Quick summary
With the Labour Codes now implemented, India has consolidated 29 central labour laws into four Codes that cover wages, industrial relations, social security and workplace safety, with the Code on Wages, 2019 unifying all core rules around minimum wages, payment of wages, equal remuneration and bonus. The new framework promises broader coverage for workers, clear definitions for wages, and simpler digital‑friendly compliance for employers, while retaining strong enforcement, penalties, and time‑bound dispute resolution.
How the four Labour Codes fit together
The Government has brought into force four integrated 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). These Codes collectively replace and rationalise 29 separate central labour statutes, many of which dated back to the mid‑twentieth century and were criticised for overlapping definitions and rigid compliance rules.
The policy goal is to increase formalisation, expand social security, and align Indian labour regulation with contemporary economic realities and global standards, while supporting ease of doing business. Implementation will be backed by digital systems, a single registration‑licence‑return architecture, and greater use of online inspections under an "Inspector‑cum‑Facilitator" model.
| Old framework | New Labour Codes | What changes in practice? |
|---|---|---|
| 29 central labour laws with multiple overlapping definitions and authorities. | 4 unified Labour Codes: Wages, Industrial Relations, Social Security, OSH & Working Conditions. | Fewer laws and authorities, harmonised definitions, and consistent standards across sectors. |
| Minimum wages applied only to scheduled employments, leaving most workers uncovered. | Minimum wages and National Floor Wage extend to all employees across organised and unorganised sectors. | Universal statutory right to minimum wages, with States barred from going below the floor wage. |
| Fragmented payment of wages, bonus and equal remuneration laws with different thresholds and procedures. | Single Code on Wages governing payment of wages, minimum wages, bonus and equal remuneration. | Uniform timelines, definitions and enforcement, easier for HR and payroll teams to implement. |
| Multiple registration, licences and returns across Acts and inspector‑driven enforcement. | Single registration and licence, unified return and Inspector‑cum‑Facilitator with tech‑enabled inspections. | Lower compliance overhead and more guidance‑oriented inspections, while retaining penalty powers. |
| Limited coverage of gig, platform and certain informal workers under social security and wage laws. | Gig/platform workers recognised and brought within social security and wage‑related protections under the Codes. | Improved access to contributory schemes and portability of benefits via Aadhaar‑linked accounts. |
Inside the Code on Wages, 2019
The Code on Wages, 2019 consolidates four earlier statutes—the Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965, and Equal Remuneration Act 1976—into one comprehensive law. It applies to almost all employees and establishments, cutting the number of separate rules and registers dramatically and giving employers a single, unified framework for wage‑related compliance.
The Code defines "wages" using a standard formula centred on basic pay, dearness allowance and retaining allowance, with a cap on excluded allowances at 50% of total remuneration—any excess must be added back into wages for statutory calculations. This structure increases the wage base for social security and gratuity, which can mean higher long‑term benefits for employees but potentially lower take‑home pay where allowances were previously inflated.
Minimum wages and National Floor Wage
Under the Code, all employees—across organised and unorganised sectors—gain a statutory right to minimum wages, ending the "scheduled employment" approach that covered only about one‑third of the workforce earlier. Appropriate governments must set minimum wages by hour, day or month, taking into account worker skill level, geography, and the arduousness or hazardous nature of work, and review them at intervals not exceeding five years.
A key innovation is the National Floor Wage, which the Central Government must fix based on minimum living standards and may vary by region, with States legally barred from setting minimum wages below the notified floor for their areas. States with higher existing rates cannot reduce them, so the floor wage works as a one‑way guardrail against downward wage competition.
Equal pay and gender‑neutral rules
The Code prohibits discrimination on the ground of gender in wages and recruitment for the same or similar work, while explicitly including transgender persons within the scope of equal treatment. Employers cannot respond to the non‑discrimination requirement by cutting the wages of any employee, and disputes over what counts as the same or similar work must be decided by an authority notified by the government.
Advisory Boards at the central and state level must include at least one‑third women, increasing female representation in wage‑setting and policy decisions. The broader Labour Codes also allow women to work at night and in more occupations—including in mining and hazardous industries—subject to consent and safety conditions, which is intended to expand women's participation and earning potential.
Payment of wages: timelines and methods
The Code standardises payment timelines: daily‑rated employees must be paid at the end of the shift, weekly‑rated on the last working day of the week, fortnightly‑rated within two days, and monthly‑rated before the seventh day of the following month. In cases of termination, dismissal, resignation, retrenchment or closure, all dues must be settled within two working days, reducing the risk of prolonged wage withholding after separation.
Employers may pay wages in cash, by cheque, or by crediting the employee's bank account, including via digital or electronic modes, and governments can mandate non‑cash payment for specified establishments. The Code caps total authorised deductions—including fines, absence, and recovery of advances—at 50% of wages per pay period and clarifies that employees are not liable if the employer fails to deposit deducted statutory contributions.
Bonus entitlements and ceilings
The Code retains the concept of a statutory annual bonus for eligible employees who have worked at least 30 days in an accounting year, with the minimum set at 8.33% of wages earned or a notified amount (such as 100 rupees), and the maximum at 20%. Eligibility and calculation thresholds are tied to wage ceilings to be prescribed by appropriate governments, ensuring that bonus coverage remains focused on lower‑paid employees.
The Code sets out detailed rules for computing gross profit, available surplus, and set‑on/set‑off across accounting years, so that employers carry forward excess allocable surplus or deficiency for up to four years when calculating bonus obligations. It also allows adjustment of customary or interim bonus against the statutory bonus and permits deductions from bonus amounts for proven misconduct‑related losses.
Enforcement, claims and penalties
Enforcement moves to an Inspector‑cum‑Facilitator model, where officials both inspect and advise establishments, with scope for web‑based and randomly selected inspections to improve transparency. Inspectors can examine persons, seek information, and search or seize wage records, but must also focus on guidance and awareness rather than only punitive action.
Employees, trade unions or Inspectors can bring wage and bonus claims before a designated Authority, which has expanded powers and can award compensation up to ten times the claim amount. The limitation period for claims extends to three years, the burden of proof that dues were paid lies on the employer, and penalties for under‑payment or repeated offences include steep fines, potential imprisonment and limited scope for compounding.
What this means for employers and workers
For employers, the main operational changes are the harmonised wage definition, mandatory appointment letters, uniform minimum‑wage and payment timelines, expanded record‑keeping and a single registration/licensing process under the Labour Codes. Payroll structures with very high allowances relative to basic pay may need redesign to comply with the 50% exclusion cap, and systems must support faster final settlement and electronic wage payments.
Workers benefit from a universal right to minimum wages, a national floor wage, stronger gender‑neutral protections, expanded bonus and social security coverage, and better access to enforcement with longer limitation periods and stronger employer‑side obligations. The Codes are particularly significant for women, youth, gig and migrant workers, who gain more formal recognition and clearer entitlements in India's evolving labour market.
Important: This blog explains the structure and intent of the Labour Code 2025 rollout and the Code on Wages, 2019 in plain language and does not constitute legal advice; specific compliance decisions should be taken with professional legal or HR counsel.