New Labour Code 2025 Explained: What Startups, MSMEs & Workers Must Know

Imagine getting your full gratuity after just one year of work, or running a startup without drowning in outdated compliance forms. That’s not a dream it’s India’s reality starting 2025. With the new labour codes now officially in force, every founder, MSME owner, and gig worker needs to understand what’s changed and fast. This isn't just a legal update—it's a ground-level shift in how work, wages, and rights are handled across the country.

This blog breaks down the new labour code 2025 into simple, human terms so you can stay compliant, informed, and ahead of the curve whether you’re a startup founder, freelancer, factory worker, or HR professional.

What Are the New Labour Codes?

India introduced four new labour codes in 2025, replacing 29 outdated labour laws. These include:

• Code on Wages, 2019
• Industrial Relations Code, 2020
• Social Security Code, 2020
• Occupational Safety, Health and Working Conditions Code, 2020

These new labour codes aim to simplify compliance, ensure fair treatment for workers, and modernize labour governance.

Why India Needed New Labour Laws in 2025

The old laws were designed in the 1930s–1950s, and didn't reflect today’s digital, gig-driven, or MSME-led economy. These new labour laws create a future-ready system that supports startup founders, formal employment, and gig workers alike.

New Labour Codes Highlights

Here are the top reforms:

• National minimum wage for all workers
• Gratuity eligibility after just one year for fixed-term employees
• Written appointment letters mandatory
• Free annual health checkups for workers aged 40+
• Timely salary payments enforced
• Women can work night shifts with consent and safety
• ESIC coverage for even one employee in hazardous work

Gratuity Rules Under the New Labour Codes

Earlier, gratuity was given after 5 years of service. Now, under the new gratuity rules, even fixed-term employees qualify for gratuity after just one year, improving job benefits for contractual and short-term workers.

National Minimum Wage: What Founders & Workers Need to Know

The new labour code 2025 introduces a national minimum wage, applicable across all sectors and regions. Startups and MSMEs must now review their pay structures to ensure compliance.

Legal Recognition for Gig Workers Under the New Labour Codes

Gig and platform workers (like food delivery staff, app-based freelancers) are now legally recognised under Section 2(35) of the Social Security Code. They are entitled to welfare schemes, aggregator-funded benefits, and portable social security.

New Labour Code for MSMEs: Simplified Compliance & Big Benefits

MSMEs benefit from:

• Single registration and licensing
• Reduced paperwork
• Clear definitions of employment types
• Easy integration with PF and ESIC This promotes formalisation while reducing legal hassles.

New Labour Code for Startup Founders: What to Update in Your HR & Payroll

Startup founders must now:

• Issue appointment letters to all staff
• Update HR policies for leaves, working hours, and health benefits
• Ensure payroll systems follow wage timelines
• Cover all eligible staff under PF and ESIC as per new labour codes in India

How the New Labour Laws Empower Women at Work

The new labour codes promote gender-neutral employment by:

• Allowing women to work night shifts
• Ensuring workplace safety protocols
• Enforcing mandatory representation in safety committees These changes will help increase women’s workforce participation.

Compliance Made Simple: Single License, Return & Registration

With the new labour codes, businesses no longer need to manage multiple labour returns. A unified compliance structure makes it easier to stay legally updated.

Future-Ready Workforce: The Broader Vision Behind Labour Reforms

From protecting gig workers to ensuring gratuity and universal wage protection, these reforms aim to:

• Create a resilient Indian workforce
• Improve ease of doing business
• Align India’s labour laws with global standards

FAQs

Q1. Are the new labour codes applicable to small startups?

Yes, especially regarding wages, PF/ESIC, and appointment letters.

Q2. What is the new gratuity rule?

Employees now become eligible for gratuity after just one year (if on fixed-term).

Q3. Are gig workers covered under the new labour codes?

Yes, they are legally recognised and entitled to social security benefits.

Q4. How does this affect MSMEs?

MSMEs must comply with simplified returns, ESIC coverage, and updated wage rules.

Q5. What are the 4 new Labour Codes?

The four new Labour Codes are:

(1) Code on Wages, 2019,

(2) Industrial Relations Code, 2020,

(3) Code on Social Security, 2020,

(4) Occupational Safety, Health and Working Conditions Code, 2020.