The New Labour Codes 2025: A Compliance Checklist for Indian Startups

In 2025, India took a monumental step in labour law reform, consolidating 29 central laws into four streamlined codes. For startups, this is more than just a legal update—it is a fundamental shift in how you calculate payroll, manage gig workers, and ensure workplace safety.

To help you navigate this transition, we’ve put together a comprehensive compliance checklist specifically for founders and HR leaders.

The Four Pillars of the 2025 Labour Codes

The reforms are categorized into four distinct codes:

1. Code on Wages (2019): Standardises minimum wages and timely payment.
2. Social Security Code (2020): Expands the safety net to gig and platform workers.
3. Industrial Relations Code (2020): Simplifies dispute resolution and hiring/firing norms.
4. Occupational Safety, Health & Working Conditions (OSH) Code (2020): Focuses on workplace welfare and safety standards.

The Ultimate Compliance Checklist for Startups

1. Payroll & Wage Restructuring

• The 50% Rule: Ensure that “Wages” (Basic Pay + DA + Retaining Allowance) comprise at least 50% of the total CTC.
• Statutory Outlays: Recalculate PF, Gratuity, and Leave Encashment, as these will now be based on the higher “wage” definition.
• Timely Payments: Monthly salaries must be paid within 7 days of the wage period ending. For employees who leave or are terminated, full settlement must happen within 2 working days.
• Overtime: Any work beyond 8 hours a day or 48 hours a week must be paid at double the ordinary wage rate.

2. Employee Benefits & Social Security

• Gratuity for Fixed-Term Employees: Startups hiring on a contract basis (Fixed-Term Employment) must now pay gratuity if the employee completes one year of service, rather than the previous five-year threshold.
• Gig Worker Inclusion: If your startup uses aggregators or a “platform” model (like delivery or freelance apps), you may need to contribute 1-2% of annual turnover to a social security fund.
• Annual Health Checkups: Provide mandatory free health checkups for employees aged 40 and above.

3. Operational & Hiring Policies

• Mandatory Appointment Letters: Every employee, regardless of their role or the company’s size, must be issued a formal appointment letter.
• Night Shift Safety: Women can now work night shifts (beyond 7 PM and before 6 AM), but only with their written consent and if the startup provides adequate safety and transport.
• Threshold for Layoffs: Startups with up to 300 employees (previously 100) no longer need prior government permission for layoffs or closures, offering greater operational flexibility.

4. Digital Compliance & Safety

• Single Window Registration: Use the Shram Suvidha Portal for a single registration and annual return, replacing multiple filings.
• Creche Facilities: If your startup has 50 or more employees, you are required to provide a creche facility (either on-site or shared within a 500m radius).
• Safety Committees: Establish safety committees if you cross the threshold of 250 employees or work in hazardous sectors.

Frequently Asked Questions (FAQs)

Q1: Do these codes apply to early-stage startups with only 5 employees?

Yes, certain codes like the Code on Wages apply to all establishments regardless of size. However, thresholds for PF (20+ employees) and ESI (10+ employees) generally remain.

Q2: What is the “National Floor Wage”?

It is a minimum wage level set by the Central Government. No State Government can set a minimum wage lower than this floor wage.

Q3: Can we still offer a 4-day work week?

Yes. The codes allow for a 4-day work week, provided the total weekly hours do not exceed 48. This means daily shifts could extend up to 12 hours, including breaks.

Q4: Is there a “Reskilling Fund” requirement?

Yes. For every worker retrenched, the employer must contribute an amount equal to 15 days of the last drawn wages to a Reskilling Fund to help the worker find new employment.

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