Salary Shock: India’s New Labour Codes are Now Effective

Forget what you read yesterday. The four Labour Codes—Wages, Industrial Relations, Social Security, and OSH—are effective now (as of November 21, 2025). This isn’t a future proposal. It’s here. Every working Indian, from the gig worker to the factory boss, has to read the fine print. Or nothing.

The big idea was to clean up a century of scattered laws. X was the old, complicated rulebook. And then Y followed: a unified code meant to make life easier for businesses and safer for workers. But the trade-offs are massive.

The Salary Question: Why Your Take-Home Is Dropping

This is the immediate shockwave. Companies loved keeping your Basic Pay low (say, $35\%$ of CTC) to minimize their PF and gratuity outgo. That game is over.

• The 50% Rule: Your allowances (HRA, special allowances, etc.) cannot exceed 50% of your total salary. This means your Basic Pay must be at least 50% of your CTC.

• The Result: Since PF (Provident Fund) and Gratuity are calculated on Basic Pay, the base figure for deductions just went way up.

• The Math: If your CTC stays fixed, a higher PF contribution means less money in your pocket every month. Lower take-home pay today, for higher retirement savings tomorrow. That trade-off is real, and companies are already scrambling to adjust payroll.

The Employer Power and Worker Fear

The Industrial Relations Code is where the tension begins.

• Layoffs Get Easier: Firms with up to 300 workers (up from 100) can now conduct layoffs, retrenchments, or closure without getting prior government approval. This is meant to boost manufacturing appetite and scale faster. Unions see it as a serious weakening of job security, a shift of bargaining power toward the company.

• Gig Workers are Legal (Finally): The Social Security Code formally recognizes gig and platform workers (Ola, Uber, Zomato, etc.) for the first time. Aggregators must contribute a percentage of revenue to a welfare fund. This is historic on paper. The thing is, the contribution formulas and timelines are still fuzzy.

The Gains: Small Wins That Matter

• Gratuity: Fixed-term workers now get gratuity after just one year, not five. A massive win for contract staff.

• Safety: The OSH Code introduces the “one-worker rule.” Even a tiny micro-unit with one person must follow safety protocols. It closes the loophole where small firms skipped basic protective gear.

• Portability: Benefits are supposed to be more portable, making it easier for migrant workers to move across states in peak season.

Ultimately, these codes are trying to do two opposite things: modernise the market for global business and protect the massive workforce. The entire system is rebooting right now. Execution is everything. Everyone is watching the fine print. It’s ongoing.

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