How new labour codes will impact employees' take-home pay

Four new codes – Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020) and the Occupational Safety, Health and Working Conditions (OSHWC) Code (2020) – formally came into effect from November 21, 2025.

The Union government on November 21, 2025, (Friday) announced the implementation of four consolidated labour codes that seek to build a future-ready labour ecosystem by promoting formalisation, expanding social security and boosting women’s participation.

Four new codes – Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020) and the Occupational Safety, Health and Working Conditions (OSHWC) Code (2020) – formally came into effect from Friday, around five years after being passed by the Parliament.

Through this move, 29 labour laws have been consolidated in four codes.

“These codes will serve as a strong foundation for universal social security, minimum and timely payment of wages, safe workplaces and remunerative opportunities for our people,” Prime Minister Narendra Modi said in a post on X.

The new rules allow companies to run longer factory shifts. The approval limit for lay-offs has been increased from 100 to 300 workers. This means, companies won’t need any authority approval for firing up to 300 employees. States have been given flexibility to further enhance this limit.

Under the new regulations, women will be permitted to work night shifts across all industries including mining, heavy machinery and hazardous sites.

Under the new regulations, all workers, regardless of sector, will receive a statutory minimum wage aligned to a national floor rate, along with mandatory timely wage payment and no unauthorised deductions.

The codes further provide for national safety standards, mandatory safety committees in units with 500+ workers and streamlined dispute resolution via two-member industrial tribunals.

The codes direct gender equality, prohibiting discrimination in hiring, wages or employment terms for same work, universal wage payment coverage ensuring timely payments, prevention of unauthorised deductions for employees earning up to Rs 24,000, over time compensation be paid twice the normal rate.

Following is why and how CTC, take-home pay and gratuity will change after the implementation of the four new labour codes:

1 - Mandatory retirement contributions, including provident fund and gratuity payments, after implementation of Code on Wages.

2 - Employees' basic salary must constitute at least 50 per cent of their total cost-to-company (CTC).

3 - Higher contributions as both PF and gratuity calculations are based on an individual's basic pay.

4 - Enhanced retirement benefits for workers, but reduced take-home pay due to increased contributions.

5 - PF contributions are set at 12 per cent of basic salary and increasing allowances to reduce obligations towards retirement benefits and gratuity.

6 - Higher retirement savings will come at the cost of lower take-home pay as contributions increase within the same CTC.

(With PTI inputs)