NEW DELHI: In a landmark overhaul set to reshape the Indian workplace, the Central Government has officially implemented the four new Labour Codes with effect from November 21, 2025. This historic move unifies and replaces 29 central labour laws, bringing significant changes to employee compensation, social security, and, critically, working hours.

The new legislation aims to balance Ease of Doing Business for employers with an expanded social security net for the vast Indian workforce.

Key Change: The Flexible 4-Day Workweek

The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 introduces the most widely discussed change: flexibility in the working schedule.

• Weekly Cap Maintained: The law strictly maintains the maximum weekly working hours at 48 hours.

• Condensed Week Option: Employers can now legally adopt a 4-day workweek or a 5-day workweek, provided they compensate by increasing the daily working limit.

• Daily Max Hours: To achieve a 4-day week, the daily working hours can be extended to 12 hours (12 hours $\times$ 4 days = 48 hours). This shift is possible only with the consent of the worker and the notification of the State Government.

• Mandatory Rest: If the 4-day week is implemented, the Code mandates three consecutive days of paid weekly rest.

• Overtime Compensation: Any work done beyond the standard 8-hour day (or the mutually agreed higher daily limit) or beyond the 48-hour weekly limit must be compensated at twice the normal wage rate.

Major Impact on Salaries: The 50% Rule

The Code on Wages, 2019 implements a crucial structural change affecting the take-home salary of most employees:

• Higher PF & Gratuity: The new law standardises the definition of ‘Wages’ and mandates that the core components (Basic Pay, Dearness Allowance, and Retaining Allowance) must constitute at least 50% of the employee’s total Cost-to-Company (CTC).

• Financial Effect: Since retirement contributions like Provident Fund (PF) and Gratuity are calculated on this higher basic component, employee and employer contributions will increase. While this substantially boosts long-term retirement savings, it will likely lead to a reduction in the monthly in-hand salary for employees whose basic pay was previously kept below 50% of their CTC.

Expanded Social Security for All

The new codes formalise protection for previously excluded segments of the workforce under the Code on Social Security, 2020:

• Gig and Platform Workers: For the first time, these workers are legally defined and brought under social security schemes. Aggregators are now required to contribute towards a dedicated welfare fund for this segment.

• Gratuity after One Year: Fixed-Term Employees (FTEs) are now eligible for gratuity benefits after only one year of continuous service, down from the previous five-year requirement.

• Universal Minimum Wage: The Code extends the right to statutory minimum wages to all workers across organised and unorganised sectors, supported by a National Floor Wage.

The new framework aims to create a unified, simplified, and technology-driven compliance system across all states, moving India’s labour governance into a new era.