India's labor landscape has undergone a significant transformation with the implementation of four new labor codes, effective November 21, 2025. These codes consolidate 29 existing labor laws, aiming to simplify compliance, enhance worker protections, and modernize the regulatory framework to align with the evolving economic and industrial landscape. The changes cover a wide range of aspects, including gratuity, minimum wages, work-from-home (WFH) arrangements, and worker safety.
Gratuity
One of the most notable changes is the revised gratuity rule. Previously, employees were eligible for gratuity only after completing five continuous years of service with an organization. The new labor codes reduce this requirement to one year for Fixed Term Employees (FTEs). This change aims to provide FTEs with benefits on par with permanent staff, including access to salary structures, leave, medical benefits, and social security. This reform is expected to reduce the over-reliance on contract staffing and encourage more transparent, direct hiring. The gratuity amount is calculated using the formula: Last drawn salary × (15/26) × Number of years of service. The ceiling for tax-free gratuity has been retained at ₹20 lakh. Employers will need to update payroll and HR policies and reassess gratuity liabilities.
Minimum Wages
The new labor codes introduce universal minimum wages for all employees across organized and unorganized sectors. The government will set a statutory floor wage based on minimum living standards, and no state can fix wages below this benchmark. This aims to provide a uniform legal safeguard across the country, reducing wage disparity and benefiting worker groups like casual employees, daily wagers, and migrant laborers. The codes also mandate gender equality, prohibiting discrimination in hiring, wages, or employment terms for similar work. Overtime compensation must be paid at twice the normal rate.
Work From Home (WFH)
The new labor codes formally recognize work-from-home arrangements, particularly in the service sector, with mutual consent between employers and employees. This provides legal recognition to a model that gained prominence during the COVID-19 pandemic. The new WFH law also requires clearer documentation of employee work hours to prevent wage disputes and ensures remote workers receive the same wage protections as on-site staff. Employees working remotely on a full-time basis must receive reimbursement for necessary job-related expenses, including internet costs, required office equipment, and ergonomic chairs. The law introduces new cybersecurity requirements to protect sensitive company data accessed from home environments.
Worker Safety
The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020, expands safety rules and definitions. The definition of migrant workers has been widened, and all digital and audio-visual professionals are included under formal protections. The government can now extend safety provisions even to establishments with a single employee if the work is hazardous. Accidents during commutes, under specific conditions, will now be treated as employment-related. Mandatory annual health check-ups become standard in several industries for workers above the age of 40. Women are allowed to work night shifts across all sectors, including mining and hazardous occupations, provided consent is given and safety measures are in place. The codes also emphasize the formalization of employment through mandatory appointment letters, detailing job roles, wages, and social security.
