With the implementation of the four new labour codes, the subtle yet imperative changes to India’s compensation structure cannot be ignored. From universal social security coverage to minimum wage requirements, employees and employers both need to be aware of not only their rights but also the new responsibilities that come with them.
Effective as of November 21, 2025, the four labour codes are intended to help realise the Indian government’s Aatmanirbhar Bharat dream. The aim behind the implemented changes is to help the legal system keep up with the country’s modern workforce and provide world-class benefits worthy of a growing economy.
The Widespread Effect
As per George Thomas, Group Chief Human Resources Officer at MSP Steel, the execution and effects of these codes will only be evident once different state governments adjust their frameworks as per the directives. Furthermore, Thomas highlighted that these codes are not exactly new and that his company is already mostly compliant with the requests.
The compiled codes present a plethora of changes for both employers and employees. From changes in how healthcare mandates are to how salaries should be decided, the government is indeed looking to overhaul what compensation means in modern Indian workplaces.
The social security aspects of the codes, particularly pertaining to the unorganised sectors, have certainly captured headlines. This is particularly effective for those in heavy labour industries such as steel, manufacturing, and power.
For some companies, this might result in an overhaul of the compensation structure. However, for others, it might just be a task of tweaking certain aspects of a framework that is already geared towards employee welfare.
What these new codes bring is a sense of obligation and duty. Employers now have to ensure that their employees, regardless of their work, are paid properly and enjoy benefits such as health insurance and pensions.
Not Just About Full-Timers
The compensation changes introduced in the four labour codes will significantly impact Fixed Term Employees (FTEs), gig & platform workers, and unorganised labour. From assured one-year gratuity for FTEs to a social security allocation for platform workers, the codes have done their level best to ensure that no part of the Indian workforce is left behind.
“For the first time, India’s gig and platform workers move from being invisible to being visible and protected — they keep their flexibility, but now with a real safety net and greater accountability from platforms,” said Deepti Manchanda, Head – HR and Business Partner at Classic Informatics.
“At the same time, fixed-term and contract workers see a major upgrade: gratuity after one year, PF and ESI access, and equal pay standards are no longer perks – they are rights.”
The new labour codes mark a new and better beginning for those within non-traditional working environments. With their increasing importance and contributions to the Indian economy, it is indeed high time to provide them with job security and accountability as India’s traditional workforce.
New in Social Security Coverage
The Code on Social Security (COSS), 2020, has mandated that all workers, whether full-time, contractual, gig, or platform, are entitled to social security coverage. These include benefits like life and disability insurance, health and maternity care, provident fund, and gratuity.
One of the most impactful changes is for Fixed Term Employees (FTEs) who are now eligible for gratuity after one year of continuous service. Previously, they had to have been working for a company for five years.
The COSS also mandates the creation of the Social Security Fund. This will be based on contributions from the central and state Governments, collected from Corporate Social Responsibility (CSR), fines collected due to compounding, etc.
Some of the more significant changes to be seen under the new codes include:
- The Employees’ Provident Fund (EPF) applies to all establishments with 20 or more employees, regardless of industry type.
- A National Database of Unorganised Workers to help design and deliver social security benefits for specific worker groups.
- Employees’ State Insurance Corporation (ESIC) is now applicable across India. Plantation owners are not covered by ESIC Schemes but can join voluntarily.
Where it was once not a legal requirement for employers to provide free annual health check-ups to workers, employers are now mandated to provide all workers aged 40 or older with a free annual health check-up.
Furthermore, the COSS has expanded the definition of “family” to increase the coverage of family members eligible for ESIC benefits. As per the new definition, the mother-in-law and father-in-law of a woman employee are now considered part of the family. Similarly, a minor sibling wholly dependent on the insured person, if the parents are not alive, is also eligible for benefits.
The new guidelines and definitions regarding social security coverage have brought a new wave of relief for many. This is especially true for gig workers and those in the unorganised sector, who have often struggled to access social security benefits.
The Wage Impact
As per Code on Wages (COW), 2019, both wage rates and dates have been modified in an effort to uplift the living standard of India’s working population. The initiative to make wage norms universal, irrespective of industry and working style, has been lauded by many and is sure to bring uniformity to India’s economy.
The term wage itself has been given a new definition that states that “wage” refers to all remuneration whether by way of salary, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and
includes,—
(i) basic pay
(ii) dearness allowance; and
(iii) retaining allowance, if any
The COW established a Universal Minimum Wage that is applicable to all those in organised and unorganised sectors. Earlier, it was applicable only to about 30% of workers in India.
This will be done with the central government establishing a statutory floor wage based on minimum living standards. No state will be allowed to fix their minimum wage below the floor wage.
The minimum wage will be decided taking into account
- Workers’ skill levels: Unskilled, skilled, semi-skilled and highly skilled
- Geographic areas
- Job conditions: Temperature, humidity, or hazardous environments
Overtime workers will be paid double their normal wages. Additionally, the COW has mandated that employees must be paid wages in a timely manner. For IT & ITES workers, employers must release their salaries by the 7th of every month.
These changes ensure that all workers receive wages that allow them to live a life with dignity. The standardisation of wages and commitment to their timely distribution have become key to ensuring that employees are paid their fair share.
Final Thoughts
The changes introduced in the compensation structure of India through the new labour codes are both sweeping and crucial. The new definitions and guidelines ensure that India’s diversified workforce, no matter the sector or location, is compensated fairly.
The dream of a happy workforce begins with one that feels valued and compensated. The new initiatives are but a step towards achieving the same. After all, health, wealth, and skills are all crucial to create a functioning economy.
