India’s long‑awaited labour reforms have finally come into effect, promising to transform the way employees are paid, protected, and treated at work. The four consolidated labour codes replace 29 existing laws, aiming to simplify compliance while strengthening worker welfare.
One of the most significant changes is in gratuity eligibility. Previously, employees had to complete five years of continuous service to qualify. Under the new rules, fixed‑term and contract workers will now be eligible after just one year. This move is expected to benefit millions of short‑term employees who often missed out on long‑term benefits.
The codes also introduce flexibility in working hours. While the weekly cap remains at 48 hours, employees may now opt for a four‑day work week. Overtime must be voluntary and compensated at double the regular rate, ensuring fairer treatment and clearer schedules.
Perhaps the most talked‑about change is in salary restructuring. Employers must ensure that basic pay plus Dearness Allowance (DA) accounts for at least 50% of the total salary. This adjustment will likely reduce monthly take‑home pay but increase contributions to Provident Fund (PF) and gratuity, boosting long‑term savings and retirement security.
Another employee‑friendly reform is the reduction in paid leave eligibility. Workers will now qualify after 180 days of service, down from the earlier 240 days. This change expands access to leave benefits, particularly for newer employees.
The rules also mandate faster full and final settlements. Companies must clear dues within two working days of an employee’s departure, compared to the earlier 30–60 day window. This ensures smoother transitions and financial stability for departing staff.
In a landmark move, the codes extend social security coverage to gig workers, freelancers, and platform workers. For the first time, these categories will be included under PF, ESI, insurance, and other welfare schemes, reflecting the growing importance of India’s digital and informal workforce.
Experts believe the reforms will make workplaces more transparent and employee‑friendly, though employers will need to adapt payroll systems and compliance mechanisms. Trade unions have raised concerns about reduced bargaining power and potential ease of layoffs, but the government insists the changes strike a balance between worker protection and business efficiency.
Overall, the new labour codes mark a historic shift in India’s employment landscape. By expanding benefits, ensuring faster settlements, and aligning pay structures with global standards, they promise to create a more secure and inclusive workforce for the future.
