The year 2025 is greatly unique in India’s labour laws. For a few decades, the employers and HR professionals have been managing a patchwork of 29 separate labor laws, each with separate compliance deadlines and applications or forms, interpretations, etc. This fragmented system must have been ailing against much confusion, inconsistent enforcement, sometimes very expensive overheads, and administrative cost.
The situation is set to change in 2025. The Government of India has consolidated the 29 laws into 4 Labour Codes, with a view to streamlining compliance and more effectively protecting workers’ rights.
For HR managers, SMEs, and startups, all these changes are not mere legal updates but real shifts in day-to-day operations. These new codes and laws directly impact HR processes such as wage calculation for overtime, employee rights like paid leaves and holiday lists, and working hours including overtime and holidays. They also affect time records such as clockings and manual attendance tracking. On the payroll side, compliance now involves accurate calculation and deduction of statutory contributions. For companies focused on Hiring in India, understanding these changes is critical, as every new employee hire must be onboarded in strict compliance with the 2025 labour codes.
Our guide will walk you through the important features of the new labour codes, what the major differences are from the older laws, and what steps your organisation ought to be taking to be compliant in 2025 and years to come.
Table of Contents
- Overview of India’s New Labour Codes (2025)
- Key Changes from Previous Laws
- Impact on Employers & Employees
- Understanding the Code on Wages (2019)
- Occupational Safety, Health & Working Conditions Code
- Industrial Relations Code: Dispute Management & Union Rules
- Social Security Code: Gig Workers & Benefits
- State-Level Variations & Multi-State Compliance Challenges
- Recent State Reforms: Registration & Penalty Relaxations
- Factory Licensing & Digital Compliance Improvements
- POSH Act (Sexual Harassment) Compliance in 2025
- HR Statutory Compliance Checklist for 2025
- Practical Compliance Calendar & Implementation Plan
- Preparing SMEs for Labour Code Transitions
- Why Use Asanify to Hire in a Complex Labour-Law Environment
- Common Penalties & How to Avoid Them
- FAQs
Overview of India’s New Labour Codes (2025)
Purpose of Labour Code Reforms
Originally, 29 individual laws governed the Indian labour environment. Reforms were attempted and brought in to make the system simple and workable for contemporary times. Businesses have always grappled with overlapping provisions and outdated laws, not to speak of differing state-level interpretations.
The four codes attempt to:
- Remove duplication and contradictions in legislation.
- Bring into force a uniform set of definitions for certain terms in laws, such as wages and employees.
- Encourage ease of doing business with less paperwork and inspections.
- Allow adherence procedures to go online for registers and self-certification.
Key Changes from Previous Laws
The new codes have brought substantive and procedural changes. Some of the major differences are:
- Uniform Wage Definition: There must be only one standard formula for calculating wages so it may be equally applicable to all benefits and deductions.
- Computerizing Record-Keeping: Employers are allowed to maintain registers and submit returns online.
- Working Hour Standards: Maximum daily and weekly working hours are clearly laid down, irrespective of the industry.
- Single Compliance Filing: One registration and license is required instead of multiple permits.
- National vs. State Level Clarity: States still retain some degree of autonomy; however, there are now central laws ensuring uniform minimum conditions.
Impact on Employers & Employees
For employers, the unified codes reduce duplication but also stricter enforcement. Violation penalties are harsher, and digital systems also make inspections transparent.
For employees, the codes ensure that the minimum wage is more widely enforced, formalise rights for gig and platform workers, and provide greater social security benefits. Thus is the best system placed in the easiest manner to navigate for all involved but requires their timely adaptation from HR teams.
Suggested Read: India Minimum Wage in USD Explained: Everything Global Companies Must Know
Understanding the Code on Wages (2019)
Scope and Applicability
The Code on Wages is applicable to all workers, whether in the organised or unorganised sector, and spans industries from manufacturing to IT services. In contrast to previous wage legislations, it eliminates wage ceilings for applicability, making coverage wider.
Minimum Wage Rules
Under the new regime, minimum wages will be determined by both central and state governments. The Central Government will determine a national floor wage, but states may also determine higher ones according to regional cost-of-living considerations. Employers are required to pay whichever is greater in their area.
Payment Timelines & Bonus Rules
The wage code requires strict timeframes for salary payment:
- Monthly salaries have to be remitted within 7 days of the wage period’s expiry
- Dues of terminated personnel have to be cleared within 2 working days
- Bonus provisions provide for annual bonuses for eligible employees drawing less than a specified wage limit, as a percentage of wages.
Occupational Safety, Health & Working Conditions Code
Health & Safety Standards
The OSH Code 2025 requires employers to provide a healthy and safe working environment for all their workers, irrespective of the sector. Major requirements are:
- Carrying out risk assessments and taking preventive safety steps
- Providing mandatory safety training to workers, particularly in high-risk sectors such as construction, manufacturing, and mining
- Ensuring adherence to industry-specific safety guidelines released by the central or state governments
- Keeping incident registers and reporting workplace accidents in a timely manner to the authorities
These are intended to lower on-the-job accidents and instill a culture of safety across industries.
Working Hours & Leave Provisions
Under the OSH Code, regular working hours are limited to 8 hours a day and 48 hours a week, with a compulsory day of rest every week. Overtime is allowed but must be paid twice the ordinary wage rate.
Leave entitlements include:
- Annual leave: At least one day in 20 days of work
- Casual leave: According to state regulations
- Maternity and paternity leave: According to specific laws, with a facility for adoption and surrogacy
Workplace Facility Requirements
The OSH Code mandates employers to establish certain minimum facilities:
- Toilets for male and female employees separately
- Safe drinking water that is available to all employees
- First-aid facilities and trained staff for emergencies
- Toilets and canteens (where number of employees crosses specified limits)
- Proper ventilation, illumination, and sanitation
Industrial Relations Code: Dispute Management & Union Rules
Trade Union Formation
Industrial Relations Code simplifies the procedure for registering a trade union:
- At least 10% of the workers or 100 employees, whichever is lower, can apply for registration
- Registered unions obtain legal status and the right to represent workers during negotiations
- Sole negotiating union provisions provide employer-union communications with clarity
Dispute Resolution Mechanisms
The Code lays out unequivocal directions for resolving industrial disputes:
- Advance notice is required for strikes and lockouts (14 days)
- Disputes are to be referred initially to conciliation officers or industrial tribunals
- Provisions are intended to prevent abrupt work stoppages and promote negotiated settlements
Employer Approvals & Thresholds - Explain when government approval is required.
Social Security Code: Gig Workers & Benefits
Expanded Coverage
For the first time, India’s labour laws officially extend social security benefits to gig workers, platform workers, and workers in the unorganised sector. For the first time, this includes under its fold a wide assortment of professionals from delivery drivers and ride-hailing partners to freelance digital service providers under legal protection, giving them access to welfare benefits that were hitherto only for traditional employees.
Employer Contribution Obligations
Employers continue to contribute towards basic social security schemes like the Provident Fund, Employees’ State Insurance, and gratuity payments, which are based on wage ceilings and service duration. Fixed-term workers are also eligible for gratuity without the usual five-year cutoff. These contributions are the bedrock of fiscal security and healthcare cover for India’s working population.
Government Schemes & Benefits
The Code brings together several welfare schemes within one framework to make benefits more accessible. These include pensions for employees under the Employees’ Pension Scheme, maternity and disability benefits, and schemes for unorganised workers under the National Social Security Board. With the encouragement of digital registration and benefit disbursal, employees and gig workers can anticipate quicker and clearer access to their entitlements.
State-Level Variations & Multi-State Compliance Challenges
Differences Across States
Despite the implementation of integrated labour codes, there is still authorisation for states to determine some rules, and hence, there are discernible differences in implementation. For instance, Kerala prescribes higher floor wages for unskilled labour than the central standard, and Maharashtra demands additional contributions of welfare cess on certain construction works. These differences may impact payroll computation, employee benefits, and operational expenses for enterprises functioning in different regions.
Registration & Licensing Variations
Registration and licensing processes also vary widely from state to state. In Tamil Nadu, a manufacturing plant might require different approvals from the Factories Inspectorate and the Pollution Control Board, whereas in Gujarat, most of these submissions can be made using an online single-window portal. These variations permeate into paper formats, renewal periods, and inspection intervals, tending to add complexity for HR departments dealing with multi-site compliance.
How to Manage Multi-State Compliance
Compliance management across states calls for a systematic method. While several businesses are adopting HR compliance software that has jurisdiction-updated requirements, reminds employees of due dates, and allows digital submissions, others leave the task to Employer of Record (EOR) service providers or compliance consultants specializing in monitoring state-level adjustments to maintain standard compliance without extending the weight to internal teams.
Recent State Reforms: Registration & Penalty Relaxations
Relaxed Registration Norms
A few states have implemented streamlined registration procedures to ease the burden of compliance for small and medium-sized enterprises. Rajasthan and Karnataka have eased factory registration norms for units having less than forty employees, and Haryana has facilitated online self-certification for shop and establishment registration. These relaxations cut down on paperwork and enable SMEs to concentrate more on business than paperwork.
Penalty Reductions for SMEs
To promote compliance instead of penalizing small businesses, a few states have cut down the first-offence fines. Madhya Pradesh and Telangana, for example, now charge lower penalties for non-compliance with a few labour law conditions by SMEs as long as they take remedial steps within a stipulated time period. This is a welcome change towards a supportive system to bring small businesses in line with the laws.
Industry-Specific Reforms
Some state-level reforms are industry-specific. Karnataka has widened permissions for women working in IT and IT-enabled services to handle night shifts, subject to safety measures being in place. Gujarat has relaxed contract labour licensing requirements in manufacturing clusters to ensure operational flexibility. These industry-specific modifications can provide strategic benefits to organizations that closely track and take advantage of them.
Factory Licensing & Digital Compliance Improvements
Digital Application Processes
New reforms now enable companies to apply for factory licenses online. Through state and central government portals, employers can submit applications, upload documents, and monitor approval status online. This move towards labour compliance digitisation does away with the need to physically visit government offices and minimizes delays due to manual processing.
Renewal Timelines & Requirements
Factory licenses usually need to be renewed between one and five years, as dictated by the state. Employers have to submit renewal applications on time along with new compliance documents like safety inspection reports, employee registers, and fee payment proof. Failure to renew on time can result in fines or business disruption, which is why it is so important that HR teams retain a clear compliance renewal checklist.
Benefits for Employers
Digitisation of compliance and licensing procedures has enormous benefits for employers. It eliminates paperwork, shortens approval times, and minimizes errors due to human intervention. Compliance automation tools embedded in HR systems can provide reminders for pending renewals, keep a record of compliance, and create inspection reports. These efficiencies result in time and cost savings, enabling the HR team to concentrate on strategic workforce planning.
POSH Act (Sexual Harassment) Compliance in 2025
Mandatory Policies
The POSH Act still mandates each workplace in India to maintain a written Sexual Harassment Prevention Policy. The policy has to define the unacceptable behaviours, describe complaint procedures, and indicate support measures for victims. It must be prominently displayed in the workplace and distributed to employee handbooks in order to create comprehensive awareness.
Internal Committee Formation
Organisations of ten or more staff need to establish an Internal Complaints Committee (ICC) to deal with sexual harassment complaints. The ICC must consist of a senior woman employee as the chairperson, at least two other staff members who are dedicated to gender equality, and one outside member from an NGO or women’s rights organization. Committee members need to undergo regular training in how to deal with complaints sensitively and in accordance with legal guidelines.
Employee Awareness & Training
Periodic POSH training sessions are essential to create a safe environment. These workshops inform the employees about what constitutes harassment, reporting it, and the ICC’s role. Organisational awareness campaigns, e-learning modules, and induction sessions can reaffirm the organisation’s zero-tolerance approach and compliance with legal requirements.
Women’s Safety Regulations & Working Hours
Night Shift Guidelines
Female workers are now able to lawfully work night shifts in some states, as long as employers adhere to stringent safety measures. These include providing safe transport to and from the workplace, not having female staff rostered alone at night time, and providing proper rest breaks. Employers also have to adhere to any state-specific bans or approval procedures for allocating women to late-night shifts.
Workplace Security Measures
Compulsory security measures encompass CCTV monitoring 24/7 in sensitive areas, proper lighting within and around premises, and the deployment of trained security guards. Emergency call lines, panic alarms, and periodic safety inspections are gaining popularity to instill compliance and trust among employees.
Sector-Specific Restrictions
Industry-specific regulations continue to hold good in a few cases. For instance, in mining and manufacturing, prohibitions on underground or dangerous work by women continue to be in place unless special safety permits are taken. IT and ITES sectors, however, have experienced more lenient rules to facilitate nighttime work, as long as companies follow state-recommended safety standards.
HR Statutory Compliance Checklist for 2025
Wage-Related Compliance
Wage compliance continues to rank high on HR departments’ agendas in 2025. Provident Fund (PF) contributions, Employees’ State Insurance (ESI) scheme registration and contributions, and gratuity payments to qualified employees, such as fixed-term employees who meet the criteria, are some of the areas an employer needs to ensure timely deposits for.
The Payment of Bonus requirements under the Wage Code also need to be adhered to, with eligible staff receiving their bonuses within the specified timeframes. All these requirements are time-specific, with severe penalties for delay or default.
Welfare-Related Compliance
Welfare compliance includes legal entitlements like maternity benefits, i.e., paid leave and protection of job for female workers, and paternity or adoption leave where the employee is eligible. Employers also have to deal with accrual of earned leave, carry-forward rules, and contribution towards any state-level welfare funds. Transparent leave records and timely approvals not only satisfy legal needs but also increase employee confidence.
Health & Safety Compliance
According to the OSH Code, organisations should have a strong health and safety system in place, such as regular workplace inspections, fire safety checks, and first-aid preparedness checks. All workplace accidents should be reported and documented to the authorities, and registers of inspections must be regularly updated. Precautionary safety steps and compliance checks should be integrated into the organisation’s HR and facility management practices.
Practical Compliance Calendar & Implementation Plan
Monthly & Quarterly Tasks
Deposit of PF and ESI contributions, payment of salaries within statutory periods, and maintaining employees’ attendance and wage registers are some routine compliance obligations at a monthly level. Quarterly filing of returns with the labour department, revising standing orders, or giving workplace safety training are some of the compliance tasks that may be required. A systematic HR compliance calendar ensures no deadline is missed, especially for organizations having multiple locations.
Annual Filings
Annual duties consist of renewing factory and shop establishment licenses, filing annual returns under relevant labour laws, reporting bonus payment, and revising employee welfare fund contributions. Organisations need to check and update workplace policies to reflect legal updates made during the year.
Tools for Tracking Compliance
With the number and range of statutory requirements, employers are investing in compliance tracking solutions or HRMS systems with integrated reminders and electronic filing features. These programs can consolidate paperwork, automate routine compliance procedures, and produce reports for internal or third-party audits with fewer human errors.
Preparing SMEs for Labour Code Transitions
Staff Training
SMEs that are switching over to the new labour codes must start with training HR teams on the new provisions, such as modifications in definitions, wages structures, and filing requirements. Workshops, webinars, and internal knowledge forums can assist in ensuring compliance processes are comprehended and applied consistently.
Policy Updates
Firm policies, staff manuals, and agreements must be reviewed and re-aligned with the new labour codes. These range from wage definitions and working hours to leave entitlements and safety procedures. New policies need to be distributed among employees and incorporated into the induction process for new employees.
Outsourcing Compliance
For SMEs without dedicated compliance teams, outsourcing HR compliance to consultants or Employer of Record (EOR) service providers can be a practical solution. These experts monitor legal changes, handle filings, and ensure deadlines are met, allowing business owners to focus on growth without risking penalties.
Why Use Asanify to Hire in a Complex Labour-Law Environment
Automated Compliance in Hiring
In India’s intricately developed labour-law landscape, hiring errors can result in costly fines immediately. Asanify’s automated HR compliance technology makes sure each new employee undergoes inbuilt legal validation, confirming eligibility, contract conditions, and salary compliance prior to joining. The software maintains hiring processes in sync with the most recent labour code provisions, avoiding the risk of error while liberating HR teams from making tedious verification calls.
Documentation & Payroll Integration
Asanify combines documentation and payroll procedures into one workflow, cutting out the need for redundant data input. Employment agreements, offer letters, and statutory documents are automatically drafted, with all of them saved in a secure central repository. Payroll is directly connected to compliance obligations, which means PF, ESI, gratuity, and other statutory deductions are calculated and remitted on time.
Risk Reduction & Efficiency Gains
Through digitization of compliance and automating routine HR activities, Asanify minimizes the chances of errors that may precipitate legal conflicts or penalties. Real-time notifications for deadlines, electronic audit trails, and pre-set compliance checklists increase operational efficiency while providing employers with certainty that the hiring and payroll processes are compliant at all times.
Suggested Read: EOR India: A Detailed Guide on Employer of Record 2025
Common Penalties & How to Avoid Them
Frequent Compliance Mistakes
Common compliance errors include delayed PF or ESI contributions, incorrect wage calculations due to misinterpretation of “wages” under the new code, and failure to update employee records in line with statutory requirements. Missing license renewals, neglecting mandatory safety audits, and not constituting an Internal Complaints Committee under the POSH Act are also frequent missteps.
Financial & Legal Consequences
Defaulting can fetch heavy monetary penalties, suspension of operations, and in certain cases, criminal liability of directors or heads of HR. For instance, habitual PF defaults can invite a fine of several lakhs of rupees, whereas contravention of provisions of workplace safety can call for stoppages of work and loss of reputation. The new labour codes have also raised the amount of penalties for the purposes of enhancing enforcement.
Prevention Strategies
The most effective way to steer clear of penalties is to bake compliance into daily HR processes. That means having current policies, having regular audits, and employing HR compliance software to monitor deadlines and legislative changes. Outsourcing specialized tasks like payroll processing or factory license renewals to specialists also lessens the risk of errors. Ongoing staff training ensures that all involved in compliance are on top of their obligations under the most recent legislation.
FAQs
They are the Code on Wages, Occupational Safety, Health & Working Conditions (OSH) Code, Industrial Relations Code, and Social Security Code, which consolidate 29 older laws into 4 streamlined regulations.
All four codes are passed, and full implementation is expected in 2025, once both central and state governments notify the final rules.
Yes. The Social Security Code extends benefits like insurance, pensions, and maternity cover to gig, platform, and unorganised workers for the first time.
Employers may face hefty fines, stricter inspections, and in some cases criminal liability for defaults in wage payments or bonus provisions.
SMEs can use HR compliance software or EOR services to track state-level variations, automate filings, and avoid missing deadlines.
Startups with 10 or more employees must form an Internal Complaints Committee (ICC), have a written POSH policy, and conduct awareness training.
Employers must provide safe transport, adequate security, rest breaks, and proper lighting to allow women to work night shifts legally.
HR tech automates PF/ESI filings, wage calculations, and compliance reminders, reducing errors and ensuring audit readiness.
Asanify automates BPJS/PF/ESI contributions, wage compliance, and documentation, ensuring error-free hiring aligned with the 2025 labour codes.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
