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Based on recent reports from major Indian business publications, India has implemented a major restructuring of its labour system by consolidating 29 separate labour laws into four unified labour codes. The Code on Wages, the Code on Social Security, the Industrial Relations Code and the Occupational Safety, Health and Working Conditions Code represent the most significant shift in India’s labour framework in many years. These reforms are currently among the most searched topics across Indian employees, HR teams and global companies hiring in India.
The new laws aim to improve worker protections, expand social security coverage and simplify compliance for employers. However, they also introduce important changes in salary structure, take home pay, employer contributions and benefits.
Key Changes Introduced Under the New Labour Codes
A standard definition of wages
The new labour codes introduce a single definition of wages that includes basic salary, dearness allowance and retaining allowance. Most allowances and reimbursements are not considered wages. This change affects calculations for provident fund, gratuity and other statutory benefits.
Impact on take home salary
Reports indicate that employees may experience a reduction in take home salary because a larger portion of their compensation will now fall under the wage component. This increases PF and gratuity contributions. While take home pay may reduce, long term savings and retirement benefits will increase.
Gratuity eligibility for more workers
The new codes extend gratuity eligibility to fixed term employees and contract workers who complete one year of service. Earlier, employees needed five years of continuous service to qualify. Gig workers and platform workers also gain expanded access to social security schemes.
Mandatory appointment letters and simplified procedures
The codes now require employers to provide written appointment letters to all employees. They also introduce clearer rules for layoffs and dispute resolution. Compliance becomes simpler because overlapping laws have been unified into four codes.
Simplified processes for companies
Businesses benefit from a more streamlined compliance framework. However, companies must now adjust payroll structures, update contracts, review statutory contributions and ensure that benefits extend to all eligible workers under the new codes.
What This Means for Companies Hiring in India
The new labour codes affect both Indian and international companies that employ workers in India. Employers must reassess how compensation is structured, how benefits are delivered and how statutory contributions are calculated. Remote-first and global companies must review their hiring models to stay compliant.
Key areas that need attention include:
• Salary structuring under the new wage definition
• Revised PF and gratuity contributions
• Contract terms for full time, fixed term and gig workers
• Accurate payroll and documentation processes
• Compliance monitoring across states
This shift increases the importance of reliable compliance partners who can guide employers through the transition.
“India’s new labour codes bring clarity to employers and stronger protections to workers. The reforms encourage formal employment and create a more structured environment for companies that want to build teams in India. At Wisemonk, we are helping organisations understand and adapt to these changes so they can stay compliant while continuing to grow their teams with confidence.” says Aditya Nagpal, Founder & CEO of Wisemonk.
Why These Reforms Are Important
The new labour codes reflect India’s effort to modernise its workforce regulations and make them suitable for today’s employment landscape, which includes remote work, gig work and contract-based roles. For employees, the reforms provide more predictable benefits and greater security. For employers, they help simplify regulation but require adjustments in payroll and compliance.
These reforms come at a time when India is seeing increasing global interest in hiring. Companies that understand and adapt to the new rules early will be better positioned to build strong teams and maintain compliance.