New Labour Code 2025: Key Changes, Benefits & Challenges Explained
New Labour Code 2025: Key Changes, Benefits & Challenges Explained
The Government of India announced major updates to the New Labour Code 2025, sparking strong discussions among HR teams, employers, employees and labour unions. These reforms impact salaries, compliance, job security, social security and hiring flexibility, making it essential for organizations to stay informed.
What Is the New Labour Code 2025?
The reform merges 29 labour laws into four simplified codes:
• Code on Wages
• Industrial Relations Code
• Code on Social Security
• OSH (Occupational Safety, Health & Working Conditions) Code
These affect CTC structure, payroll, employee benefits, hiring models, and workplace standards.
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Key Changes in the Labour Code 2025
1. New Wage Structure
Allowances capped at 50% of CTC.
Impact: Slightly lower take-home salary, higher PF and gratuity, need for payroll restructuring.
2. Social Security for Gig & Platform Workers
Gig workers like delivery riders and freelancers are now included.
Impact: Wider protection; employer contribution to welfare funds.
3. Strengthened Fixed-Term Employment
Fixed-term employees receive benefits similar to permanent staff.
Impact: Ideal for project roles; better benefit predictability.
4. Layoff Threshold Increased
Firms with up to 300 employees can lay off staff without approval.
Impact: More flexibility for employers; job security concerns for unions.
5. Stricter Safety & Health Standards
Mandatory check-ups and OSH audits.
Impact: Safer workplaces and higher compliance expectations.
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Public Reactions
Employees
Worried about take-home salary and stability, but hopeful about better benefits.
Labour Unions
Oppose easier layoffs; fear misuse of contract roles.
Employers
Welcome simplified compliance and hiring flexibility but are concerned about increased costs and tech upgrades.
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Pros
• Simplified compliance
• Social security for gig workers
• Flexible hiring models
• Better workplace safety
• Supports skill-driven economy
Cons
• Lower take-home salary
• Job security concerns
• MSME compliance pressure
• Possible misuse of fixed-term roles
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Key Insights for Businesses
• HR will shift to a more strategic role.
• Transparent communication improves retention.
• Skill-based hiring will rise.
• HR tech adoption will grow rapidly in 2026.
What Employers Should Do Now
Recalculate CTC, update contracts, train HR teams, communicate salary changes and conduct safety audits.
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Final Thoughts
The New Labour Code 2025 marks a turning point for India’s workforce. While short-term disruptions are expected, the long-term goal is a more transparent, structured and future-ready employment ecosystem.