New Labour Code – The work culture in India is about to experience a major overhaul with the introduction of the New Labour Code 2025. This set of reforms is designed to simplify the outdated labor laws that have been in place for years and introduce modern practices that align with global standards. From the possibility of a four-day workweek to changes in salary structures, employee benefits, and work conditions, the New Labour Code brings in a wave of changes that will have a big impact on both employees and employers across various sectors.
What Exactly is the New Labour Code 2025?
The New Labour Code consists of four key laws that combine and replace 29 existing regulations. These four laws are:
- Code on Wages
- Industrial Relations Code
- Occupational Safety, Health, and Working Conditions Code
- Social Security Code
These reforms aim to simplify the entire compliance process, ensure better worker welfare, and bring India’s labor laws in line with international norms.
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What’s New in the Code?
Some of the most significant changes introduced by the new code are the 4-day workweek, revised salary structures, and changes in leave policies, along with safety measures for workers.
The 4-Day Workweek
One of the most exciting changes is the proposal for a 4-day workweek, which has been the subject of much discussion. Although the shift to a 4-day week won’t reduce the total number of weekly working hours, it allows employees to complete the standard 48-hour workweek in fewer days. Here’s how it works:
- Companies will have the option to offer employees the choice to work 4, 5, or 6 days a week, depending on mutual agreement.
- Employees working 4 days will need to work 12 hours each day to complete the full 48 hours in the week.
- While the 4-day workweek is not mandatory, it gives companies more flexibility and allows employees to enjoy an extended weekend, provided they can handle longer workdays.
Work Week Comparison: 4 Days vs 5 Days vs 6 Days
- 4 Days: Employees will work 12 hours each day, maintaining the total weekly hours of 48. This might impact leave days and could be a high point for work-life balance.
- 5 Days: A more typical 9.6 hours of work per day, still totaling 48 hours a week. The work-life balance here is moderate, making it a balanced option for many.
- 6 Days: A standard 8 hours per day, totalling 48 hours for the week. This is the most traditional option, with low work-life balance benefits.
Higher PF Contributions, Less Take-Home Pay
Along with the changes in workweek structure, the New Labour Code also overhauls the salary structure in a big way. Under the new rules, companies will need to increase the basic salary of their employees to at least 50% of the total CTC (Cost to Company). The goal is to provide a clearer and more standardized wage structure, but the downside for some employees is that this could lead to a decrease in their take-home salary due to higher contributions to provident fund (PF) and gratuity.
For example, if your basic salary increases, your PF and gratuity contributions will also increase, which means the amount you take home after deductions might be lower, but it helps you save for retirement and secure better benefits in the long term.
Overtime and Leave
The New Labour Code introduces several changes around overtime and leave policies, making them more employee-friendly. Some of the key updates include:
- Overtime: The overtime limit has been increased to 125 hours per quarter, compared to the old limit of 50 hours. This gives employees more opportunities to earn extra income.
- Leave: The code introduces a more structured approach to leave. Employees will now be entitled to one day of leave for every 20 days worked. Additionally, the carry-forward of unused leave will be capped at 30 days.
- Settlement After Resignation: Employers are now required to complete full and final settlements within 2 days of an employee’s resignation. This is a significant improvement from the previous, often lengthy process.
More Coverage for Workers
Perhaps one of the most important reforms is the expansion of social security benefits. The new code ensures that more workers, especially those in the gig and platform economy (like delivery drivers and freelance workers), will now receive benefits such as maternity, health coverage, and disability support.
This also includes more comprehensive coverage through Employee State Insurance (ESI) and Employees’ Provident Fund (EPF), even for workers in sectors that were previously not covered under social security benefits. In addition, gig workers who are part of companies like Zomato, Swiggy, or Uber will now have access to essential benefits such as healthcare and retirement savings.
Who Benefits the Most?
These changes will benefit several groups:
- Young professionals who are looking for a better work-life balance, especially with the option of a 4-day workweek.
- Workers in sectors like IT, telecom, and the creative industries, where flexible working hours and work-from-home options are already popular.
- Gig and platform workers, who have traditionally lacked basic benefits, will now be entitled to more protections.
- Women employees, who will benefit from better maternity and safety benefits.
- Workers nearing retirement, as the higher gratuity contributions will ensure better financial security in their later years.
What Employers Need to Do
Employers will have to adjust to the new code by restructuring their payroll systems to comply with the new wage structure, updating HR policies regarding work hours, overtime, and leave, and ensuring that all employees are registered under the national social security portal.
A Step Toward a More Modern Workforce
The New Labour Code 2025 represents a major shift in India’s work culture. It emphasizes employee welfare, work-life balance, and a more transparent approach to salary and benefits. While it might take some time for both employers and employees to adjust to the new rules, these changes are a step toward creating a modern, more efficient workforce. With improved benefits, better work hours, and enhanced social security, the future of work in India looks brighter and more inclusive than ever before.