OPINION India's labour codes–Modi’s landmark reform

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As India eyes a $5 trillion economy status, India's Labour Codes embody "Shramev Jayate”, which basically means that labour is divine and labour needs to be treated with dignity,to ensure equitable and resilient growth.

Viksit Bharat by 2047 is not a mere slogan but an achievable goal,best amplified by Prime Minister Narendra Modi’s larger vision.Taking the concept of inclusive growth further, in a pathbreaking step for India's workforce, the Modi government has notified the four consolidated Labour Codes effective November 21, 2025.

Compressing 29 central laws into four codes

This landmark reform consolidates 29 outdated labour laws,many dating back to the colonial era,into a unified, modern framework designed to empower over 400 million workers, enhance social security, simplify compliance for businesses and align India's labour ecosystem with global best practices.

PM Modi described it as "one of the most comprehensive and progressive labour-oriented reforms since Independence," emphasizing its role in building a "future-ready ecosystem that protects workers' rights and strengthens economic growth."

An outcome of extensive stakeholder consultation

The implementation follows years of consultations with stakeholders, including industry bodies like CII and Nasscom, which hailed it as a "transformative leap" toward a simplified, technology-enabled labour regime.

Social security coverage has already surged from 19% of the workforce in 2015 to over 64% in 2025 and these Codes will further expand portable benefits for gig workers, migrants, women and youth, fostering formalization and productivity. During the transition, existing laws remain operational until new rules are notified, ensuring seamless adoption.

Below is an overview of the four Codes, highlighting their key provisions and benefits as they take effect. (a) Code on Wages, 2019–This Code unifies wage-related laws, guaranteeing a statutory national floor wage that States cannot undercut, ending the patchwork of over 2000 disparate rates that often left unorganized workers vulnerable.

Effective November 21, 2025, it mandates timely payments,within seven days for contract workers and the 10th of the following month for others,via digital or bank modes, minimizing delays and exploitation. A uniform definition of "wages" (basic pay, dearness allowance and retaining allowance, with at least 50% of total remuneration counted) boosts calculations for bonuses, provident funds and gratuity, increasing take-home pay and retirement benefits. For instance, employers can no longer fragment salaries into allowances to evade contributions, ensuring workers receive higher terminal dues.

Gender parity in pay

More importantly,equal pay for equal work is now statutorily backed, promoting gender parity and fairness across sectors.The Code's inspector-cum-facilitator model shifts from punitive inspections to supportive guidance, with randomized, web-based checks reducing harassment while enforcing compliance. This benefits MSMEs by cutting red tape and over 40 crore workers by embedding minimum wage guarantees nationwide, driving consumption and economic inclusion.

Striking a balance between layoffs and retrenchment compensation

(b) Industrial Relations Code, 2020–Aiming for industrial peace, this Code streamlines dispute resolution and trade union processes. It raises the threshold for layoffs and retrenchment from 100 to 300 workers (with State opt-in flexibility), but enhances protections. Retrenchment compensation rises to 15 days' average pay per year of service and fixed-term employees (FTEs) gain pro-rata benefits like gratuity after just one year,down from five,making short-term roles more attractive and secure.

Mandatory negotiation periods and reskilling funds during layoffs support worker transitions, while transparent union recognition via secret ballots ends inter-union rivalries, stabilizing workplaces. Two-member Industrial Tribunals (judicial and administrative) with a two-year filing limit will expedite resolutions, clearing backlogs of over 40,000 pre-independence disputes and delivering faster justice. For businesses, it introduces single registration and returns, easing compliance in multi-State operations.

Gig and platform workers benefit from clearer dispute mechanisms, while youth gain from mandatory appointment letters, formalizing entry-level jobs and boosting employability. Overall, it balances flexibility for "Make in India" with robust safeguards, projected to spur manufacturing jobs and productivity.

Extending the safety net to gig workers

(c) Code on Social Security, 2020–This flagship Code extends a safety net to India's 460 million unorganized workers, including 23.5 million gig and platform employees.Gig workers like cab drivers, delivery agents and freelancers are now defined as "workers," eligible for life and disability insurance, provident funds and maternity benefits too,via a dedicated welfare board and national database.

Portability is a game-changer as it benefits travel across States and sectors, vital for 10 crore migrants. ESI coverage expands pan-India, even to single-employee hazardous units, with gratuity after one year for FTEs and enhanced pensions. The Aatmanirbhar Bharat Rojgar Yojana subsidizes EPF for new hires, already creating over 6 crore accounts since 2020, mostly for the under-25 age-group.

Women and youth are prioritized with gender-neutral benefits and skilling funds. A single national portal for claims digitizes access, reducing leakages. By formalizing the informal, it lifts living standards, cuts poverty and aligns with SDG goals, positioning India as a leader in inclusive growth.

Setting a new threshold for safety and work conditions

(d) Occupational Safety, Health and Working Conditions (OSHWC) Code,2020– Consolidating 13 laws, this Code sets pan-India standards for safety and amenities. It mandates annual health check-ups, safety officers in factories/mines with 500+ workers, and women’s right to night shifts with transport/safety provisions,thus empowering over 10 crore women in the workforce.

Uniform working hours (maximum 8 hours a day, 48 hours /week) and a single all-India contractor license will end multi-State hassles for labour suppliers. Migrant workers will gain journey allowances and helplines, while creches will expand to employee establishments with more than 50 employees. Penalties for negligence causing fatalities now include imprisonment, thereby deterring violations.The facilitator-led inspections promote proactive compliance, benefiting construction and real estate, by including migrants in benefits. National safety standards and committees foster zero-harm cultures, reducing accidents (down 20% since 2014) and boosting investor confidence.

To cut to the chase, with expanded social security, stronger protections and nationwide portability of entitlements, the Labour Codes place workers, especially women, youth, unorganised, gig and migrant workers, firmly at the centre of labour governance. By reducing compliance burden and enabling flexible and modern working arrangements, the Codes boost employment, skilling and industrial growth, reaffirming PM Modi unflinching commitment to a pro-worker, pro-women, pro-youth and pro-employment labour ecosystem.

Sanju Verma is an economist, National Spokesperson for BJP and bestselling author of "The Modi Gambit"

Views are personal and do not represent the stand of this publication.