Ten months on, implementation challenges still exist in the labour codes transition, says GT Bharat
Ten months after India's four labour codes came into effect, implementation challenges remain, according to an industry assessment presented at a recent seminar.
Around ten states have notified their final rules under the codes; the remaining states and Union Territories have so far only released draft rules for public consultation.
Central rule-making is largely complete, but full operationalisation depends on matching state-level rules, since labour is a subject on which both the Centre and states legislate.
Persistent gaps include unclear wage and worker classification norms, contract labour compliance, payroll system upgrades, delayed full and final settlements, and low worker awareness of new entitlements.
Government functionaries have indicated an expectation that most states and UTs will notify their rules by around end-October 2026.
The Four Labour Codes — Consolidation and Effective Date
India's labour law framework was overhauled by consolidating 29 central labour laws into four 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 (OSH) Code (2020). All four codes were brought into force with effect from 21 November 2025, replacing a fragmented body of legislation that had accumulated since the early twentieth century.
Key Details
- Code on Wages, 2019 — merges the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act
- Industrial Relations Code, 2020 — merges the Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act
- Code on Social Security, 2020 — merges the EPF Act, ESI Act, Maternity Benefit Act, and Employees' Compensation Act, among others
- OSH Code, 2020 — merges the Factories Act, Contract Labour Act, and several other safety-related statutes
- Codes notified as effective from 21 November 2025, but full implementation also requires matching Central and State rules
The "ten months" reference point in the news traces back to the codes' effective date; the residual implementation gap is precisely the rule-making step that remains incomplete at both Central and State levels.
Labour as a Concurrent List Subject — Why State Rules Matter
Labour welfare, industrial disputes, and social security fall under the Concurrent List (List III) of the Seventh Schedule to the Constitution, meaning both Parliament and State Legislatures can make laws on these subjects. This is why a Central code alone cannot be operationalised uniformly — each state must separately notify its own rules (covering matters like inspection mechanisms, licensing, and local wage boards) before the code takes practical effect within that state.
Key Details
- Entry 22, List III — Trade unions; industrial and labour disputes
- Entry 23, List III — Social security and social insurance; employment and unemployment
- Entry 24, List III — Welfare of labour, including conditions of work, provident funds, employers' liability, and maternity benefits
- Under Article 254, a Central law prevails over a conflicting State law on a Concurrent List subject, unless the State law has received Presidential assent
The staggered pace of state rule notification — some states finalised, others still at the draft stage — is a direct consequence of labour being a shared Centre-State legislative domain rather than an exclusively Union subject.
Code on Wages, 2019 — Floor Wage vs Minimum Wage
The Code on Wages introduced the concept of a national "floor wage" for the first time in Indian labour law, distinct from the pre-existing "minimum wage." Under Section 9, the Central Government determines a floor wage after considering workers' minimum living standards, and may notify different floor wages for different geographical areas. Under Sections 6 and 9, no state or Central minimum wage fixed for any category of employment can be lower than the applicable floor wage.
Key Details
- Floor wage: fixed by the Central Government (Section 9), varies by region
- Minimum wage: fixed by the "appropriate government" (Centre or State) under Section 6, cannot be set below the floor wage
- Existing minimum wages higher than the floor wage cannot be reduced to match it
- The earlier Minimum Wages Act, 1948 had no equivalent floor-wage safeguard
Wage and worker classification ambiguity — cited as a live implementation challenge — stems partly from employers and states still aligning existing wage schedules with the new floor-wage architecture.
Code on Social Security, 2020 — Gig and Platform Worker Coverage
The Code on Social Security is the first Indian labour statute to formally define and extend social security coverage to gig workers and platform workers, reflecting the growth of app-based and on-demand work. It places specific funding obligations on "aggregators" — digital intermediaries connecting service providers with users — to finance welfare schemes for this workforce.
Key Details
- "Gig worker" defined under Section 2(35): a person performing work outside a traditional employer-employee relationship
- "Platform worker" defined under Section 2(61): a person performing tasks through an online platform or app that functions as an aggregator
- "Aggregator" defined under Section 2(2): a digital intermediary or marketplace connecting a buyer/user of a service with the service provider
- Under Section 114, read with the Seventh Schedule, aggregators across specified categories must contribute an amount typically between 1% and 2% of annual turnover toward a social security fund for gig and platform workers, subject to a ceiling of 5% of the amount paid or payable to such workers
Extending these new entitlements in practice depends on state rules and administrative machinery for registration and contribution collection — one of the "digital capability" gaps flagged in the implementation review.
- 29 central labour laws consolidated into 4 labour codes
- The four codes: Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), OSH Code (2020)
- Codes came into effect: 21 November 2025
- Roughly 10 states had notified final rules by the time of the review; others remain at the draft-rules stage
- Target cited for most states/UTs to notify rules: around end-October 2026
- Relevant Concurrent List entries: 22 (trade unions/labour disputes), 23 (social security/employment), 24 (labour welfare)
- Floor wage: Section 9, Code on Wages, 2019; minimum wage cannot be fixed below it (Sections 6 and 9)
- Aggregator contribution for gig/platform worker welfare: 1–2% of annual turnover, capped at 5% of amounts paid to such workers (Section 114, Code on Social Security, 2020)