New Labor Code: 29 old laws abolished, 4 new labor codes implemented, what will be the impact on HR, companies and employees?

Four new labor codes have come into effect in the country. This is being described as the biggest change in the labor system so far. Highlights of these labor codes include a guarantee of timely minimum wages for all workers, a guarantee of appointment letters for youth, equal pay and respect for women, a guarantee of social security for 400 million workers, and a guarantee of gratuity after one year of service for fixed-term employees. The government claims that the new labor codes will transform the lives of over 400 million workers. Experts say that the greater the change, the greater the long-term benefits it will bring to employees and companies.

The government implemented all four labor codes with immediate effect yesterday. Industry had expected some time for this, but the sudden implementation has required companies and HR teams to immediately adapt their policies and procedures to the new rules. The four labor codes notified by the central government on Friday are the Code on Wages 2019, the Occupational Safety and Health and Working Conditions Code (OSHWC), the Industrial Relations Code, and the Social Security Code. Together, these codes transform the country's approximately 29 outdated labor laws into a simplified and modern framework.

Transformational Step

According to a Moneycontrol report, experts say these labor codes will benefit both industry and employees. They will provide stability to industries and increase job opportunities. CII Director General Chandrajit Banerjee described the move as "transformational." He said the reforms will not only improve wages and social security, but also make workplaces safer and regulations clearer.

Sudhakar Sethuraman, partner at Deloitte India, says this change was the need of the hour. The government implemented it at a time when India is rapidly adopting AI and new technologies. In such a time, the new labor codes will play a crucial role in protecting the interests of employees. These rules have been formulated with the future of work culture in mind and align with India's rapidly changing economy.

Companies will have to make significant changes.
Experts say that under the new labor code, companies will have to make several significant changes. For example, annual health checkups will now be mandatory for employees. Fixed-term employees will also receive gratuity. Gig and platform workers, such as app-based delivery boys or drivers, will also be covered by social security. Furthermore, companies will now be more strictly enforced to pay wages on time.

There are also significant changes on the compliance front. Companies will now have access to features like pan-India licensing, a single registration, and a combined return. This will reduce paperwork and filing, providing significant relief to small and medium-sized enterprises. Akhil Chandana, Partner at Grant Thornton India, explained that state governments' own "Shops & Establishments" laws will still apply. This means that in some cases, such as holidays, overtime, or working hours, there may be overlap between central and state regulations. In such a situation, companies will have to comply very carefully to avoid any mistakes.

Long-term benefits will be enormous.
Suhail Nathani, Managing Partner of the Economic Laws Practice, says that implementing these labor codes will require companies to make major operational changes. However, in the long run, these codes will provide a strong protection framework for workers in the unorganized sector, increase transparency, and bring India's labor market closer to global standards.

Anshul Prakash, Partner at Khaitan & Co., said that while partial implementation of the Wage Labor Code and Social Security Labor Code was already expected, the real role now lies with the officials working at the central and state levels, who will implement these codes. Experts say that if they adopt a collaborative approach rather than a punitive approach, the implementation of these codes will be smooth and effective.

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