India’s Biggest Labour Reform in 75 Years: New Labour Codes to Change Salary Structure, PF, Job Rules

India is preparing for a historic overhaul of its labour laws as the long-awaited four Labour Codes move closer to nationwide implementation. Considered the biggest labour reform in the last 75 years, the new framework aims to simplify compliance, increase worker protection, and modernise India’s employment ecosystem — but not without major changes to salaries, retirement benefits and job security.

For decades, India’s labour rules were scattered across 29 separate laws, each with its own definitions and compliance procedures. To eliminate confusion and streamline the system, the government consolidated them into four comprehensive codes:

1. Code on Wages
2. Industrial Relations Code
3. Social Security Code
4. Occupational Safety, Health & Working Conditions (OSH) Code)

These codes touch nearly every segment of India’s workforce — from full-time employees and contract labour to gig and platform workers — and will determine take-home salary, PF contributions, safety norms, and how easily companies can hire or fire.

Key Changes Under the New Labour Codes

✔ Higher PF, Lower Take-Home Salary

The new definition of “wages” mandates that basic salary must be at least 50% of total compensation.
This will increase PF and gratuity contributions but reduce monthly take-home pay for many employees.

Example:

• Old basic: ₹35,000 → PF = ₹4,200
• New basic: ₹50,000 → PF = ₹6,000
  Employees gain in retirement fund, but monthly income drops.

✔ Easier Layoffs for Companies

The Industrial Relations Code allows firms with up to 300 workers (earlier 100) to lay off or close operations without prior government approval.
Businesses say this improves flexibility; unions say it weakens job security.

✔ Gig Workers Recognised for the First Time

The Social Security Code brings gig and platform workers (Swiggy, Zomato, Uber, Ola, etc.) under formal welfare schemes.
Aggregators must contribute to a central fund, but implementation rules remain unclear.

✔ Gratuity After 1 Year (For Fixed-Term Workers)

Fixed-term employees can now earn gratuity after one year, instead of the earlier five.

✔ Better Safety & Working Condition Rules

Even micro-units with just one worker must follow safety norms under the OSH Code.
Women are allowed to work night shifts with proper safety measures.

✔ Faster Salary Payment

IT and ITES companies must pay salaries within the first week of every month.

✔ Impact on State-Level Wages

A national floor wage will require some states to increase minimum wages, potentially raising labour costs for employers.

Why It Matters

The reforms aim to balance two goals:

• More flexibility for employers → easier hiring, scaling, and restructuring
• More security for workers → stronger benefits, safety, and legal clarity

But the trade-off means:

• Salaried employees may see reduced take-home pay
• Industry may gain greater operational freedom
• Gig workers get long-awaited recognition
• Implementation depends on how quickly states enforce the rules

India’s labour market is being rebuilt for a modern, digital economy — but the impact will vary until the codes are fully rolled out across states.