While the Centre’s decision to put into effect the four Labour Codes has been welcomed across the board, industry bodies and labour experts have said the government must now turn its attention to the implementational challenges.
Such challenges include the burden these new laws will place on smaller enterprises and the services sector, the problems associated with the overnight implementation of such sweeping changes, and the need for authorities to be conciliatory rather than over-strict with defaulters.
The Centre on Friday (November 21, 2025) announced that the four labour codes it had introduced about five years ago — the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 — would be made effective from November 21, 2025.
These four codes, rationalising 29 existing labour laws, are aimed at providing India’s working population with greater surety when it comes to appointment letters, social security, minimum wages, timely wage payments, insurance coverage, and health benefits, among others.
Compliance difficulties
“21 November is a date that has, without much notice or warning, become a landmark date in the context of employment laws and labour relations in India,” Atul Gupta, Partner, labour and employment practice at Trilegal said. “Decades old laws, many from the British era, have been replaced today with the Labour Codes, which have been in the making for several years.”
However, Mr. Gupta also highlighted the fact that the immediate applicability of the new laws will make compliance somewhat difficult for companies.
“Unfortunately, with no grace period for implementation, organisations will need to take immediate cognisance of the substantive provisions of the Codes that have come into force, even while they wait for Rules to be formalised,” he said.
Similarly, Rahul Ahluwalia, Founder and Director at Foundation for Economic Development, also said that the new labour codes would reduce the compliance burden for manufacturers, while also providing States greater flexibility on aspects such as retrenchment thresholds and quarterly caps on working hours.
‘Companies must tread carefully’
That said, Mr. Ahluwalia also said that the new labour codes also raise some new concerns.
“The services sector will now be affected by a lot of the rigid laws that used to cover only factories earlier,” he explained. “The government will need to stay flexible while ironing out wrinkles of implementation to ensure that we don’t disrupt sectors that are working well, and simultaneously encourage new investment.”
Mr. Gupta in fact cautioned organisations to pause and assess any material employment related actions right now, and seek legal guidance “to ensure that they do not unwittingly fall afoul of these new codes”.
‘MSMEs will need fiscal support’
In a note released following the decision on the labour codes, the Association of Indian Entrepreneurs (AIE), a not-for-profit body advocating on behalf of gig workers, traders, micro entrepreneurs, and the self-employed, said that the new labour codes would significantly increase employment costs for micro and small enterprises. It added that these enterprises would need fiscal support to comply.
“The expanded scope of Employees’ State Insurance Corporation (ESIC), Provident Fund and safety compliance means thousands of micro and small enterprises will see a sharp rise in employee-related expenditure,” AIE said in its statement.
It added that many MSMEs may be forced to restructure their workforce size, absorb higher social security payouts, invest in safety equipment and periodic medical checks, and upgrade HR systems to comply with new digital requirements.
“All of these are good measures, but [they] need financial support,” AIE argued. “These costs come at a time when MSMEs are already battling high inflation, rising capital costs and market uncertainties.”
‘Implementation must be conciliatory’
Anshul Prakash, Partner at Khaitan & Co, said that a lot would now depend on the implementation by the Centre and the States.
“Much would now depend on the ground level machinery of facilitators at Central and State levels who will be expected to approach the enforcement of these laws with a conciliatory mindset instead of that of prosecution for any non-compliance,” Mr. Prakash said.
“Practical bottlenecks may come up in respect of Rules under these codes that would need to be made effective by respective State governments,” he added.
Published – November 22, 2025 04:36 pm IST
