On November 21, four labour codes replaced 29 older laws. A new definition of “wages” means more goes to provident fund and gratuity, take-home pay may dip slightly, and gig workers enter the social security net.
Five years after Parliament passed them, India’s four labour codes took effect on November 21. They replace 29 separate laws, some dating to the colonial era, with four: a Code on Wages, an Industrial Relations Code, a Code on Social Security and an Occupational Safety, Health and Working Conditions Code. The most immediate change most salaried workers will notice is not on a factory floor. It is on the salary slip.
The 50% rule
Indian employers have long kept basic pay low and paid the rest of a salary as allowances, because contributions to provident fund and gratuity are calculated on basic pay. The new codes set a single definition of wages and cap allowances, so that basic pay must be at least half of total pay. Higher basic pay means larger PF contributions from both employee and employer, and a bigger gratuity at the end of service. The trade-off is that monthly take-home pay can dip slightly for some workers, even though their total compensation has not changed.
Gig workers enter the net
The biggest structural change is for the gig economy. Delivery riders, cab drivers and other platform workers had no formal social security because they are not employees in the legal sense. The Code on Social Security creates a fund for them, financed partly by aggregator companies, which must contribute a small share of their turnover. It is the first time Indian law recognises platform work as a category of its own.
A salary is not just what lands in the account. It is also what lands in the provident fund, and that share just went up.
What else changes
Every worker is entitled to a written appointment letter. Women can work night shifts with their consent and adequate safety arrangements. Employers must offer free annual health check-ups to workers over 40. On the business side, firms with up to 300 workers can now lay off staff or close without prior government permission, up from 100, which employers say will encourage hiring and unions say will weaken job security. The detailed rules are still being finalised, so expect payroll departments to spend the next few months recalculating everyone’s pay.
Sources: Ministry of Labour and Employment notifications, November 21, 2025.
- The four codes cover wages, industrial relations, social security, and occupational safety.
- Basic pay must now be at least half of total pay, which raises provident fund and gratuity contributions.
- Fixed-term employees qualify for gratuity after one year instead of five.
- Gig and platform workers, such as delivery riders, are brought under social security for the first time.
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