India's biggest overhaul of employment law since Independence is now fully in force. The government calls it a guarantee of dignity for every worker. Trade unions call it a deceptive fraud. Both descriptions are doing some work for the side that's saying them. Here's what the four Codes actually change, and an honest, segmented answer to who really comes out ahead — because the truthful answer isn't the same for every worker, or every employer.
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 consolidate 29 separate central labour laws — some dating back to before Independence — into four unified statutes. They were notified into force on 21 November 2025, and the Central Rules that actually operationalise them were notified on 8–9 May 2026. One genuinely important caveat before anything else: labour sits on the Concurrent List, so each state must frame and notify its own rules too. As of mid-2026, only around 11 states — including Madhya Pradesh, Uttar Pradesh, Gujarat, Karnataka, and Haryana — have finalised their rules. Several of India's largest industrial states, including Maharashtra, Tamil Nadu, Kerala, Punjab, Rajasthan, Telangana, Andhra Pradesh and West Bengal, are still working from draft rules. In plain terms: what actually applies to your business right now depends materially on which state you're in, and that patchwork will likely persist for a while yet.
What each Code actually does
The Code on Wages does three big things: it extends minimum-wage protection to every worker in every sector, regardless of the old wage-ceiling distinctions; it sets a national floor wage below which no state can fix its own minimum; and it introduces a new, uniform definition of "wages" requiring that basic pay plus dearness allowance make up at least 50% of an employee's total remuneration. That last point sounds technical, but it is the single change with the most direct effect on individual paycheques, and we'll come back to it in detail.
The Industrial Relations Code is where most of the political heat sits. It formalises fixed-term employment — contracts of typically 6 to 11 months with no obligation on the employer to renew or compensate the worker once the term ends, and crucially, no requirement that the underlying work itself be temporary in nature. It raises the employee-count threshold above which a company needs government permission before laying off or retrenching workers, from 100 employees to 300 — a change with far more practical reach than it might sound, since the large majority of Indian manufacturing establishments employ fewer than 300 people, meaning most factories can now downsize without seeking prior government approval at all. It introduces a "sole negotiating union" mechanism: if one registered union holds at least 30% (an even higher single-union threshold of over 51% is used in some contexts) of workers as members, the employer is required to recognise it as the sole body it negotiates with, effectively sidelining smaller or newer unions. And it tightens the conditions for a lawful strike or lockout — a mandatory 14-day notice, a requirement that the strike begin within 60 days of that notice, and an outright prohibition on striking while conciliation, arbitration, or a settlement is pending, which in practice can cover long stretches of a dispute's life.
The Code on Social Security is where most of the genuinely new protection sits. For the first time, gig and platform workers — the Ola, Uber, Swiggy, Zomato and similar workforce, numbering in the tens of millions — get formal recognition and a path to provident fund and insurance coverage, funded partly through a contribution from aggregator platforms. Fixed-term employees now qualify for gratuity after just one year of service, compared with five years for a permanent employee under the old law. The ESI wage ceiling rises to Rs 21,000, bringing more mid-level workers into health-insurance coverage. And social security accounts become portable across employers and states, addressing a long-standing problem for migrant workers who previously lost continuity of benefits every time they changed jobs or moved cities.
The Occupational Safety, Health and Working Conditions Code mandates free annual health check-ups for workers above 40, crèche facilities at qualifying establishments, mandatory written appointment letters for every worker — including previously undocumented categories like audio-visual workers — and expands the sectors and shifts in which women can legally work, including night shifts, subject to consent and safety conditions. Overtime work must now be paid at double the normal wage rate.
The honest scorecard: who gains, who loses
Trade unions describe the overall package as a shift of power from labour to capital. The government describes it as modernisation and ease of doing business that simultaneously extends protection to workers who never had any. Both claims are partially true, and the more useful exercise is to stop treating "workers" and "employers" as single blocks, because the Codes affect different segments of each very differently.
Gig, platform, and informal workers are the clearest net winners on paper. This is a workforce — the government's own figures put social security coverage in India at just 19% in 2015, now over 64% — that had essentially zero formal protection before. Getting any provident fund or insurance access, even at modest initial contribution rates, is a genuine, measurable improvement for tens of millions of people who had nothing.
Fixed-term and short-tenure contract workers gain a mixed bag: real, meaningful wins like gratuity after one year instead of five, mandatory appointment letters, and a national floor wage — but also legal normalisation of the exact employment structure (repeatable 6–11 month contracts with no renewal obligation) that made their situation precarious in the first place. The Code makes precarious work more humane while making it easier to keep offering, rather than reducing how much of it exists.
Permanent employees at larger organisations — the classic, organised-sector workforce that already had EPF, gratuity, and ESI coverage before any of this — are, on balance, the group with the most to lose and the least to gain. They already had most of the protections the Codes formally extend to others; what changes for them is that their employer's threshold for retrenching without government permission jumps threefold, their union's bargaining leverage is diluted by the sole-negotiating-union rule if a rival union holds a plurality, and their ability to strike lawfully is meaningfully narrowed. Retired Supreme Court and High Court judges who reviewed the Codes have been unusually direct in saying that, taken as a whole, the balance of power has shifted toward employers — a characterisation the government disputes but which is difficult to argue with purely on the retrenchment-threshold and strike-restriction provisions in isolation.
Large employers gain real operational flexibility — easier workforce right-sizing, a much larger pool of companies exempt from seeking permission for layoffs, and a cleaner single-union negotiating structure — but this comes bundled with a genuine cost increase from the wage-definition change (more on that below), so "employer-favourable" doesn't mean "cost-free for employers." It's a trade of flexibility for higher fixed labour cost, not a straightforward employer windfall.
Small and mid-sized employers may be the group facing the most friction relative to their capacity to absorb it. They carry the same compliance obligations — wage restructuring, appointment letters, safety audits, retiral contribution increases — as a large corporate, but typically without dedicated HR, payroll or legal teams to manage the transition. Industry bodies like the Association of Indian Entrepreneurs have specifically flagged this as a disproportionate burden and asked for transitional support, a concern that strikes us as legitimate and somewhat under-discussed relative to the louder employer-versus-union framing.
The one change that touches every single payslip
Whatever side of the broader debate you land on, the Code on Wages' 50% basic-pay rule is the change every salaried employee should actually understand, because it affects take-home pay regardless of sector, seniority, or which state you're in. Under the old convention, many employers kept basic pay deliberately low — often 30–40% of CTC — and pushed the rest into HRA, conveyance, and "special allowances," precisely because provident fund and gratuity are calculated on basic pay, not total CTC. Keeping basic low kept statutory contributions low. The new rule closes that gap directly: if allowances (everything excluded from the formal wage definition) exceed 50% of total remuneration, the excess is automatically added back into "wages" for the purpose of calculating PF, gratuity, ESI, overtime, and statutory bonus.
The practical result, confirmed by payroll data from companies that have already restructured: total CTC generally stays the same, but the split changes — more goes into PF and future gratuity, less lands in the bank account every month. Estimates across payroll advisories put the typical in-hand pay reduction at 2–7%, more for employees whose basic was previously well below the new floor. It is not, strictly speaking, a pay cut — the money isn't disappearing, it's being redirected into compulsory long-term savings the employee will eventually receive, with meaningfully higher gratuity payouts on exit or retirement as the direct upside. But it is a real, immediate reduction in monthly liquidity for a very large share of India's salaried workforce, and it interacts with this year's tax-regime choice in a way that we think is genuinely underappreciated — enough that we've written about it separately, in tomorrow's piece.
This article summarises the Code on Wages, Industrial Relations Code, Code on Social Security, and Occupational Safety, Health and Working Conditions Code as notified and operationalised through Central Rules as of May 2026. State-level rules remain a work in progress in several major states, and applicability should always be checked against your specific state's notified position. This is intended as a plain-language overview, not advice on any specific employer's or employee's situation.