India’s New Labor Codes: Gratuity in 1 Year, Overtime Pay Doubled, Gig Workers Protected

On November 21, 2025, the Ministry of Labour and Employment rolled out four landmark labor codes that replace 29 outdated labor laws — a move that instantly reshapes employment rights for over 500 million workers across India. The most dramatic change? Workers now qualify for gratuity after just one year of service, down from five. Overtime pay is doubled, gig workers gain formal social security, and fixed-term employees get equal benefits as permanent staff. This isn’t just policy reform — it’s a seismic shift in how India treats its workforce.

From Five Years to One: The Gratuity Revolution

For decades, Indian workers had to slog through five years before earning gratuity — a lump-sum payment upon leaving a job. Now, thanks to the Labour Code on Wages, 2019, that wait is gone. A worker who leaves after 12 months gets paid based on last drawn salary, prorated. This isn’t symbolic. It’s financial relief for contract workers, retail staff, and seasonal laborers who rarely stay long enough to qualify before. The change also means employers must now allocate at least 50% of an employee’s CTC as basic pay — a rule that automatically boosts PF and gratuity contributions. For someone earning ₹40,000/month, that could mean an extra ₹4,000–₹6,000 in monthly savings tucked away.

Overtime Pay Doubled — And It’s Not Optional

Working late used to be a silent expectation. Now, it’s a legally binding cost. Under the Industrial Relations Code, 2020, overtime must be paid at double the normal rate. No more ‘voluntary’ extra hours disguised as duty. Employers can’t force it either — workers must give written consent. The workweek is capped at 48 hours, with daily limits of eight. This change hits manufacturing, logistics, and call centers hardest. But it also empowers workers: if you’re clocking 12-hour days, you’re now entitled to ₹1,600 extra per day on a ₹100/hour wage. That’s more than ₹32,000 extra a month for someone working six days a week.

Gig Workers Are Now Workers — Not Just ‘Contractors’

The Social Security Code, 2020 does something unprecedented: it legally defines gig workers, platform workers, and aggregators. That means Uber drivers, Swiggy delivery partners, and UrbanClap cleaners are no longer invisible. They’re now eligible for provident fund, life and disability insurance, maternity benefits, and even skill development funds. The government will set up a ₹10,000 crore National Social Security Fund to cover them. It’s not perfect — contributions are still split between platform, worker, and state — but for the first time, these workers have a seat at the table. A 2024 NITI Aayog report estimated 15 million gig workers in India. Now, they’re covered.

Fixed-Term Workers Get Equal Pay, Equal Rights

Companies have long used fixed-term contracts to avoid benefits. No more. The new codes mandate that fixed-term employees receive the same wages, leave, medical coverage, and social security as permanent staff doing the same job. This kills the ‘contract trap’ — where workers are stuck in 6-month renewals for years, denied bonuses or promotions. It also forces employers to be transparent. A ₹35,000/month fixed-term engineer now gets the same PF, gratuity, and bonus as a permanent one. The move is expected to cut down contract labor abuse in factories, IT parks, and even hospitals.

One Registration, One License, One Return

Before, a factory owner had to file 15+ forms across different departments. Now, it’s one registration, one license, one annual return — all online. The Occupational Safety, Health and Working Conditions Code, 2020 streamlines compliance. Small units under 50 workers get lighter rules. Big ones? They must form safety committees. And for the first time, the National OSH Board will set uniform safety standards across sectors — from mines to software offices. This isn’t bureaucracy. It’s accountability.

Enforcement Gets Teeth — And Speed

Labour disputes used to drag on for years. Now, industrial tribunals with two members must resolve cases within 60 days. Appeals against EPFO orders require only 25% of the disputed amount to be deposited upfront — not the full sum. And the Employees’ Provident Fund Organisation (EPFO) has just two years to audit all pending cases — a massive backlog that’s been ignored since 2019. No more ‘reopen cases’ after five years. The system is being cleaned up.

What’s Next? Implementation Is the Real Test

The rules are clear. But enforcement? That’s where history stumbles. Previous labor reforms in 2020 were delayed for years by state resistance and employer lobbying. This time, the central government is tying compliance to GST and tax filings. Non-compliant firms could face digital blacklisting. The Universal Account Number (UAN) now links all workers’ PF accounts nationwide — so a migrant laborer from Bihar working in Gujarat can carry his savings with him. That’s portability. That’s dignity.

Still, challenges remain. Will small businesses afford the higher payroll costs? Will platforms like Zomato and Ola truly contribute to social security funds? Will workers know their rights? The government is launching 50,000 labor helplines and 10,000 mobile vans to educate workers in rural areas. But the real test begins now — when the first gig worker files a claim, or the first factory owner is fined for unpaid overtime.