India’s shift toward formalisation was already underway as written contracts rose, paid leave benefits expanded

The codes’ emphasis on written appointment letters, paid leave and broader social-security eligibility is expected to reinforce this shift and extend these protections deeper into the MSME workforce.

A steady rise in written contracts and basic workplace entitlements suggests that India’s labour market was moving toward greater formalisation even before the full rollout of the new labour codes, a Moneycontrol analysis of official data shows.

The new codes, which mandate appointment letters, expand paid-leave provisions for MSME workers, and widen social-security eligibility, are expected to accelerate this transition once implemented.

The Periodic Labour Force Survey (PLFS) 2023–24 shows a clear improvement in formal work arrangements. The share of salaried employees without a written job contract fell to 58 percent, from 62 percent in 2021–22. The improvement spans rural and urban areas and is visible among both men and women, indicating a gradual tightening of employment practices across the labour market.

Rural India leads the shift

Rural areas saw the sharpest change. Among male regular workers, the proportion without written contracts dropped from 67 percent in 2021–22 to 62.9 percent in 2023–24. For rural women, the share fell from 56.7 percent to 54.6 percent during the same period.

Urban India, which already had a relatively formalised workforce, recorded similar gains. The share of regular urban workers without written contracts eased from 59.9 percent in 2021–22 to 55.7 percent in 2023–24.

Access to paid leave has also edged up. The proportion of regular workers not eligible for paid leave declined from 49.2 percent in 2021–22 to 47.3 percent in 2023–24, signalling an incremental improvement in basic workplace benefits.

Social-security trends remain uneven

Progress on social-security coverage has been mixed. At the national level, the share of employees lacking any specified social-security benefits fell only marginally — from 53.4 percent to 53 percent. In rural areas, the situation worsened slightly, with the proportion of workers without benefits rising from 58.2 percent to 58.8 percent.

The codes’ emphasis on written appointment letters, paid leave and broader social-security eligibility is expected to reinforce this shift and extend these protections deeper into the MSME workforce.