Government Activates Labour Codes in Major Reform Aimed at Modernising Worker Rights

In a significant move described as one of the most far-reaching labour reforms in independent India, the government on Friday announced that all four national Labour Codes are being brought into immediate effect.

With this decision, 29 central labour laws that have existed for decades in a fragmented, overlapping and often outdated framework now stand consolidated into a modern regulatory structure aimed at simplifying compliance, expanding social security, and aligning India’s labour market with contemporary economic realities.

Labour Minister Mansukh Mandaviya confirmed at a press conference that the Codes are “now the law of the land”, marking the culmination of a reform process that has been under discussion for several years.

The Labour Ministry, in its detailed statement issued shortly after the announcement, said the new regime marks a decisive shift away from a patchwork of legislations dating back to the 1930s, 1940s and early decades after Independence. According to the ministry, while many major economies updated their labour frameworks to account for new technology, new forms of work, and changing employer-employee relationships, India continued to operate under provisions that were often repetitive, opaque, or misaligned with the demands of an expanding and increasingly mobile workforce.

The consolidation 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 is positioned as a transformative policy shift.

The government has emphasised that the restructured framework seeks to balance worker protection with industry flexibility.

Much of the public interest, however, centers around what these changes mean for the everyday worker. A large part of the ministry’s explanation highlights how different categories of workers, fixed-term employees, gig and platform workers, contract workers, women in the workforce, young entrants and workers employed in micro, small and medium enterprises stand to benefit from these reforms.

One of the biggest transitions relates to fixed-term employment, which has grown sharply over the last decade as companies seek specialised short-term skills without entering into long-term commitments.

Under the new codes, fixed-term employees must receive all benefits on par with permanent workers, including leave entitlements, medical benefits, social security and access to welfare schemes. The most notable shift is that workers employed on a fixed-term basis will now become eligible for gratuity after completing one year of service, rather than the earlier requirement of five years of continuous employment.

The government argues that this will curb excessive contractualisation and instead incentivise direct hiring, which in turn gives workers better wage structures and formal protections.

The Social Security Code brings gig workers and platform workers such as delivery partners, taxi-app drivers, and freelance digital service providers, within the scope of a statutory welfare and security framework for the first time in India. The Code defines gig and platform work, recognises aggregators as a distinct category of employers, and mandates contributions from them amounting to 1 to 2 percent of annual turnover, capped at 5 percent of the total payouts made to workers.

The introduction of an Aadhaar-linked Universal Account Number is intended to make benefits fully portable, especially since many gig workers move across states or platforms. This portability, according to the ministry, ensures that workers are not tied down by geographic or organisational boundaries and can still maintain a cumulative benefits history.

Contract workers, long considered one of the most vulnerable segments of the labour ecosystem, receive several important protections under the new legal regime. Their employers will now be required to provide social security benefits, health benefits, and free annual health check-ups.

In addition, since fixed-term employees are expressly placed on an equal footing with permanent staff, the government expects a decline in exploitative contracting practices and a more structured approach to the use of contract labour.

Women workers are positioned as key beneficiaries of the reforms. The Codes prohibit discrimination on the basis of gender and reinforce equal pay for equal work. Women will now be permitted to work night shifts or in sectors that earlier excluded them, including underground mining and operations involving heavy machinery, but only with their consent and with compulsory safety measures in place.

Further, organisations must ensure representation of women on internal grievance-redressal committees.

The definition of “family” for female employees has also been expanded to include parents-in-law, broadening dependent coverage and offering greater support to married women who shoulder joint family responsibilities.

Young workers and new entrants to the workforce are assured a minimum wage, appointment letters and payment of wages during leave. The government’s rationale is that a guaranteed floor wage determined by the Centre will help ensure a basic standard of living across sectors.

For workers employed in MSMEs, the Codes guarantee minimum wages, canteen facilities, drinking water, rest areas, standard working hours, double wages for overtime and timely wage payments. The ministry has explained that these provisions aim to ensure that the push for MSME growth does not come at the cost of worker well-being.

The implementation of the four Codes marks a structural shift whose impact will unfold in the months ahead. While industry groups are assessing the compliance requirements under the new framework, unions and worker groups are examining how the transition will play out on the ground.

What remains clear is that India’s labour regime has formally entered a new phase one that seeks to streamline regulation, widen protections and prepare the workforce for a rapidly evolving economic landscape.

Inputs from ETNOW