While the Centre’s decision to implement the four labor codes has been welcomed across the board, industry bodies and labor experts have said the government should now focus its attention on implementation-related challenges.
Such challenges include the burden these new laws will impose on small enterprises and the service sector, problems associated with overnight implementation of such sweeping changes, and the need for authorities to be accommodative rather than overly strict with defaulters.
The Center on Friday (November 21, 2025) announced that the four labor codes it introduced nearly five years ago – the Code on Wages, 2019, the Code on Industrial Relations, 2020, the Code on Social Security, 2020 and the Code on Occupational Safety, Health and Working Conditions, 2020 – will be made effective from November 21, 2025.
29 These four codes, which rationalize existing labor laws, aim to provide greater certainty to India’s working population in terms of appointment letters, social security, minimum wages, timely wage payments, insurance coverage and health benefits, etc.
compliance difficulties
“November 21 is a date that, without any prior notice or warning, has become a landmark date in terms of employment laws and labor relations in India,” said Atul Gupta, Partner, Labor and Employment Practice, Trilegal. “Decades-old laws, many of which date back to the British era, have today been replaced by labor codes that were many years in the making.”
However, Mr Gupta also highlighted the fact that the immediate applicability of the new laws will make compliance somewhat difficult for companies.
“Unfortunately, with no grace period for implementation, organizations will need to immediately take cognizance of the substantive provisions of the codes that have come into force, even as they wait for the rules to be formalized,” he said.
Similarly, Rahul Ahluwalia, founder and director of the Foundation for Economic Development, also said that the new labor codes will reduce the compliance burden for manufacturers, while also providing greater flexibility to states on aspects such as retrenchment limits and quarterly limits on working hours.
‘Companies should proceed with caution’
That said, Mr Ahluwalia also said that the new labor codes also raise some new concerns.
“The services sector will now be hit by many stringent laws that earlier covered only factories,” he said. “The government will need to remain flexible while addressing implementation difficulties to ensure we do not disrupt sectors that are working well, and at the same time encourage new investment.”
Mr Gupta actually cautioned organizations to pause and assess any material employment-related actions now, and seek legal guidance “to ensure they do not inadvertently violate these new codes”.
‘MSMEs will need fiscal support’
In a note issued after the decision on labor codes, the Association of Indian Entrepreneurs (AIE), a non-profit body advocating on behalf of gig workers, traders, micro entrepreneurs and the self-employed, said the new labor codes will significantly increase employment costs for micro and small enterprises. It added that these enterprises would require financial assistance to comply.
“The expanded scope of Employees’ State Insurance Corporation (ESIC), Provident Fund and security compliance means that thousands of micro and small enterprises will see a sharp increase in employee-related expenses,” AIE said in its statement.
It said many MSMEs may be forced to restructure the size of their workforce, absorb higher social security payments, invest in safety equipment and periodic medical checkups, and upgrade human resource systems to comply with new digital requirements.
“These are all good measures, but [they] Financial support is needed,” AIE argued. “These costs come at a time when MSMEs are already struggling with high inflation, rising capital costs and market uncertainties.”
‘Implementation should be cordial’
Anshul Prakash, partner, Khaitan & Company, said that now a lot will depend on the implementation by the Center and states.
“A lot will now depend on the grassroots machinery of facilitators at the Center and State level, who will be expected to implement these laws with a conciliatory mindset rather than prosecuting for any non-compliance,” Mr Prakash said.
“There may be practical constraints in terms of rules under these codes, which will need to be given effect to by the respective state governments,” he said.
published – November 22, 2025 04:36 PM IST