How New Labour Laws in India Impact Businesses & Employees

Labour laws in India have undergone significant reforms in recent years, impacting both businesses and employees. The government has consolidated multiple labour laws into four key labour codes—Code on Wages, Industrial Relations Code, Occupational Safety, Health and Working Conditions Code, and the Social Security Code. These changes aim to simplify compliance, enhance worker protections, and promote ease of doing business.

In this article, we’ll explore how these new labour laws affect both employers and employees.

Impact on Businesses

1. Simplified Compliance & Reduced Complexity

• The new laws merge 29 existing labour laws into 4 codes, reducing legal complexities.
• Businesses now face fewer registrations and filings, making compliance easier.
  2. Flexibility in Hiring & Firing
• Employers can now hire fixed-term employees with the same benefits as permanent employees.
• The threshold for layoffs and retrenchments has increased from 100 to 300 workers, allowing businesses more flexibility.
  3. Changes in Working Hours & Overtime
• The new laws allow a 4-day workweekwith longer daily hours, offering more flexibility in workforce management.
• Overtime calculations are stricter, requiring employers to pay higher wages for extended work hours.
  4. Enhanced Social Security Obligations
• Companies must provide PF, ESI, and other benefitseven to gig and platform workers.
• Gratuity is now extended to fixed-term employees, increasing financial liabilities for businesses.

Impact on Employees

1. Higher Take-Home Salary vs. Higher Deductions

• The new wage code ensures that basic salary must be at least 50% of total compensation, affecting take-home salaries and PF contributions.
• Employees will benefit from increased social security but may see reduced in-hand salary.
  2. Better Job Security & Benefits
• Gig workers, platform workers, and unorganized sector employees now have legal recognition and social security benefits.
• Fixed-term workers will receive gratuity just like permanent employees.
  3. Increased Work Hours & Overtime Pay
• While employees may have to work up to 12 hours in a day under a 4-day workweek model, overtime compensationis now mandatory.
• Workers will be entitled to additional wages if they exceed stipulated working hours.
  4. Stronger Dispute Resolution Mechanisms
• Employees now have better protection against unfair terminationand improved dispute resolution mechanisms via tribunals.
• Unions are given greater power, allowing better collective bargaining rights.

The new labour laws in India present both opportunities and challenges for businesses and employees. While companies benefit from simplified regulations, they must also adapt to increased social security obligations and stricter compliance. For employees, these reforms provide better protections, improved benefits, and job security, but may come with higher deductions and workload adjustments.

Understanding these changes is crucial for businesses to stay compliant and for employees to know their rights. At Law Chambers of Ritesh Kumar, we offer expert legal guidance on navigating these new labour laws. Contact us today to ensure your business remains compliant and employees are well-protected.