Key Takeaways From the New Labour Codes for HR Professionals | Mahesh Krishnamoorthy | Managing Director | Core Integra

As the long-awaited Labour Codes officially come into effect, HR professionals across industries are preparing for one of the most significant transitions in employment law in decades. Designed to consolidate 29 complex central labour legislations into four streamlined codes, namely, the Codes on Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions, these changes aim to simplify compliance, strengthen worker welfare, and create uniformity across states. Yet, beyond legal commentary, the real question is: what do these new codes mean for HR teams on the ground, and how will they impact costs, hiring, and operations?

Redefining Wages and Salary Structures

One of the most visible and immediate shifts is the new statutory definition of “wages.” By mandating that Basic Pay, Dearness Allowance, and Retaining Allowance together must constitute at least 50% of total remuneration, organisations can no longer use allowances disproportionately to dilute the wage base. This change has far-reaching implications for payroll and compensation planning.

For HR teams, this means a complete review of salary structures, recalculation of CTCs, and reconfiguration of PF, gratuity, and overtime calculations. For instance, in a mid-sized company with 500 employees, recalculating contributions under the new wage definition could increase social security liabilities by 10–15% annually. Transparent employee communication is crucial; HR must clearly explain revised take-home pay, statutory deductions, and the rationale behind these changes to prevent confusion or dissatisfaction.

Accelerated Offboarding Processes

The new codes also demand faster action during separations, with full and final settlements required within two working days of an employee’s exit. Traditional exit processes, which often relied on staggered handovers over a week, are now obsolete. HR teams must ensure seamless coordination between payroll, IT, operations, and asset management departments.

This is both a challenge and an opportunity. By automating exit workflows through HRMS platforms, organisations can minimise delays, reduce errors, and maintain compliance. In addition, this shift encourages HR to standardise processes across locations, ensuring multi-state operations adhere to uniform timelines and procedures.

Employee Classification: Worker vs Employee vs Contract Worker

The codes bring uniformity to the definitions of “employee,” “worker,” and “contract worker,” which directly affects benefits eligibility, statutory coverage, and payroll computations. Under the new framework, a worker is defined as someone earning up to ₹15,000 per month, while “employee” applies to all roles including managerial, supervisory, and technical staff.

This has practical implications: HR must now conduct role-based audits, revising records, contracts, and benefits alignment. Training managers and supervisors on these distinctions is essential, as misclassification can expose the organisation to compliance violations, penalties, and reputational risk.

Increased Accountability for Contract Labour

The principal employer now bears greater liability for contract labour compliance. While contractors retain primary responsibility, non-compliance by vendors can result in penalties for the company. HR teams must therefore implement rigorous monitoring, including monthly compliance checks, PF and ESI verification, and audit-ready record maintenance. Contract agreements must be strengthened, with clear KPIs and compliance clauses, to safeguard the organisation against legal and financial risks.

Expanding Social Security Coverage

The Social Security Code has broadened workforce coverage considerably. ESIC now applies even if a hazardous workplace employs a single worker. Fixed-term employees become eligible for gratuity after just one year, and gig or platform workers, who were previously outside formal safety nets, are now included through a central registration system.

For HR, this translates into updated onboarding documentation, correct eligibility assessments, and employee education programs about available benefits. Organisations must treat all categories of employees, contractual, gig-based, or fixed-term—with greater uniformity and care, reinforcing employer branding and building trust across the workforce.

Occupational Safety and Health: A Proactive Approach

Workplace safety receives renewed emphasis under the OSHWC Code. Mandatory health checkups, stricter safety norms, and a structured process for accident compensation highlight the need for proactive welfare management. HR teams must update SOPs, conduct periodic training, collaborate with operations and safety teams, and maintain detailed records.

Penalties for non-compliance are now significantly higher, creating an incentive for organisations to adopt digital safety monitoring, routine audits, and incident tracking. In industries such as manufacturing, construction, or chemicals, compliance with OSHWC can reduce workplace accidents, improve morale, and enhance productivity.

Industrial Relations and Workforce Stability

The Industrial Relations Code also brings a paradigm shift. A mandatory 14-day strike notice, formation of Works Committees, and Grievance Redressal Committees require HR teams to adopt proactive engagement strategies. Additionally, the Reskilling Fund, mandating a deposit equivalent to 15 days’ wages for retrenched employees, adds a financial dimension to workforce rationalisation.

HR leaders must ensure that internal policies reflect these requirements, create communication channels for conflict resolution, and document all industrial relations activities to remain compliant. Proactive engagement not only prevents disputes but also strengthens employee trust and retention.

Digital Compliance and Policy Modernisation

The new codes require updates to nearly all HR policies, employment contracts, and statutory registers. Fragmented formats are replaced by digital documentation, unified registration systems, and streamlined returns. HR now has an opportunity to drive a complete compliance modernisation, leveraging technology to standardise processes, improve record accuracy, and ensure timely reporting.

Investing in HRMS tools, training teams on digital workflows, and educating employees on new procedures will determine how smoothly organisations transition to the new regime. Those that embrace digital compliance early will gain a strategic advantage in efficiency, cost management, and regulatory resilience.

Strategic Implications for HR Professionals

Beyond operational changes, the new Labour Codes present HR professionals with a chance to redefine the workplace ecosystem. By ensuring transparent communication, fair and uniform treatment of employees, and proactive compliance management, HR can strengthen organisational credibility and employee trust.

For example, digital tracking of social security compliance and safety metrics not only prevents penalties but also demonstrates a company’s commitment to employee welfare—a factor increasingly valued by investors, regulators, and prospective talent. Similarly, standardised wage structures and offboarding processes improve financial predictability and operational efficiency, providing a clear return on investment for HR-led initiatives.

In essence, the new Labour Codes are far more than legal updates, they are a catalyst for a modern, organised, and employee-centered HR ecosystem. For HR professionals, they present both challenges and opportunities: the challenge of overhauling legacy processes, and the opportunity to implement robust, transparent, and future-ready HR practices.