India’s new labour laws, set to take effect in 2026, could significantly change how employees are paid, work, and retire. From faster gratuity payouts as part of full and final settlements to clearer rules on working hours, layoffs, and social security, the four new labour codes aim to bring greater transparency, protection, and financial security for employees across sectors.
Gratuity in full and final settlement may come sooner after job exit under new labour laws (AI-generated image)
India is set to witness the biggest changes to its labour laws in decades, with the Centre having already cleared four new labour codes and states now preparing to notify their own rules under these laws. The central government last month announced the implementation of four labour codes, replacing 29 existing, older labour laws. These laws are aimed at simplifying regulations, expanding social security, and enhancing worker welfare.
The real impact of these labour codes – Code on Wages, 2019; the Industrial Relations Code, 2020; the Occupational Safety, Health and Working Conditions (OSH) Code, 2020; and the Code on Social Security, 2020 – for the average employee will only become clear when state governments issue their rules and companies implement them on the ground. It is expected that the effects of these changes will become clearly visible soon in 2026.
From an employee’s point of view, the questions are straightforward — will take-home salary increase, will working hours change, will gratuity come sooner, and will job security actually improve? Let’s understand these changes, one point at a time.
With the implementation of these codes, terms of employment, payment methods, retirement benefits, and working conditions will be more clearly defined and documented than before.
Salary: Emphasis on minimum wage and timely payment
The most significant change under the new Wages Code is that the minimum wage will now extend to all sectors. This means that whether you are an office worker or a factory worker, a contract employee or working in the unorganised sector, there will be a common framework for minimum wages.
For employees, this means that companies will find it more difficult to delay salary payments. Rules regarding overtime will also be clearer, and the expectation of fair compensation for overtime work will increase. The law also clearly emphasises equal pay for equal work for both male and female employees.
Working hours: More flexibility, but with limits
Working hours have been the subject of much discussion. Under the new rules, the maximum working hours per week are capped at 48 hours, but daily working hours can range from 8 to 12 hours under a shift system.
This does not mean that everyone will have to work 12 hours every day. A model where employees work longer hours for four days a week and take the remaining days off could emerge in several sectors. This change is likely to be more visible in sectors like IT, logistics, manufacturing, and hospitality.
For female employees, providing security, transportation, and other facilities will be mandatory along with permission for night shifts, ensuring that flexibility does not come at the cost of safety.
Gratuity and retirement: The biggest change
The changes regarding gratuity in the new labour laws are considered the biggest and most beneficial for employees. Until now, five years of continuous service were required to receive gratuity, excluding a large segment of contract and fixed-term employees.
The new rules pave the way for including fixed-term employees within the scope of gratuity. In some situations, gratuity may even be granted after just one year of service. This will directly benefit employees who work on repeated contracts or whose jobs are not permanent.
It will now be more likely for employees to receive their gratuity as part of their full and final settlement when they leave their job. This can strengthen financial security during retirement and job changes.
Notice period and layoffs: Striking a balance
The Industrial Relations Code aims to protect employees from sudden job losses on one hand, while also giving companies the freedom to make decisions as needed on the other.
The new framework clarifies the provisions for notice or payment in lieu of notice upon termination of employment. This could reduce instances of sudden dismissals and give employees some time to prepare for their next job.
However, in some cases, companies will no longer require prior government approval for layoffs. This means that job security will now largely depend on the size and sector of the company.
Full and final settlement: Curbing delays
Often, employees face months of hassle after leaving their jobs to receive their final payments. The new labour codes attempt to mitigate this problem. With stricter rules for payments and record-keeping, it is expected that salaries, gratuity, leave encashment, and other dues will be settled quickly and transparently. Digital records and defined processes will make it difficult for companies to cause unnecessary delays in full and final settlements.
Social security: Thinking beyond PF
The scope of the Social Security Code is not limited to just provident fund (PF) and pension. It also attempts to include gig and platform workers—such as delivery partners, cab drivers, and freelance workers.
In the future, this could pave the way for these workers to receive benefits like health insurance, maternity benefits, or pensions. This is considered a major change for the unorganised and gig sectors.
Safety and health: Safer workplaces
The new rules place a strong emphasis on workplace safety and health. Provisions include better safety equipment in hazardous industries, annual health checkups in certain sectors, and accountability for workplace accidents.
This change is likely to have the most significant impact on the ground for employees working in the factory, construction, and manufacturing sectors.
When and how will the changes be seen?
It’s important to understand that all the changes will not come into effect simultaneously. Employees will not receive the full benefits until state governments notify their rules and companies revise their HR policies.
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