Khaitan & Co.

India’s labour landscape is undergoing a comprehensive transformation through the enactment of four new labour codes – Code on Wages, Industrial Relations Code, Social Security Code, and Occupational Safety, Health & Working Conditions Code – which replace 29 older central laws and seek to modernize, simplify, and formalize employment regulation. Notification of the Labour Codes On 21 November 2025, the Central Government has brought into force the four labour codes, namely: (i) the Code on Wages, 2019; (ii) the Industrial Relations Code 2020; (iii) the Code on Social Security 2020; and (iv) the Occupational Safety, Health and Working Conditions Code 2020 (collectively, the “Labour Codes”), thus operationalising a consolidated statutory framework that would subsume and repeal 29 labour laws. However, several procedural and operational elements under the Labour Codes remain contingent upon the issuance of corresponding rules, schemes, and notifications by the Central and State Governments. Until such time, the Central Government has clarified that the existing rules, forms, registers, and procedural requirements prescribed under the erstwhile labour law regime will continue to govern day-to-day compliance including those protected by applicable survival provisions under the Labour Codes. Accordingly, while the substantive standards and provisions introduced under the Labour Codes have been notified and are in force, the operative framework on several aspects remains in a transitional phase. The consolidation exercise in the form of the labour codes does bring with it certain changes in the existing labour law regime. The digitization of procedures (relating to registration and intimations) and the concept of deemed registration (in case authorities do not register the establishment within the specified timeline) may be seen as a positive impact on the ease of commencing business as well as the ease of doing business. Similarly, the substitution of prosecution-oriented framework with facilitation process, whereby an employer would be given an opportunity to rectify any non-compliance, heralds an important change in the approach of the government. Having said that, current and potential employers may have to gear up for a relook at their workplace arrangements and workforce engagement structures. Fixed-term employments will see an important change in that employees engaged for a specified duration will also enjoy tenure-based benefits similar to permanent workforce (albeit on a pro-rated basis). Engagement of contract labour in an establishment’s core activities would be barred except in certain situations. Another salient feature includes the incorporation of a proviso to the definition of ‘wages’. As per the proviso, if the expressly excluded components exceed 50% of the overall remuneration (i.e., the ‘wages’ bucket + expressly excluded components), then some portion of these expressly excluded components will be taken out and added to the ‘wages’ bucket, idea being to bring ‘wages’ bucket to 50% level at the time of making various computations such as gratuity and retrenchment compensation. Accordingly, on the cost front, employers may see some impact on their expenses towards gratuity and severance compensation as these computations may have to be calculated on at least 50% of the total remuneration paid to an employee.   Supreme Court of India (“SC”) upholds validity of employment bonds The SC’s recent ruling in Vijaya Bank & Another v Prashant B Narnaware (2025 INSC 691) has reaffirmed the enforceability of employment bonds that require employees to serve a minimum tenure or pay liquidated damages for early exit. In the extant matter, the SC assessed the validity of a clause in an employee’s employment contract which mandated 3 (three) years of service and an indemnity of INR 2,00,000 for premature resignation, i.e., the consequential breach to be paid by the employee, prior to the lapse of the stipulated 3 (three) years. The employee in this regard, argued that such a clause violated Articles 14 and 19 of the Constitution of India, 1950, along with Sections 23 and 27 of the Indian Contract Act, 1872 (“Contract Act”). Through this judgment, the SC drew a clear line between restrictions applicable during employment and that applicable post-termination of employment, holding that service obligations during employment do not amount to restraint of trade under Section 27 of the Contract Act. It emphasized that such clauses serve legitimate business objectives like workforce stability and skill retention, rather than curbing future employment opportunities. The SC further held that such a clause is not violative of public policy given that public policy should be weighed against other factors including increased competition of a public sector organisations vis-à-vis private employers. Accordingly, the SC upheld the provisions concerning liquidated damages but specified that the enforceability of these clauses hinge on reasonableness and proportionality. The SC further opined that while employers can use service bonds to curb attrition, they must ensure that penalties are not excessive and align with actual losses. This decision signals judicial support for employment bonds as a lawful retention tool, provided they do not impose unfair burdens or conflict with public interest. This judgment is notable in the context of service bonds as the SC reiterated the distinction between a restrictive covenant meant to apply post termination, which amounts to a restraint on employment, and a restrictive covenant which operates during the subsistence of employment, noting that the service bonds fall into the latter category and, therefore, have legal force. That said, the contours of enforceability of service bonds do not appear to have been discussed in detail by the SC, as it does not deal with factual situations where an employee may be bound by onerous bond conditions and is subsequently restricted from tendering their resignation.   Issuance of mandatory directives for strict compliance with the POSH Act With the SC’s judgment in the case of Aureliano Fernandes v The State of Goa and Others (2025 SCC OnLine SC 1749), enforcement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 (“POSH Act”) has been on strict spotlight with directions to Indian states and union territories for robust compliance with the POSH Act, particularly the submission of their compliance reports and appointment of district officers as mandated under the POSH Act. This judicial push has acted as a catalyst for state administrations to tighten enforcement measures and ensure that employers adhere to statutory obligations under the framework of the POSH Act. Following these developments, several states have issued mandatory directives to strengthen compliance with the POSH Act. In Maharashtra, district administrations in Mumbai and Pune have instructed establishments with 10 (ten) or more employees to constitute internal committees (“ICs”) and update their details on the She Box portal. Additionally, Pune has mandated that proof of IC constitution to be submitted to the District Women and Child Development Officer via email. Following a similar suit, state governments of Rajasthan, Karnataka and Delhi have also released notifications directing establishments to register and update their IC details on the She Box portal. These measures reflect a nationwide trend toward stricter enforcement and greater digital transparency in preventing workplace sexual harassment. Separately, the FAQs on the She Box Portal also specify that it is mandatory for all eligible establishments (both public and private entities) to establish an IC. For ensuring compliance under the POSH Act, the portal is structured in such a way that, unless the concerned workplace/ office or authority uploads information about their IC, complainants will be unable to file complaints through the portal to the respective IC of their workplace. Therefore, it is imperative for all workplaces including public and private organizations and workplaces within their jurisdictions to submit the required details.   *** About the Firm and Employment, Labour and Benefits team Khaitan & Co is one of the oldest, national, top tier premier full-service law firm with over 1200 legal professionals, including 300+ leaders with presence in 7 states in India (Delhi, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal) and Singapore. With more than a century of experience in practicing law, we offer end-to-end legal solutions in diverse practice areas to our clients across the world. We have a team of highly motivated and dynamic professionals delivering outstanding client service and expert legal advice across a wide gamut of sectors and industries. The employment law practice team comprises of around 50 lawyers including 7 partners and 3 counsels, spread across various offices in the country (Mumbai, Bengaluru and Delhi). The team provides commercially oriented and practical advice on areas and events around business sale and acquisitions, change of ownership, employee benefits including equity-based incentive schemes, employment agreements and policies, workplace diversity and discrimination issues. We routinely conduct staff training on workplace ethics and anti-bribery issues. We also work closely with our clients on CXO recruitment, exits and separation agreements, secondment and consulting agreements, employee disputes and disciplinary inquiries and investigations and sexual harassment related situations. We also specialise in contract labour and alternate employment arrangements, whistle blower complaints, employee grievance redressal, workforce restructuring, staff re-classification and mobility, workplace health and safety issues as well as immigration advisory.

India’s labour and employment law landscape is in the midst of a pivotal transformation. From the shaping up of corresponding state-specific rules under the proposed Indian labour codes, to the recognition of the gig and platform economy within the Indian labour law regime, the intent has been to ensure that these laws remain contemporary and in accordance with the evolving Indian market. Introduction In India, the labour law regime is governed by various statutes and regulations, including both central and state-specific legislations. In fact, there are certain central labour law statutes under which the state government has formulated state-specific rules. For an establishment to ensure compliance with the labour laws in India, it has to compulsorily adhere to both the central and as well as state-specific labour law statutes. Various employment-related laws in India can be broadly categorized into four main areas: industrial relations, wages, social security measures and safety, health and working conditions of the employees. The applicability of most of the labour law statutes in India is subject to the employee threshold as set out under each of them, such as the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 (“EPF Act”) which applies to establishments employing 20 or more employees. In the event, the establishment has not met the employee threshold specified under the EPF Act vis-à-vis the applicability, the establishment will not be mandatorily covered under this law. Further, an establishment to which the EPF Act applies shall continue to be governed by the EPF Act notwithstanding that the number of persons employed subsequently falls below 20. Through this article, we have summed up the significant updates in the Indian labour law space that have transpired recently.   Extending the Social Security Net: The Evolving Legal Landscape for Gig Workers in India The exponential rise of the gig and platform economy in India has challenged the conventional employer–employee relationship that has historically underpinned statutory protections under Indian labour laws. With millions of individuals engaging in non-traditional work arrangements—whether in ride-hailing, food delivery, logistics, or freelance digital services, the Indian legal system has begun to acknowledge the need for a new robust framework that recognises and regulates this segment of the workforce. In recent years, both state and central governments have initiated steps to institutionalise social security protections for gig and platform workers. These measures reflect a conscious shift from exclusion to inclusion—acknowledging that platform-based workers deserve the same degree of social protection traditionally reserved for formal employees. In a landmark development, the state of Rajasthan became the first Indian state to enact a statute specifically targeted at regulating platform-based gig work. The Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act 2023 lays the foundation for a formalised system of social protection. The legislation mandates the registration of both gig workers and aggregators and provides for the establishment of a dedicated welfare board, namely the Rajasthan Platform-Based Gig Workers Welfare Board, empowered to design and administer benefit schemes for such gig workers. Following Rajasthan’s lead, the government of Karnataka released the draft Karnataka Platform Based Gig Workers (Social Security and Welfare) Bill, 2024. While yet to be enacted, the draft legislation reflects an intent to establish a more holistic regulatory framework. Like its Rajasthan counterpart, it provides for the constitution of a welfare board and the creation of a social security fund, to be financed through contributions from aggregators, workers themselves, and public grants. At the national level, the Code on Social Security 2020 (“SS Code”) represents a major legislative milestone. For the first time in Indian legal history, gig and platform workers are recognised as distinct categories of labour entitled to social security coverage. The SS Code empowers the Central Government to formulate schemes tailored to the needs of this segment and envisages the establishment of a National Social Security Board to oversee their implementation. The SS Code’s funding structure is envisaged as a collaborative model, drawing contributions from the Central and State Governments, aggregators, and other stakeholders. However, despite its potential, the SS Code remains unenforced as of May 2025, pending formal notification and the issuance of underlying state-specific rules. Its eventual implementation will be critical in ensuring a consistent, pan-India framework for gig workers’ social security and enforcement.   Labour Codes: Journey So Far The years 2019 and 2020 have seen major development on the Indian employment and labour law front wherein the President of India granted his assent to the four labour codes on wages, social security, industrial relations and working conditions i.e., (i) The Code on Wages 2019; (ii) The SS Code; (iii) The Industrial Relations Code 2020; and (iv) The Occupational Safety, Health and Working Conditions Code 2020. These codes aim to consolidate and consequently replace 29 central labour laws. They are yet to be brought into force, barring certain provisions relating to (a) employees’ pension fund, (b) Central Advisory Board on minimum wages, and (c) identification of workers and beneficiaries through Aadhaar number for social security benefits. Moreover, even if the codes are brought into effect, the same would require the issuance of rules, schemes, and notifications of the relevant state governments to have a comprehensive revised compliance regime. Under the labour codes, the ‘appropriate government’ for an establishment can be the Central Government or the state government, depending on the nature of its operations or the existence of multi-state operations. Such appropriate government has the power to inter alia issue rules detailing some of the substantive aspects broadly set out under the codes and also prescribing procedural compliances such as filings, maintenance of registers, etc. In the past year, several key industrialised states such as Haryana, Delhi, Maharashtra, Gujarat, Andhra Pradesh, Telangana, Tamil Nadu, and Karnataka released draft rules under some or all of the labour codes for public consultation. As of now, certain states are yet to publish draft rules on the code on wages, code on industrial relations, social security and occupational safety, health and working conditions. One of the salient features of the proposed labour codes shall be the inclusion of a proviso to the definition of ‘wages’. As per the proviso, if the expressly excluded components exceed 50% of the overall remuneration (i.e., the ‘wages’ bucket + expressly excluded components), then some portion of these expressly excluded components will be taken out and added to the ‘wages’ bucket, idea being to bring ‘wages’ bucket to 50% level at the time of making various computations such as gratuity, social security contributions and leave encashment. This, however, does not mean that the quantum of the ‘wages’ bucket will have to be increased to 50% level – all that the codes state is that if the ‘wages’ portion of the remuneration falls short of 50%, then some portion of the expressly excluded components specified in the definition of ‘wages’ should be taken out and added to the ‘wages’ portion at the time of making computation of payments such as gratuity, leave encashment, etc. Social security contributions such as employees’ provident fund contributions have to be computed basis the definition of wages under the codes. Gratuity, overtime, leave encashment and retrenchment compensation may see some impact due to maintenance of ‘wages’ at least at 50% level.   Karnataka High Court deems Special Provisions for “International Workers” under the EPF Act Unconstitutional In the case of Stone Hill Education Foundation v Union of India and Others [Writ Petition Number 18486 of 2012], the Karnataka High Court invalidated paragraph 83 of the Employees’ Provident Funds Scheme, 1952 (“EPF Scheme”) and Paragraph 43A of Employees’ Pension Scheme, 1995 (“EPS Scheme”), which contain special provisions for social security contributions to be made to international workers, as being violative of Article 14 of the Constitution of India. The petitioners in this case challenged the constitutionality of Paragraph 83 in the EPF Scheme and Paragraph 43A of EPS Scheme wherein they argued that requiring contributions for international workers to be made on their entire salary (without any capping) was arbitrary and violative of Article 14 of the Constitution of India. The court held that it was unconstitutional to treat “non-citizen employees working in India” differently from “employees who are citizens of India”, when both sets of workers are employed in India and are equals. The court further noted that while contributions towards employees’ provident fund contributions in India for an Indian employee working in a social security agreement (“SSA”) country are capped, a foreign national from a non-SSA country working in India is required to contribute to their employees’ provident fund contributions in India without any cap. Such a distinction among international workers based on nationality was held to be discriminatory. Significance: India has established SSAs with various countries to ensure continuity of social security benefits, avoid dual contributions, and facilitate mobility of labour across borders. These bilateral arrangements are intended to safeguard the social security rights of employees on international assignments by enabling reciprocal benefits between partnering nations. The judgment carries significant implications for international workers (foreign nationals), as it may prompt a substantial shift in the methodology used to compute employees’ provident fund contributions for this category of employees. If the Employees’ Provident Fund Organisation or the Supreme Court of India consider this ruling further, the regulatory framework governing international workers could undergo notable changes.   Looking Ahead: Challenges and the Road to Realisation These important developments, collectively mark a fundamental evolution in Indian labour law. However, the effectiveness of these reforms will depend heavily on robust implementation, consistent funding, institutional capacity, and continued stakeholder engagement, as relevant and appropriate.   About the Firm and Employment, Labour and Benefits team Khaitan & Co is one of the oldest, national, top tier premier full-service law firm with over 1200 legal professionals, including 300+ leaders with presence in 7 states in India (Delhi, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal) and Singapore. With more than a century of experience in practicing law, we offer end-to-end legal solutions in diverse practice areas to our clients across the world. We have a team of highly motivated and dynamic professionals delivering outstanding client service and expert legal advice across a wide gamut of sectors and industries. The employment law practice team comprises of around 50 lawyers including 7 partners and 3 counsels, spread across various offices in the country (Mumbai, Bengaluru and Delhi). The team provides commercially oriented and practical advice on areas and events around business sale and acquisitions, change of ownership, employee benefits including equity-based incentive schemes, employment agreements and policies, trade union related issues, workplace diversity and discrimination issues. We routinely conduct staff training on workplace ethics and anti-bribery issues. We also work closely with our clients on CXO recruitment, exits and separation agreements, secondment and consulting agreements, employee disputes and disciplinary inquiries and investigations and sexual harassment related situations. We also specialise in contract labour and alternate employment arrangements, whistle blower complaints, employee grievance redressal, workforce restructuring, staff re-classification and mobility, workplace health and safety issues as well as immigration advisory.