INDIA’S UNORGANISED LABOUR AND THE 2025 LABOUR CODES:
This paper analyses the impact of India’s four Labour Codes, implemented in November 2025, on the unorganised workforce, which constitutes over 90% of total employment. The Codes aim to consolidate fragmented labour laws and expand coverage through measures such as universal minimum wages, social security for gig and platform workers, and portability of benefits. While these reforms signal a shift towards formalisation and inclusivity, their effectiveness remains contingent on implementation. The paper highlights key challenges, including uneven state-level rulemaking, gaps in coverage, and limited clarity in enforcement mechanisms. It argues that despite their progressive intent, the Codes risk reproducing structural inefficiencies of the earlier regime unless supported by coordinated state action and robust administrative execution.
1. INTRODUCTION
India’s unorganised sector is the engine of its economy as well as its invisible sector. More than 90% of the workforce (estimated to be over 450 million people) works in it but is largely excluded from the scope of law and regulation. Construction workers, farm workers, domestic workers, daily-wage earners all those who build cities and feed villages go without contracts, without benefits and with salaries that often fall short of the legal minimum wage. The National Commission for Enterprises in the Unorganised Sector (NCEUS) reported that only 0.4% of unorganised workers were covered by the Provident Fund (even as they were in 1999-2000).
For a long time, this sector was governed by three key laws the Unorganised Workers Social Security Act, 2008; the Building and Other Construction Workers Act, 1996 and the Inter-State Migrant Workmen Act, 1979. All had one common problem they established an institutional framework without welfare obligations. For example, building welfare boards amassed an unspent corpus of around ₹70,000 crore while the majority of 5.65 crore registered workers were unable to benefit from this money because of state-bifurcated administration.
On 21 November 2025, the Government of India implemented all four Labour Codes in one go, an occasion the Ministry of Labour and Employment heralded as a significant move to “modernise India’s labour market, expand worker protections and simplify regulations”. The Codes harmonise 29 central laws into four.
2. INDIA’S FOUR LABOUR CODES
- The Code on Wages, 2019
The Code on Wages replaces four earlier laws the Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976. By far its most significant reform is that minimum wages will now be applicable to all workers, in both the organised and unorganised sectors, regardless of type of work or the amount of wages.
Three other reforms are noteworthy. First, a national minimum wage is mandated set by the Central Government on the basis of minimum living standards which cannot be lower than the state’s minimum wage. Second, Section 2(y) defines “wages” as basic pay and dearness allowance, with a 50% rule the total allowances (HRA, conveyance, etc.) must not exceed 50% of total remuneration. This increases the salary base for PF, gratuity and bonus, which significantly boosts long-term benefits. Third, termination and resignation wages are to be paid within 2 days and the statute of limitation for payment of wages is increased from 6 months-2 years to 3 years. There is a prohibition on gender discrimination in wages (including those of transgender persons).
- The Code on Social Security, 2020
The Code on Social Security is the most architecturally important Code. It amends nine existing laws such as the Unorganised Workers Social Security Act, 2008; the Employees Provident Funds Act, 1952; the Maternity Benefit Act, 1961 and the Construction Workers Welfare Cess Act, 1996 and includes three new classes of workers unorganised workers, gig workers and platform workers.
The Code provides a critical new financing model for gig and platform workers: aggregators (digital platforms like food delivery and ride-hailing apps) must pay 1-2% of their turnover to a central Social Security Fund (with a maximum of 5% of payments to such workers). This fund funds life and disability insurance, health and maternity benefits, accident insurance, and old age security for an estimated 23.5 million gig workers by 2029-30. All workers are given an Aadhaar-based Universal Account Number (UAN) to allow benefit portability across states and aggregators overcoming the cross-state benefit exclusion that rendered the 1996 Act unworkable. Workers on contract are now eligible for gratuity after one year, rather than five.
- The Industrial Relations Code, 2020
The Industrial Relations Code all sections of which were enforced on 21 November 2025 amalgamates the Industrial Disputes Act, 1947; Trade Unions Act, 1926 and Industrial Employment (Standing Orders) Act, 1946 The number of workers for which government permission is required for retrenchment, lay-offs and closures is increased from 100 to 300. A Workers Re-skilling Fund is established at the time of retrenchment, employers will have to pay 15 days last drawn wages for each worker. Industrial Tribunals, staffed with only two members, are introduced to speed up dispute resolution and there must be a formal conciliation process before disputes can proceed. Also work from home is recognised in the Model Standing Orders for services sector workers.
- The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020
The OSHWC Code amends 13 existing laws such as the Factories Act, 1948; Contract Labour (Regulation and Abolition) Act, 1970; Inter-State Migrant Workmen Act, 1979 and Building and Other Construction Workers Act, 1996. These have all been effective since 21 November 2025. The Code contains mandatory annual free health check for workers beyond a certain age; maximum 8 hours/day and 48 hours/week with double overtime pay; safety committees for factories employing 500 plus workers and allowing women to work night shifts with express permission and safety precautions. The threshold for applicability of contract labour increases from 20 to 50 workers and all-India, 5-year validity workmen’s licence replaces licensing based on work orders significantly easing compliance for inter-state contractors. Inter-state workers have their rations and construction cess benefits portable in their state of work, not just state of registration as previously required filling the most glaring loophole in the 1979 Act.
3. CRITICAL ANALYSIS
The Labour Codes represent a sea change from the past. The number of people covered by social security has grown from 19% in 2015 to 64% in 2025. According to SBI Research, if fully implemented, the scheme could potentially lead to a 1.3% drop in unemployment and creation of 77 lakh new jobs. The constitutional promise expressed in People’s Union for Democratic Rights v. Union of India (payment below minimum wage is a violation of Article 23), Olga Tellis v. Bombay Municipal Corporation (right to livelihood under Article 21) and Dhirendra Chamoli v. State of U.P. (equal pay for daily wage workers) has been largely turned into law.
But there are many hurdles as of April 2026, the draft Central Rules have been published on 30 December 2025 for comment in 30-45 days but state rules remain patchy Karnataka, Maharashtra, Kerala and Delhi have notified some rules; West Bengal has refused and Tamil Nadu has refused to notify Social Security Code rules, citing concerns they will affect existing welfare boards. This results in a complex compliance landscape that could replicate pre-existing fragmentation.
Three key gaps need addressing. First, the Code on Social Security does not detail how the Aadhaar-linked UAN will be created, or how gig workers can lodge disputes making formal status potentially a formality. Second, the Social Security Code does not explicitly include farm workers in its definition a glaring exclusion considering the agricultural workforce is the largest group in the unorganised sector. Third, the Code lacks provisions for settling disputes with state Shops and Establishments Acts, complicating compliance.
4. CONCLUSION
The simultaneous implementation of the four Labour Codes on 21 November 2025 is the most significant labour law reform in India since Independence. The Codes universalisation of minimum wages, requirement of aggregator contributions for gig workers, Aadhaar-linked portable benefits and integration of 29 statutes into a single framework overcome the structural failures definitional exclusion, bureaucratic disjointedness and non-portability of benefits that plagued their predecessor laws.
But laws are not implemented in the field. For the 90% of India’s workers in the unorganised sector, these Codes will not be experienced in their provisions, but in the quality of state notification of the rules, the roll-out of e-Shram registration and the availability of grievance redressal. The success of the 2025 Codes in closing the 100-year gap between the promise of law and the reality of lives will depend on the quality of its implementation.
Written by
Mukul Kumar BBA LL.B. 4th year
Indian Institute of Management, Rohtak
