India's sweeping labor law overhaul, implemented on November 21, 2025, has ignited a heated debate, pitting proponents of economic reform against those championing workers' rights. The Narendra Modi government hails the four new labor codes as a crucial step towards simplifying regulations, attracting investment, and boosting economic growth. However, trade unions and opposition parties decry the changes as a rollback of hard-won worker protections, paving the way for corporate exploitation.
The overhaul consolidates 29 existing central labor laws into four codes: the Code on Wages (2019), the Industrial Relations Code (2020), the Code on Social Security (2020), and the Occupational Safety, Health and Working Conditions Code (2020). The government aims to streamline labor regulations, reduce the compliance burden on businesses, and extend social security benefits to a wider range of workers, including those in the gig economy. The Ministry of Labour and Employment emphasizes that the codes prioritize workers, especially women, youth, and migrant workers, placing them "firmly at the centre of labour governance".
One of the most significant changes is the introduction of a national floor wage, which aims to establish a minimum wage standard across the country, benefiting workers in unorganized sectors. The codes also address gender equality by explicitly extending "equal pay for equal work" to all genders, including transgender persons, and strengthening protections for women working night shifts. Moreover, fixed-term employees now become eligible for gratuity after one year of service, a significant reduction from the previous requirement of five years.
However, concerns remain regarding the potential erosion of job security and the weakening of collective bargaining power. A key point of contention is the increase in the threshold for firms requiring prior government approval for layoffs, from 100 to 300 workers. This change grants companies greater flexibility in workforce management but raises fears of increased retrenchment without adequate safeguards.
Trade unions argue that the codes make it more difficult for workers to strike and easier for companies to fire employees. They also criticize the formal recognition of "fixed-term employment," which allows employers to hire workers for specific durations, potentially undermining permanent tenure. Critics also point out that the codes were passed and notified without proper consultation with trade unions, violating ILO conventions.
Another significant impact of the new codes is the mandate that basic salary must constitute at least 50% of an employee's total cost-to-company (CTC). This rule increases mandatory contributions to provident fund (PF) and gratuity, leading to a lower monthly take-home salary for many employees. While this change aims to enhance long-term social security and retirement savings, it has raised concerns about reduced disposable income in the short term.
Despite the controversies, the government emphasizes the benefits of the reforms, including simplified compliance for employers, enhanced social security for gig workers, and improved safety standards. The codes also introduce a unified framework for registration, licensing, and compliance filings, aiming to create a more predictable and transparent regulatory environment. Furthermore, the reforms recognize the increasing prevalence of work-from-home arrangements and aim to provide a framework for this model of employment.
As India navigates this significant labor law overhaul, the debate between reform and rights continues. The effective implementation of these codes will be crucial in determining whether they truly promote economic growth and worker welfare, or lead to increased exploitation and insecurity.
