File photo: Workers work at the construction site of a commercial complex in New Delhi | Photo credit: Reuters
According to the report, one major change is the new system for categorizing workers and employees. The category “employee” now includes all employees regardless of role, level or salary, while the term “employee” applies to those engaged in manual, skilled, technical, operational, administrative or supervisory functions.
However, supervisory staff earning more than ₹18,000 per month are excluded from the employee category.
This new categorization has implications for overtime, leave collection, employment contracts, retrenchments and dispute resolution, the report said.
It read: “Employee, includes all irrespective of role/level/nature of duties/salary… Employee, includes manual, unskilled, skilled, technical, operational, clerical or supervisory work, excludes managerial or clerical role, excludes supervisory role with wages exceeding ₹18,000 per month”.
The reforms, which came into effect on November 21, 2025, merged 29 existing labor laws into four comprehensive codes to simplify labor regulations and improve workplace governance.
The four codes include the Wage Code, 2019; The Social Security Code, 2020; The Occupational Safety, Health and Working Conditions Code, 2020; and the Industrial Relations Code, 2020. These replace previous workplace laws such as the Minimum Wages Act, the Payment of Wages Act, the Factories Act and the Industrial Disputes Act, among others.
Another major shift to emerge is the revised definition of ‘wages’, which directly impacts employee compensation structures.
The definition includes all salary components expressed in money, while elements such as transfer, HRA, bonus and overtime are part of the exclusion set. However, the exclusions may not exceed 50 percent of the total compensation, which means that the basic salary must represent at least half of the total salary.
As a result, statutory payments such as PF (Provident Fund) and gratuity are expected to increase, leading to higher costs for employers and lower take-home pay for employees, the report said. The codes introduce changes to tip eligibility, which will now apply to fixed-term employees with one year of service. Overtime pay applies for more than 8 hours per day or 48 hours per week, and leave collection takes place at the end of each calendar year.
The new framework formally recognizes flexible hiring, including fixed-term employment, which must receive the same wages and benefits as permanent staff. There is no limitation on the number or duration of such recruitments.
Regulations for contract labor have been tightened, with restrictions on the use of workers in core activities (with exceptions) and placing legal responsibility on the main employer.
The codes introduce online inspection systems, stricter compliance responsibility for employers and prosecution for repeat offences. Employees can now file a complaint directly with the court.
The report advises organizations to redesign salary structures, review employee classifications, update internal controls and revise HR policies in line with the new provisions.
Published on November 24, 2025
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