Labour codes at 10 months: What has changed for employees and employers?

India’s four labour codes have completed ten months since coming into force on November 21, 2025, with companies increasingly shifting their focus from regulatory preparedness to implementation, workforce classification, and sustained compliance, according to Grant Thornton Bharat.

The four codes, which consolidate 29 central labour laws, aim to simplify India's fragmented labour framework while strengthening worker welfare, social security, and regulatory transparency. They cover wages, industrial relations, social security, occupational safety, and working conditions.

Over the past 10 months, the Centre has notified rules, issued clarifications and established institutional mechanisms to implement the new framework. In May 2026, it appointed inspector-cum-facilitators, appellate authorities, certifying officers, and other designated officials to oversee implementation in establishments under its jurisdiction.

However, implementation across states remains uneven, with several states and Union Territories yet to finalise their rules.

States make progress, but implementation challenges remain

According to Grant Thornton Bharat, Andhra Pradesh, Arunachal Pradesh, Bihar, Gujarat, Dadra and Nagar Haveli, Lakshadweep and Puducherry have finalised rules under all four codes. Uttar Pradesh, Rajasthan, Punjab, and the Andaman and Nicobar Islands have finalised rules under one or more codes.

As the regulatory framework takes shape, companies are reviewing their compensation structures, employment contracts, workforce policies and compliance systems.

Devesh Uniyal, Partner and Tax & Finance Consulting Leader at Grant Thornton Bharat, said the reforms go beyond consolidating existing legislation and reflect India's ambition to balance worker welfare with economic competitiveness. "The labour codes represent far more than a consolidation of labour laws. They reflect India's aspiration to build a modern labour and employment framework that balances worker welfare, social protection and economic competitiveness," he said.

Uniyal added that effective implementation could provide greater certainty for employers, stronger protection for workers and support a more formal and inclusive labour market.

Wage definition and worker classification emerge as key concerns

Despite clarifications issued by the Ministry of Labour and Employment, companies continue to face practical challenges in applying the new wage definition across different business scenarios.

Workforce classification has emerged as another major compliance priority. The codes distinguish between employees and workers, with protections relating to working hours, overtime, leave and industrial relations depending on the classification.

Individuals in managerial or administrative roles and supervisors earning above the prescribed monthly threshold of ₹18,000 are excluded from the worker category. However, the absence of a detailed framework defining managerial, administrative and supervisory responsibilities has created uncertainty for employers.

Companies are consequently reviewing employees' actual duties, decision-making authority and supervisory responsibilities rather than relying solely on designations, grades or remuneration. Grant Thornton Bharat said additional regulatory guidance could help ensure greater consistency across industries.

Companies overhaul payroll and settlement processes

The new framework has also prompted employers to review attendance systems, leave administration, payroll processes and workforce governance to comply with provisions governing working hours, overtime and weekly rest.

One significant operational change is the two-day full-and-final settlement requirement, which is prompting companies to redesign their employee separation processes.

Rather than treating settlements solely as a payroll function, employers are increasingly coordinating across human resources, finance, reporting managers and technology teams. Companies are also automating approvals and addressing delays related to attendance records, asset recovery and banking processes.

The codes additionally strengthen accountability in the deployment of contract labour, restrict its use in core activities subject to specified exceptions, and introduce registration, licensing and oversight requirements.

According to Grant Thornton Bharat, the next phase of implementation will require companies to move beyond initial regulatory readiness towards consistent compliance, stronger internal governance and more effective workforce management.