A major transformation is underway in India's labour system. The government has implemented sweeping labour code reforms (2025-2026 rollout) that directly affect both workers and companies . These changes are among the biggest workplace rule updates in decades.
What Is the Big Change?
The government has replaced 29 old labour laws with 4 simplified Labour Codes covering:
- Wages
- Industrial relations
- Social security
- Workplace safety
This reform aims to simplify rules and modernize employment laws across India.
Major Changes for Workers
1. Change in Salary Structure
A key rule change affects how salaries are calculated:
- Basic salary must be at least 50% of total CTC
- This increases PF and gratuity contributions
Result:
- Higher retirement savings
- Slight reduction in monthly take-home salary for some employees
2. Higher Provident Fund (PF) Contribution
Because basic salary increases:
- PF contribution increases automatically
- Retirement corpus becomes larger
Benefit:
- More long-term savings
- Stronger pension security
3. Better Gratuity & Social Security
Workers may now receive:
- Higher gratuity payout
- Improved insurance and social benefits
- Faster settlement rules in some cases
4. Fixed-Term Employees Benefit
Fixed-term workers now get:
- Gratuity eligibility after 1 year of service in many cases
- Same benefits as permanent workers in several areas
5. Gig & Platform workers Recognized
For the first time:
- Gig workers (delivery, app-based jobs) get legal recognition
- Social security coverage is expanding
Major Changes for Companies
1. Higher Compliance Responsibility
Companies must:
- Restructure salary systems
- Update payroll calculations
- Follow stricter reporting rules
2. Hiring & Layoff Flexibility (with conditions)
- Larger companies may get more flexibility in workforce decisions
- But must follow updated approval thresholds and rules
3. Cost Restructuring Needed
Employers may face:
- Higher PF and gratuity cost
- Increased salary structure compliance burden
- Need for HR system changes
4. More Transparent Salary System
Companies can no longer:
- Keep basic salary artificially low
- Use allowances to reduce PF contribution
Impact on Monthly Salary (Simple View)
Short term:
- Take-home salary may slightly decrease
Long term:
- Retirement savings increase
- Gratuity becomes higher
- Social security improves
Why government Made These Changes
The main goals are:
- Simplify 29 old laws into 4 codes
- Improve worker protection
- Increase transparency
- Strengthen long-term financial security
- Formalize employment structure across India
Final Takeaway
The 'major change for workers and companies' refers to a complete overhaul of India's labour system.
workers get:
- Better long-term benefits
- Stronger PF & pension
- More legal protection
Companies get:
- Simplified but stricter compliance system
- Need to restructure salaries
Bottom Line
This reform is not just a salary change — it is a full restructuring of how employment, wages, and retirement benefits work in India.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader's own risk.
Source: India Herald - Kokila Chokkanathan