The recent announcement on November 21, 2025, regarding the implementation of India’s long-awaited four Labour Codes has created an important moment for every employer, HR head, and business leader. Although these Codes were drafted in 2020, their practical rollout has now begun, and organizations must clearly understand what happens next, how the transition works, and what compliance responsibilities remain during this interim period.
While the Labour Codes aim to simplify 29 existing labour laws into a more organized framework, multiple operational and financial aspects are still awaiting clarity due to the absence of notified Central and State Rules.
What Has the Central Government Announced?
The Central Government has officially stated that the four Labour Codes are now considered effective as of November 21, 2025. The stated objective is to create a future-ready ecosystem that ensures timely wages, workplace safety, formal employment, and broader social security coverage. The four Codes cover:
- Code on Wages
- Industrial Relations Code
- Code on Social Security
- Occupational Safety, Health and Working Conditions Code
However, as clarified in interviews and reports, while the Codes have come into force, the Central Rules are yet to be finalized. The government has indicated that draft Central Rules will be pre-published, followed by a 45-day public consultation period, after which another 30–45 days may be required for final notification. This places full operational implementation nearly two to three months away from the initial announcement.
For employers, this means:
- Payroll structures, especially the definition of wages, may undergo mandatory restructuring
- Provisions for working hours, overtime, and leave encashment may change
- HR policies, appointment letters, and employment contracts may need revision
- Compliance documentation, registers, and reporting formats may be consolidated
Why the Labour Codes Matter for Employers
The purpose of the Labour Codes is to offer businesses flexibility while ensuring transparency and standardization across sectors. However, industry bodies such as the Confederation of Indian Industry (CII) have raised concerns about increased financial liability and ambiguity in interpretation, especially where rules are absent.
One of the most significant changes relates to the redefinition of “wages.” Under the new framework, wages must constitute at least 50 percent of total remuneration, which may increase statutory payouts linked to wages, such as gratuity, provident fund, and ESI. Industry has sought clarity on whether allowances, performance bonuses, ESOPs, and variable pay will be included in wage calculations and whether these changes will apply retrospectively.
How Employers Should Prepare Right Now
Although Central and State Rules are pending, employers are advised not to delay internal preparedness. According to industry experts and audit guidance, organizations should begin by assessing the financial and operational impact of the Codes.
Key preparatory steps include:
- Reviewing wage structures to ensure compliance with the 50 percent wage requirement
- Evaluating gratuity provisioning and leave encashment obligations in financial statements
- Updating HR documentation, appointment letters, and fixed-term employment contracts
- Identifying employees who may newly qualify as “workers” under the revised definitions
- Reviewing policies related to working hours, overtime, and night shifts, particularly for women employees
- Preparing for expanded social security coverage across organized, unorganized, gig, and platform workers
Employers should also closely monitor notifications from both the Central and State governments to ensure timely alignment once the rules are finalized.
Conclusion
The announcement of the Labour Codes marks a significant step in India’s regulatory evolution. In the absence of notified Central and State Rules, existing labour laws continue to apply, even as accounting and provisioning obligations begin to reflect the new framework.
For businesses, the coming months will be critical. Proactive planning, financial readiness, and continuous monitoring of regulatory developments will be essential to ensure a smooth transition once the Labour Codes are fully implemented.
FAQs
1. Are the Labour Codes fully implemented as of November 21, 2025?
The Labour Codes are considered effective from November 21, 2025, but full implementation depends on the notification of the Central and State Rules. Until then, existing labour laws remain applicable for operational compliance.
2. Will the new wage definition apply retrospectively?
Industry bodies have specifically sought clarification on whether the revised wage definition will apply retrospectively. As of now, there is no formal confirmation, and this remains one of the key unresolved issues.
3. Do employers need to account for higher gratuity liability immediately?
Yes. As per ICAI’s clarification, any increase in gratuity or leave encashment liability arising from the Labour Codes must be recognized as an expense in current and interim financial statements, even though the Rules are pending.