New Labour Codes 2025:On 21 November 2025, India took a major step towards modernizing its labor system by enacting four unified labor codes that merged 29 old laws. The new rules cover the whole gamut: remuneration, social security, industrial relations, and occupational health and safety.
Among the changes that have the greatest impact on workers are two: for the most tightly knit group, the cutoff for the minimum period of service entitling to gratuity has been reduced to one year, and wages have been redefined which may result in your provident fund contributions increasing.
New Labour Codes 2025
One of the headline reforms is that fixed-term employees (FTEs) can now claim gratuity after just one year of continuous service not five. This change applies only to employees on fixed-term contracts, not permanent staff, who still need to complete five years for gratuity. The government’s logic? If these FTEs are doing the same job, they deserve similar financial security and recognition as regular workers.
Previously, many contract workers rarely stuck around long enough to become eligible under the old rules, meaning they missed out on a benefit that’s supposed to reward long service. But with this reform, someone on a one-year or 18-month contract can walk away with gratuity, giving them a tangible financial cushion at the end.
Why Your PF Contribution May Rise?
Beyond gratuity, the new labour codes also standardize how wages are defined and that has a direct impact on how much PF (Provident Fund) and gratuity you’ll be eligible for. According to the new rules, “wages” will now include basic pay, dearness allowance (DA), and retaining allowance. On top of that, a defined percentage (for example, 50% of the total remuneration, or as notified) will be added back to compute wages for social security and gratuity.
In practical terms, this means that even if your Cost to Company (CTC) hasn’t changed, the portion counted as “wages” could now be higher, so your PF contributions and gratuity payouts could go up. But in return, you are building a stronger long-term retirement corpus through higher social security benefits.
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Other Important Protections
The labour codes do a lot more than just tweak gratuity and PF, they widen the safety net for many types of workers. For instance, they guarantee equal treatment for fixed-term workers, so they now get similar pay, leave, and medical benefits as permanent employees. The reforms also formally define gig and platform workers, bringing them under social security protections for the first time.
On the compliance side, businesses will now do single registration and file one annual return, which simplifies things for both companies and workers. For workplace health, the Code on Wages mandates free annual health check-ups for workers above 40.
What Employees Should Do to Benefit?
For employees, especially those on fixed-term contracts or frequent job changes, this is a moment to re-evaluate their employment terms. Ask HR about how your “wages” are defined going forward, check how your PF contributions may change, and understand your eligibility for gratuity after one year. It may also be worthwhile to plan your finances afresh: with potentially higher PF, the long-term savings component of your compensation is about to become bigger.
