Companies implementing India's new labour codes are facing increased compliance costs due to standardized wage definitions and revised social security contribution calculations, according to executives from major staffing firms TeamLease Services and Info Edge.

Impact on Social Security Contributions

Balasubramanian A, Senior Vice President at TeamLease Services, explained that the company is rolling out the new rules across its client base of more than 3,000 firms covering approximately 3.50 lakh contract workers. The most significant change involves a unified wage definition that replaces the varied interpretations previously used across companies.

Under the new system, components such as provident fund (PF), employee state insurance (ESI), gratuity, bonus, and leave encashment are calculated on a single wage base, expanding coverage and increasing contributions.

Employee Impact and Cost Absorption

TeamLease Services conducted a recent rollout for a client with 10,000 employees, revealing mixed impacts on take-home pay. The implementation affected different employee groups as follows:

• 4,000 workers: Increased take-home pay
• 4,000 workers: Slightly reduced take-home pay
• 2,000 workers: Largely unchanged compensation

Despite these variations, overall company costs remained stable or increased only marginally. Balasubramanian noted that the cost increase can be absorbed within a normal annual increment cycle of 7-12%.

Corporate Margin Pressures

Ambarish Raghuvanshi, Interim CFO at Info Edge, acknowledged that while the labour codes support formalization and social security, they will increase hiring costs. "The cost of doing business is going to go up," he stated, warning that this could affect corporate margins, particularly in sectors employing large numbers of workers.

The impact will vary across companies depending on their existing gratuity policies and benefit structures, requiring careful analysis of annual reports to assess individual company exposure.

Limited Impact on Gig Platforms

For quick commerce and gig platforms, the cost impact may be less severe than initially anticipated. Balasubramanian explained that most platforms already provide insurance and coverage for workers, meaning government-led social security under the new code could replace private insurance spending rather than create additional costs.

The ESI system offers cashless healthcare for workers and their families at a scale that private insurers typically cannot match, potentially providing better value while maintaining similar or improved benefits for employees.

India's workplace landscape underwent significant transformation in 2025 as the country's four consolidated Labour Codes moved closer to implementation. The reforms, which aim to modernise decades-old labour laws, gained fresh momentum with several states notifying or revising draft rules throughout the year.

Labour Codes Framework and Implementation Progress

The four consolidated Labour Codes were originally enacted between 2019 and 2020, designed to replace or rationalise 29 existing central labour laws. The framework includes:

According to the Labour Ministry, many existing labour laws were framed between the 1930s and 1950s and no longer reflected contemporary economic and workplace realities. The fragmented framework across 29 central laws had increased uncertainty and compliance burdens for both workers and employers.

In 2025, the Centre pushed for faster implementation, with several states working to align their rules with the new framework. However, the codes are not yet in force nationwide, with states continuing to fine-tune implementation mechanisms.

Gig Worker Recognition Under Social Security Framework

A significant development under the new labour framework is the formal recognition of gig and platform workers under the Code on Social Security. For the first time, workers engaged through digital platforms receive coverage under a statutory social security framework, despite not being classified as traditional employees.

The code enables the government to notify social security schemes for gig and platform workers, including:

• Life and disability cover
• Health insurance benefits
• Accident protection
• Old-age security provisions

The funding mechanism allows for contributions from aggregators, the government, or both. Platform companies are required to contribute up to 1-2% of their annual turnover, subject to caps, toward worker welfare. However, these additional costs could potentially be passed on to consumers through higher service charges.

Structural Changes in Employment and Compliance

The labour reforms introduced greater flexibility in hiring practices through fixed-term employment provisions. Companies can now recruit workers for specific durations while providing statutory benefits comparable to permanent employees.

Employers face increased scrutiny regarding wage definitions, working hours, safety standards and record-keeping requirements. This has expanded the role of HR and legal teams in workforce planning and compliance management.

Implications for Workers and Employers

The reforms promise improved social security and clearer wage structures for employees, though with potential short-term impact on take-home pay due to restructured salary components. For employers, the focus has shifted to balancing operational flexibility with higher compliance costs.

Trade unions and employee groups have continued to raise concerns about job security and collective bargaining under the new framework, keeping labour reforms in ongoing public debate.

As states continue to develop implementation mechanisms, the full impact of these workplace transformations is expected to unfold over the coming years, establishing 2025 as a pivotal transition period in India's labour landscape.