India’s New Labour Codes: Wages, Workers, and Welfare Rights

India’s landmark labour legislation has taken effect on 21 November 2025. 

29 existing central labour laws have been consolidated into a cohesive framework of four new labour codes (“Labour Codes”):

1. Code on Wages, 2019 (“Wage Code”);
2. Industrial Relations Code, 2020;
3. Occupational Safety, Health and Working Conditions Code, 2020; and
4. Code on Social Security, 2020 (“Social Security Code”). 

The extensive reforms to India’s labour law streamline the compliance obligations of employers while enhancing protection of workers’ rights. 

We set out key changes and what they mean for employers and workers below.

1. A wider conception of “wages”

Under the new Wage Code, wages include salary, allowances or other remuneration expressed or capable of being expressed in monetary terms payable to an employee. It includes basic pay, dearness allowance and retaining allowance. 

Wages do not include: 

1. Bonus payments which do not form part of remuneration;
2. Pension or provident fund contributions;
3. Conveyance and housing allowances;
4. Overtime allowances;
5. Commission;
6. Gratuities; and
7. Retrenchment compensation or other retirement benefits.

Wages must constitute at least 50% of all remuneration. Employers will have to consider this broader conception of wages when reviewing their salary structure and calculating bonuses, gratuities, and other payouts. 

2. Expanded definition of “employee”

The Wage Code defines an employee as a person who carries out skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward. This broadened definition means that a wider range of workers will receive protection accorded to employees under the Labour Codes, including wages in line with the new definition under the Wage Code. 

The consolidation of previous labour laws into the new Labour Codes has also resulted in a more uniform approach to the protection of employees. For example, under the previous regime, certain provisions applied to select groups of employees, such as provisions governing authorised wage deductions, which applied only to employees earning INR 24,000 or less per month. Following the consolidation and implementation of the new Labour Codes, provisions governing authorised wage deductions apply to all employees under the expanded definition, regardless of wage limit.

3. Introduction of a minimum wage

The Wage Code empowers the Indian Central Government to set a uniform “Minimum Floor Wage”. No employer or state government may impose a minimum wage below the Minimum Floor Wage, and existing state legislation may only continue to apply insofar as the minimum wage is higher than the Minimum Floor Wage. 

In fixing the Minimum Floor Wage, the minimum living standards of a worker, as well as the skill level (unskilled, skilled, semi-skilled and highly-skilled), type of work (e.g., the hazardous nature or the arduousness of work), and geographical area are to be considered. Employers will need to be aware of the various minimum wage requirements across different geographical areas.

4. Enhanced protection of workers’ welfare rights

The Social Security Code protects not only employees but also gig-workers and platform workers. This means that a broader range of workers are provided welfare rights under the Labour Codes. 

Gig-workers are defined broadly as any persons who perform work outside a traditional employer-employee relationship. Platform workers are defined as persons who use an online platform to access other organisations or individuals to provide specific services outside the traditional employer-employee relationship. 

Aggregators, who are defined as digital intermediaries connecting service providers with consumers, are required to contribute between 1-2% of their annual turnover, capped at 5% of their payouts to workers, to a social security fund for the benefit of these workers. 

Further, the Social Security Code requires fixed-term employees to receive, at minimum, the same wages, allowances and other benefits as permanent employees doing the same work. Fixed-term employees are also now eligible for gratuity payments after one year of service as opposed to the previous requirement of five years.

Conclusion

India’s new Labour Codes are a transformative development in the country’s labour landscape, which should ease the compliance burden on employers, while increasing protection for a wider range of workers. Employers will ultimately need to familiarise themselves with the new framework, particularly the new wage requirements, and review their compensation structures to ensure compliance with the Labour Codes. 

This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute legal advice and is intended to provide general information only. Information in this article is accurate as of 23 December 2025.