Written by Bhavya Rai, a Student pursuing B.A. LL.B. (Hons.) at Rajiv Gandhi National University of Law (RGNUL), Punjab
To most people, workplaces include offices, factories, shops, and mines. Workplaces usually have gates, records, supervisors, remuneration for workers, and rules on how the workers should conduct themselves. The 2025-2026 Four Labour Codes were meant to change this scenario by bringing together all of the 29 labour laws in India into one uniform labour law regime. The main aim was simplification and wider coverage of those workers who had never been recognized before.
But after just one year of its implementation, the truth is starkly different.
The four Labour Codes in India that are Code on Wages, 2019, Code on Social Security, 2020, Industrial Relations Code, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 came into effect on 21st November 2025, thus repealing and replacing 29 central labour laws. The final Central Rules under these Labour Codes were notified by the central government on 8th May 2026. The aim was simple: one nation, one labour law.
But for many workers and employers, the truth was far from being so simple.
The Timeline: When Promise Met Reality
The four Codes came into force on 21 November 2025. The government decided that its target for attaining full operational parity would be achieved by 1 April 2026. Finally, the Centre notified the Central Rules in their entirety on 8 May 2026, consisting of Code on Wages (Central) Rules, 2026, Social Security (Central) Rules, 2026, Occupational Safety, Health and Working Conditions Central Rules, 2026, and Industrial Relations (Central) Rules, 2026. In addition, the Ministry has notified the Model Standing Orders, 2026, under the Industrial Relations Code, applicable in the service, manufacturing, and mining sectors.
Legally, all was now set in place.
However, as labour unions and scholars have highlighted, “implementation complete” is not necessarily equal to “worker protection.” The codes are there, but they do not uniformly apply. The enforceability of many provisions under the procedure is unclear. The process is over; the task of implementation is just starting.
State Variations: The Constitutional Patchwork
The subject Labour comes under the Concurrent List, which means that legislation can be done by Parliament as well as the State Legislatures. Though the central acts lay down the minimum standards, states need to issue their own rules for implementation. States may prescribe a higher minimum wage rate, stiffer registration requirements, and a shorter cycle of inspections than laid down in the central rules.
As of mid-2026, different states have reached various levels of notifications:
Gujarat is the sole exception wherein the State has issued final rules under all four labour codes. On 13 February 2026, Gujarat notified the Code on Social Security (Gujarat) (Amendment) Rules, 2026; and on 27 February 2026, Gujarat notified the Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) (Amendment) Act, 2026.
Karnataka has made final notifications regarding the Code on Wages and Industrial Relations Code, but draft notifications are available for the Social Security Code and OSH Code. Draft Code on Wages (Karnataka) Rules, 2026 were issued on 23 January 2026. Complete implementation of all four labour codes is expected in Karnataka from July 2026.
Maharashtra has made final notifications regarding the Code on Wages, while the rules of other codes (Industrial Relations Code, Social Security Code, OSH Code) are either draft notifications or are yet to be notified. On 28 April 2026, draft notifications regarding the Code on Wages and the Industrial Relations Rules were published by Maharashtra. The delay in making notifications regarding these labour codes by the state of Maharashtra is significant because it is the largest industrial state of India.
West Bengal and Kerala have not notified any labour code yet. According to sources, the new labour codes are soon to be implemented in West Bengal. The Union Minister Mansukh Mandaviya has said that the new codes will protect workers from being paid less than the floor wages of the nation. Even the government of West Bengal will have to implement it mandatorily.
In Delhi, there are no finalized rules in respect of the labour codes up to early 2026. However, on 11 March 2026, the government of Delhi issued notification for the Delhi Shops and Establishments (Amendment) Act, 2026, thereby bringing about modernization in the working culture of Delhi.
In such a scenario, what will be the position of a multi-state employer? The multi-state employer will have full compliance in Gujarat, partial compliance in Karnataka, and the entire old regime in Delhi. It is definitely not a common labour law system, but a compliance issue. Multi-state employers must go for “central policy plus state supplements”.
The 50% Wage Rule: The Most Consequential Change
As per Section 2(y) of the Code on Wages, basic pay, dearness allowance, and retaining allowance should collectively account for at least 50% of an individual’s total wages.
This change marks the end of an era where Indian companies maintained salaries with minimal basic pay, accounting for only 20-30% of CTC, and high allowance amounts.
The financial implications arising from this new regulation are quite significant. According to the New Labour Codes, if the allowance is more than 50% of wages, the excess would be included in wages, leading employers to revisit their payroll design. This would mean a 66% jump in gratuity payments for employees whose basic pay was traditionally 30% of their CTC.
There are some ambiguities still. The Code on Wages (Central) Rules only give a vague definition of “floor wage” without making any distinction from minimum wages. Also, the Code does not define any criteria for minimum wage fixation. From judicial observations made at the beginning, it looks like there will be disputes regarding wage definitions in 2026. Employers are already dealing with disputes on what is considered “basic pay” and allowances.
Gratuity Revolution: Fixed-Term Employees
The idea of Fixed-Term Employment (FTE) was legally introduced in India through the Industrial Relations Code, 2020, but fixed-term employment has been in use in practice for a long time. Fixed-term employees now have the right to claim pro-rata gratuity after one year of continuous service as compared to five years earlier.
This is indeed a big relief for contractual employees and project-based employees as these were not entitled to gratuity at all till date.
But for the employers, it is going to increase their liability for payment of gratuity for those companies where they have short-term contracts.
However, certain areas need to be addressed. For example, the code does not provide any information about the minimum period or any limit to the number of times the contract can be renewed. A minimum period of one year would have been useful to avoid very short periods of employment that may harm the employee. Some restrictions on the number of renewals could have been considered otherwise, even regular posts can become FTE posts. Unfortunately, the provisions of the code are still silent on these aspects.
Social Security: Gig Workers Finally Counted – But Still Vulnerable
The Social Security Code recognises gig and platform workers for the first time in the Indian laws.
There are mandatory social security payments that aggregators are required to make, amounting to 1-2% of their annual turnover, and shall not exceed 5% of payments made to gig workers. As per Central Rules, aggregators need to upload data of gig workers to the e-Shram Portal within the time periods specified under the Rules.
However, some issues persist. There is no provision in the Social Security Code (Central) Rules that seeks to clarify the nature of employment in the context of gig work. Gig workers and platform workers are considered as self-employed and form part of the unorganised sector. The Social Security Code provides for mandatory gratuity insurance that can ensure that workers are not denied gratuity by the employer. However, the Rules do not provide any guidance on how to operationalise this mechanism.
The Opposition: Trade Unions and Protests
The major central trade unions like AITUC, CITU, HMS, and INTUC have been critical of the labour codes, as these codes affect the job security of people, reduce the process of laying off workers, curtail the rights of workers to go on strike, and leave small trade unions at a disadvantaged position.
On February 12, 2026, ten Central Trade Unions called for a nationwide strike (Bharat Bandh) against the implementation of the Codes. More than 30 crore workers, farmers, agricultural workers, and other categories of workers joined the nationwide strike. The strike took place across more than 600 districts in India. The strike was called to show their opposition to the four Labour Codes and free trade agreements with the US, EU, and the UK.
The list of demands by trade unions was:
1. The cancellation of four labour codes.
2. Withdrawal of the Draft Seed Bill and Electricity Amendment Bill.
3. Withdrawal of the SHANTI Act.
4. The restoration of MGNREGA.
5. The cancellation of the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025.
To date, trade unions have staged six all-India general strikes in response to the introduction of the codes in light of the government’s continuous disregard of workers’ demands. Trade unions claim that the codes will undermine collective bargaining rights, limit the right to strike, and make almost 70% of the country’s factories exempt from labour laws, thus depriving millions of people of their occupational safety and security.
The joint forum comprises trade unions like the Indian National Trade Union Congress, All India Trade Union Congress, Hind Mazdoor Sabha, Centre of Indian Trade Unions, All India United Trade Union Centre, Self-Employed Women’s Association, All India Central Council of Trade Unions, Labor Progressive Federation, and United Trade Union Congress.
Even Bharatiya Mazdoor Sangh (BMS), which is aligned with the ruling party, has made known its intention to launch agitations against specific provisions. The agitation goes beyond just the opposition trade unions, as these codes have divided the labour movement itself.
Judicial Scrutiny: Courts Weigh In
These laws bring up major constitutional issues under Articles 14, 19, 21, and the Directive Principles of State Policy. It is believed that the weakening of inspection powers, making law through executive notifications, and failure to provide a living wage amount to a breach of fundamental rights guaranteed under the Constitution.
The Delhi High Court has highlighted gaps in the notification by the Centre, calling it an “inadequate” notification. The Madras High Court has clarified the continuation of the existing labour courts in case of the IR Code.
The Supreme Court has formed a nine-judge Constitution Bench to decide the definition of the word “industry” under the IR Code, 2020. The nine-judge bench will hear the matter starting 17 March and finish the hearing the next day.
Constitutional challenges have been filed stating that the codes violate the fundamental rights of the people. The judiciary now has to strike a balance between labour rights and the government’s “ease of doing business” policy.
Senior Advocate Sanjoy Ghose has observed that India’s new labour codes have unsettled well-developed labour jurisprudence and created fresh uncertainty for employers and employees alike.
The Economic Survey’s Optimistic Projections
The Economic Survey 2025-26 paints an optimistic picture of the labour codes. According to the Economic Survey 2025-26, implementation of the Labour Codes will be important for creating formal employment and enhancing the security of women and gig workers. The Survey claims that these codes would lead to the formalization ratio rising from 60.4% to 75.5%, creation of 77 lakh jobs, unemployment falling, an increase in the number of female labourers and contributing 1.25% to the GDP till 2029-30.
But such a projection is based on the assumption of uniform and effective implementation, which has been highly undermined by the patchwork at the state level.
Critical Gaps in the Central Rules
Instead of dealing with the controversial elements of the Codes through the promulgation of Rules, several serious lacunae have been created.
The Industrial Relations Code (Central) Rules stipulate that a single registered trade union should have a minimum membership of at least 30 percent. The Code on Wages (Central) Rules stipulate that the hourly wage will be arrived at by dividing the daily wage rate by 8. This, from a conceptual point of view, is a faulty way. The concept of hourly wage is not dependent on the pro rata determination of daily wages, since people might not get employment during the remaining part of the day. Globally, the minimum hourly wages are normally not dependent on the determination of daily wages. This is important because there are a large number of domestic workers in India, and there is a possibility of growth of gig economy jobs in the future.
Furthermore, the Rules contain a gender bias since the practice of considering a family of four members as having three consumption units is likely to continue, an adult woman will have a weightage of 0.8 while an adult man will have 1.0 weightage.
What the New Codes Offer
Despite certain shortcomings and implementation challenges, the new Labour Code introduces several progressive reforms aimed at improving workers’ rights and welfare. It mandates the issuance of a compulsory letter of appointment for all employees, ensuring greater transparency in employment relationships. Employees aged 40 years and above are entitled to free health examinations, while the principle of equal pay and equal opportunities is extended to female workers across different shifts. The Code also establishes a National Reskilling Fund to support workers who become unemployed, limits the maximum working hours to 48 hours per week, and guarantees at least one weekly rest day, along with overtime wages for work performed beyond prescribed working hours. Further, it prohibits discrimination in recruitment, wages, and other conditions of employment based on gender, expressly including transgender persons. However, the Code also raises the threshold requiring prior government permission for lay-offs, retrenchment, or closure of establishments from 100 to 300 workers, a change that has generated considerable debate regarding its impact on job security.
From Promise to Patchwork: The Unfinished Promise
After one year of implementing the biggest labour law reform that India has seen, the story that unfolds is neither the smooth sailing of reforms that its supporters had anticipated, nor the workers’ nightmare that its opponents had envisioned.
It is, rather, a quilt, an uneven quilt where, while Gujarat prepares for reforms, Delhi lingers under the haze of regulation, where workers get entitlements while others forfeit their jobs, where companies must grapple with regional variations, and where even the constitutionally appointed courts cannot pronounce a verdict yet.
While the four codes bring together 29 laws, “consolidation” does not mean “implementation”. “Notification” does not mean “enforcement”. And “legal recognition” does not imply “justice”.
The codes have already been enacted in an official capacity, but the rules that govern these codes have yet to be notified in many states, and as such, the enforcement process of many clauses of the Labour Codes is not entirely clear.
The unfulfilled promise of labour reforms in India cannot be achieved simply through legislation. There must also be political will at the state level, clarity on the part of the courts, compliance from employers, and most importantly, dialogue with the workers whom the codes are supposed to help.
The codes have been enacted. The real challenge has just started.
Caveat: The views, analyses, and information presented in this article are provided in good faith and for general informational purposes only. No representation or warranty, express or implied, is made regarding the accuracy, adequacy, validity, reliability, or completeness of the information. Readers should conduct their own research and seek professional guidance where appropriate. Neither the author nor the publisher shall be held responsible for any loss, liability, or consequence arising from reliance on this content.
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