations to better protect workers while providing flexibility and ease of compliance for employers. It also addresses emerging employment forms like gig and platform workers, reflecting India’s changing economic and workforce dynamics.
Four New Labour Code 2025
Code on Wages, 2019
The Code on Wages is a cornerstone of the reform, standardizing wage regulation across sectors and ensuring minimum wages are universally applied to all workers. Unlike prior laws where minimum wage applicability varied, this code mandates a uniform minimum wage floor for all employees irrespective of employment type or industry. It also consolidates rules about timely wage payments, bonus entitlements, and prohibits gender-based wage discrimination.
According to the latest provisions, the national minimum wage floor is set at ₹375 per day, subject to revision by central and state governments based on cost of living and economic factors.
A key feature is that at least 50% of the employee’s Cost to Company (CTC) should be direct salary, including basic pay and dearness allowance. This ensures a fair division within the total remuneration package, protecting workers’ actual take-home earnings.
The code also provides for overtime pay at twice the normal rate and mandates equal pay for equal work across gender lines.
Industrial Relations Code, 2020
This code merges laws related to trade unions, industrial disputes, and standing orders. It simplifies processes for dispute resolution and union registration, and raises the threshold for requiring government permission before layoffs or factory closures to establishments with 300 or more workers. This encourages operational flexibility while maintaining protections against arbitrary job losses.
It also formally recognizes fixed-term employment and trade union rights.
Code on Social Security, 2020
This code expands social security coverage to gig workers, platform workers, fixed-term employees, and workers in the unorganized sector. It enables the creation of a universal social security fund and facilitates portability of benefits like provident fund, health insurance, and maternity benefits, linked to Aadhaar-based universal accounts. This is a landmark move to formalize and protect millions of otherwise vulnerable workers.
Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020
This code integrates laws related to workplace safety, health, and welfare. It standardizes safety protocols and mandates the establishment of safety committees in medium to large establishments. The code also institutes an advisory board to set uniform national standards for occupational safety and health. It expands employer responsibilities and strengthens administrative oversight, aiming to create safer, healthier work environments.
Pros and Cons of the New Labour Code 2025
The New Labour Code brings several advantages such as simplification of labour laws, which reduces regulatory complexity and ease compliance for employers. It enhances worker protections by mandating a uniform minimum wage floor, expanding social security to unorganized and gig workers, and strengthening workplace safety regulations. By legalizing fixed-term employment and mandating equal pay across genders, it offers greater inclusivity and flexibility. Moreover, setting a minimum of 50% of CTC as direct salary protects employees’ take-home pay and statutory benefits.
However, the reforms also face criticism. Some workers and labour unions express concern that easing government permission requirements for layoffs and closures in smaller establishments might weaken job security. The shift to fixed-term contracts could be exploited to bypass permanent hiring benefits. Enforcement challenges remain, particularly in informal sectors, where social security uptake and compliance could be limited. Additionally, the practical impact of these changes depends on robust implementation and government oversight.
Corporate Governance: Role of an Independent Director
An often overlooked but critical facet of the New Labour Code 2025 is its intersection with corporate governance practices, particularly the role of independent directors within organizations. Independent directors serve as vital guardians of ethical business conduct and labour compliance. They help ensure that companies uphold not only statutory labour standards but also broader governance norms encompassing transparency, accountability, and stakeholder engagement. Under the new labour regime, independent directors play a pivotal role in overseeing the implementation of labour laws, safeguarding worker rights, and promoting a culture of compliance and social responsibility. Their oversight is crucial in fostering sustainable business practices that align with evolving regulatory expectations, protecting both the interests of employees and the long-term value creation for stakeholders. In this manner, independent directors serve as catalysts for stronger ESG (Environmental, Social, and Governance) standards, bridging the gap between legal compliance and ethical corporate conduct in India’s dynamic labour environment.
Conclusion
India’s New Labour Code 2025 represents a comprehensive effort to modernize and unify labour laws, promoting fairness, inclusivity, and safety in India’s workforce. The Code on Wages, which mandates a ₹375 daily minimum wage along with a requirement that 50% of CTC constitute direct salary, exemplifies this progress. Alongside reforms in industrial relations, social security, and occupational safety, the codes aim to establish a resilient and future-ready labour ecosystem.
Additionally, integrating strong corporate governance principles, particularly through the oversight of independent directors, enhances the likelihood of responsible and effective implementation of these laws. Independent directors ensure that companies uphold legal compliance while fostering ethical standards and social responsibility, bridging labour reforms with ESG goals and long-term sustainable growth. Thus, the success of the New Labour Code will rely not only on government enforcement but also on robust corporate governance and stakeholder engagement.
For official details, visit the Ministry of Labour and Employment site:
https://labour.gov.in
