The full implementation of India's four consolidated Labour Codes (The Code on Wages, The Industrial Relations Code, The Code on Social Security, and The Occupational Safety, Health and Working Conditions Code) marks a strategic overhaul of the country’s industrial framework, particularly benefiting the export-driven textile and apparel sector. This modernization is a direct response to rising global demands for ethical sourcing and social accountability, exemplified by the European Union’s upcoming Corporate Sustainability Due Diligence Directive (CSDDD). Industry experts view the codes as a critical tool to ensure Indian factories are audit-ready, strengthening the supply chain's ability to maintain high compliance standards necessary to access major international markets.

The four new consolidated Labour Codes represent a strategic and historic overhaul of India's labour ecosystem, replacing 29 fragmented central laws with a unified framework. These codes were made effective from November 21, 2025, with the goal of expanding social security, formalizing employment, and streamlining compliance to align with global standards like the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD).

What are these four consolidated ‘Labour Codes’

1. The Code on Wages, 2019

This code consolidates four laws relating to wages, bonus, and equal remuneration.

● Universal ‘Minimum Wage’: Establishes a statutory right to minimum wages for all employees across the organized and unorganized sectors.

● National floor wage: Requires the Central Government to set a floor wage based on minimum living standards. State governments cannot fix minimum wages below this national threshold, ensuring uniformity.

● Wage definition standardisation: Standardizes the definition of 'Wages' across all four codes. Employers must ensure that at least 50% of the total remuneration qualifies as 'basic wages' (including basic pay and dearness allowance). This change is intended to increase the corpus for social security benefits like gratuity and pension.

● Overtime: Mandates that overtime work must be compensated at least twice the normal rate of wages.

2. The Industrial Relations Code, 2020

This code consolidates three laws governing trade unions, conditions of employment, and industrial disputes.

● Fixed-Term Employment (FTE): Provides clear legal sanction for fixed-term employees. FTEs are now entitled to the same wages, social security, and benefits (like medical cover and paid leave) as permanent workers on a pro-rata basis.

● Gratuity for FTEs: Critically, it allows fixed-term employees to qualify for gratuity after just one year of continuous service, formalizing employment for many workers, especially in the textile sector.

● Dispute resolution: Introduces a framework for the recognition of a sole Negotiating Union (with 51% or more support) to streamline collective bargaining and reduce disputes.

● Strikes and lockouts: Requires a mandatory 60-day notice period for workers planning a strike and employers planning a lockout, promoting industrial peace.

3. The Code on Social Security, 2020

This code consolidates nine laws related to social security provisions.

● Universal Social Security net: Extends social security coverage (including insurance, provident fund, and maternity benefits) for the first time to gig workers, platform workers, and all unorganized workers.

● Aadhaar-Linked portability: Mandates the creation of a national database for unorganized workers, issuing a unique, Aadhaar-linked ID that makes social security benefits fully portable across state borders for migrant workers.

● Expanded ESIC coverage: Extends the Employees’ State Insurance Corporation (ESIC) scheme coverage across India.

● Maternity benefits: Retains 26 weeks of paid maternity leave and requires establishments with 50 or more employees to provide creche facilities.

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

This code consolidates 13 laws concerning safety, health, and working conditions for workers.

● Night Shift for women: Permits women to work night shifts in all establishments (including factories) with their consent and mandatory adequate safety measures. This is a major enabler for export-oriented units to run double/triple shifts and scale up production.

● Mandatory appointment letters: Makes the issuance of a formal appointment letter to every employee compulsory, furthering the formalization of employment.

● Health and Welfare: Mandates free annual health check-ups for all workers over 40 years of age in specific establishments.

● Paid Leave: Reduces the eligibility period for earning one day of annual paid leave from 240 days of work to 180 days.

Compliance and business streamlining

Collectively, the codes introduce systemic reforms aimed at promoting Ease of Doing Business and global compliance:

● Single compliance regime: Replaces multiple registration, license, and return requirements with a Pan-India single registration and license system.

● Inspector-cum-Facilitator: Replaces the punitive "Inspector" role with an "Inspector-cum-Facilitator" model, emphasizing guidance and compliance support over rigid policing.

● Decriminalization: Replaces imprisonment with monetary fines for many minor, first-time offenses, encouraging voluntary compliance.

Scaling production with worker welfare

A key feature impacting manufacturing scale is the provision permitting women to work night shifts with their consent and mandated safety measures. This change is a game-changer for the female-dominated garment industry, allowing factories to operate double or triple shifts and significantly boost overall production capacity to meet seasonal export peaks. Simultaneously, worker security is enhanced: fixed-term employees (FTEs) now qualify for gratuity after just one year of service, down from five years. This measure formalizes the employment of up to 110 million textile workers and reduces high attrition rates in labor-intensive units like spinning mills.

Major Indian textile players view this reform as essential for their growth plan. Arvind, with its robust retail presence, relies on a highly competitive and ethically compliant domestic supply chain. The predictable, formalized labor environment provided by the new codes helps its sourcing partners maintain their financial outlook while ensuring the social compliance required for brand reputation and continued retail expansion against global competitors. The Southern India Mills' Association (SIMA) hailed the reform as a "historic achievement" that facilitates a level playing field in compliance costs.