The New Labour Codes Implemented: An Immediate Call to Action for Employers and HR Professionals

The full-scale implementation of India’s four new Labour Codes—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) with effect from 21st November 2025, marks one of the most significant overhauls in the nation's employment landscape since Independence. Consolidating 29 fragmented central laws into a simplified framework, this transition is not a gradual process but an immediate requirement for HR professionals and employers to secure statutory compliance and re-evaluate their entire Industrial Relations (IR) ecosystem.

This article details the critical, immediate shifts in industrial relations, dispute management, and fundamental employment terms that demand proactive change management and expert HR mentorship.

Statutory Approach to Unions and the Unrepresented Worker

The new IR Code fundamentally alters the dynamics between employers, Trade Unions, and the vast majority of the workforce who may not be union members.

Redefining Collective Bargaining

The Code introduces the concept of a Recognised Negotiating Union or a Negotiating Council. For the first time, a Trade Union must be formally recognised by the employer if it meets the statutory criteria (e.g., representing 51% of the workers in the establishment).

Impact: This formalisation is intended to streamline collective bargaining by ensuring that management negotiates with a legitimate, single entity. However, it also demands immediate verification and, potentially, new negotiation protocols for HR teams to ensure all settlements are legally binding and enforceable.

A New Voice for the Unrepresented

One of the most profound changes is the statutory mechanism for handling disputes involving workers who are not members of a Trade Union.

Individual Disputes as Industrial Disputes: The IR Code explicitly expands the definition of 'Industrial Dispute' to include a dispute arising from the discharge, dismissal, retrenchment, or termination of an individual worker, regardless of whether a Union espouses it. This is a massive shift from the old regime.

The Mandate for Grievance Redressal: Establishments with 20 or more workers must establish a Grievance Redressal Committee (GRC). This committee must include both employer and worker representatives, with mandatory inclusion of women members (at least one-third). The GRC is the first formal stop for any employee grievance, which must be resolved within 30 days.

This dual approach means that HR must immediately implement or upgrade a fair, impartial, and time-bound GRC process to prevent individual employee grievances from quickly escalating into formal, statutory Individual Disputes eligible for conciliation or adjudication.

Settlement of Disputes and Management of Disciplinary Actions

The new codes introduce procedural requirements and higher stakes in managing terminations and disputes.

Streamlining Dispute Resolution

The IR Code aims for faster, more formalised dispute resolution. Key changes include:

Two-Member Industrial Tribunal: To expedite the process, the Code permits the establishment of two-member Tribunals, accelerating the backlog of cases.

Voluntary Arbitration: It places greater emphasis on Voluntary Arbitration as a legitimate, pre-adjudication method for dispute settlement.

Time-Bound Awards: Awards by the Tribunal are expected to be made within one year from the date of the dispute reference.

Managing Disciplinary Actions: The Increased Threshold

For establishments with 300 or more workers (up from 100 in the previous law), the requirement to seek prior government approval for retrenchment, lay-off, or closure remains. While this threshold is higher, offering flexibility to smaller businesses, the process for managing all disciplinary actions (including termination for misconduct) must be impeccably documented. With the new Individual Dispute mechanism, a faulty disciplinary enquiry or a procedurally unsound termination is now an immediate, statutory dispute risk.

HR Action: HR must review all internal procedures, Standing Orders (if applicable), and documentation standards for terminations to ensure they stand up to the increased scrutiny of the new GRC and Tribunal process.

Immediate Impact on Wages and Working Conditions

The most quantifiable and immediate compliance challenges stem from the Code on Wages and the Occupational Safety, Health and Working Conditions (OSHWC) Code.

The New Definition of 'Wages'

The Code on Wages introduces a uniform, single definition of 'Wages' that impacts the calculation of all major social security and statutory benefits, including Provident Fund (PF), Gratuity, ESIC, and Bonus.

50% Basic Pay Mandate: The Code stipulates that the excluded allowances (like HRA, conveyance, and overtime) cannot exceed 50% of the total remuneration. This means the base components (basic pay, dearness allowance, and retaining allowance) must constitute at least 50% of the total pay.

Impact on Take-Home Pay: For companies that previously kept the basic component low for statutory benefit savings, this mandate forces a restructuring of the entire compensation structure. While statutory contributions will increase, leading to a potential reduction in immediate 'take-home' pay, it will simultaneously ensure higher retirement and terminal benefits for the employee. Immediate payroll system and compensation policy adjustments are non-negotiable.

Significant impact because of minimum wage based on ‘national floor wage’ may become a concern.

New Working Condition Mandates

The OSHWC Code introduces several new requirements that demand urgent operational and policy changes:

Fixed-Term Employment (FTE): FTE workers are now entitled to all statutory benefits equivalent to permanent employees, including gratuity after just one year of service (instead of the previous five years).

Gender Parity: The codes promote gender equality by permitting women to work night shifts and in all occupations, subject to their consent and the provision of mandatory safety measures, transport, and adequate security.

Mandatory Appointment Letters: All workers must be issued a mandatory appointment letter, formalising their employment and ensuring clarity on wages and working conditions.

The Imperative for Statutory Compliance and HR Mentorship

The comprehensive nature of the four Labour Codes makes a reactive approach a recipe for significant financial penalties, litigation, and reputational damage. The transition requires a dual focus: immediate statutory compliance and long-term HR capability building.

Immediate Statutory Compliance Checklist

Compensation Restructuring: Recalculate and re-roll payroll to align with the new 'Wages' definition and the 50% statutory-base requirement.

GRC Implementation: Establish and train the Grievance Redressal Committee mechanism immediately to comply with the IR Code, thus legally managing the new risk of Individual Disputes.

Policy Updates: Update all employment contracts, Fixed-Term Employment clauses, Standing Orders, and Disciplinary Procedures to reflect the new thresholds and statutory requirements.

The Role of HR Professionals and Employers

HR leaders and employers must shift from a 'compliance-as-policing' mindset to a 'compliance-as-facilitation' model. This is where HR Mentorship becomes crucial.

Internal Mentorship: HR teams need to be trained not just on the letter of the law, but on the spirit—promoting fairness, documentation excellence, and proactive dispute prevention.

External Support: Given the complexity and need for rapid change, engagement with external legal and HR compliance experts is vital for a smooth transition. They provide the necessary mentorship and statutory support to ensure that the immediate impact of these codes is one of preparedness and competitive advantage, rather than one of disruption.

The new Labour Codes are here to stay. They promise a modern, streamlined, and welfare-oriented framework. For HR professionals, the time to act is now, ensuring their organisations move swiftly and confidently into the new era of Industrial Relations.