India Implements Consolidated Labour Codes: New Rules on Gratuity, Working Hours, Layoffs and Gig Worker Rights

The Centre on Friday announced the rollout of the new labour codes, a major reform that consolidates 29 existing labour laws into four comprehensive codes aimed at modernising decades-old rules governing factories, workplaces and workers.

According to a PIB release, the government has notified four Labour 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 The move, the Centre said, streamlines compliance, replaces outdated provisions and creates a simplified framework that improves ease of doing business while safeguarding workers’ rights.

The codes—covering wages, industrial relations, social security and occupational safety—will now be implemented uniformly across the country. Importantly, gig and platform workers, who traditionally operate outside formal labour protections, have been included for the first time.

Below are the major changes under each of the four codes:

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Gratuity Eligibility

• Fixed-term employees will now qualify for gratuity after one year of continuous service, instead of the earlier requirement of five years.

• Additionally, 50% of total remuneration (or a notified percentage) will be added back for wage computation to bring uniformity in calculating gratuity, pensions and other social security benefits.

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Revised Working Hours & Overtime

• Establishments may now engage employees for 8–12 hours per day, subject to a 48-hour weekly cap. Current norms limit shifts to nine hours.

• Overtime will be paid at twice the normal wage rate.

• Contractors can now obtain a single, nationwide licence valid for five years, replacing the earlier state-wise licensing.

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Layoff and Retrenchment Rules

Under the Industrial Relations Code, 2020:

• The threshold for government approval on layoffs, retrenchment or closure has been raised from 100 to 300 workers. States may raise this limit further.

• Companies with up to 299 employees can now lay off staff without seeking prior government approval — a major shift from earlier requirements.

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Benefits for Gig and Platform Workers

• Gig and platform work has been formally defined for the first time.

• A social security fund will finance schemes for unorganised, gig and platform workers, covering life, disability, health and old-age benefits.

• The government may use proceeds from compounding of offences to extend these benefits.

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Work-from-Home Provision

• To promote workplace flexibility, the codes incorporate provisions for work from home in service sectors through mutual consent.

• The norm gained prominence during the pandemic and continues under hybrid work models.

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Minimum Wages for All Workers

• A statutory floor wage will be set by the Centre based on minimum living standards, with room for regional variations.

• No state may set minimum wages below this floor.

• All workers—whether in the organised or unorganised sector—will be entitled to minimum wages.

• New rules ensure timely payment of wages and restrict unauthorised deductions.

• Definition of wages is also streamlined to include basic pay, dearness allowance and retaining allowance.

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Gender Inclusivity

• Women are now allowed to work night shifts, subject to safety measures—replacing earlier restrictions in many states.

• Maternity benefits, including 26 weeks of paid leave, are extended to women workers in the unorganised sector.

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Social Security Enhancements

• The Social Security Code expands benefits to all categories of workers, including those in the unorganised, gig and platform sectors.

• Coverage includes life insurance, health insurance, maternity benefits and provident fund access.

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Benefits for Migrant Workers

Inter-state migrant workers will now receive:

• A lump-sum annual travel allowance to return to their native place once every 12 months.

• Portability of PDS benefits across states.

• Access to a dedicated toll-free helpline.

• Employers must declare the number of inter-state migrant workers engaged directly or through contractors.