India's new Labor Codes are poised to transform the lives of over 500 million workers by rewriting rules related to wages, working hours, social security, and workplace conditions. However, three reforms are crucial for workers: they retain the gratuity limit at ₹20 lakh, double overtime pay, and provide one day of leave for every 20 days of work, extending only 180 working days. The new Labor Codes subsume 29 labor laws. The four Labor Codes include the Wages and Salaries Code, 2019, the Industrial Relations Code, 2020, the Social Security Code, 2020, and the Occupational Safety, Health, and Working Conditions Code, 2020.

The Labor Ministry stated that this landmark reform streamlines compliance, modernizes outdated provisions, and creates a simple, efficient framework that promotes ease of doing business while protecting workers' rights and welfare. Although the four labor codes cover a wide range of reforms, these three directly impact the daily lives, financial security, and well-being of employees in both the organized and unorganized sectors. Let's discuss three reforms that will significantly impact over 5 million employees in the country.

The tax-free gratuity limit has been kept at ₹20 lakh. This reform applies to all establishments covered by gratuity laws and is particularly relevant for employees in the later stages of their careers. The gratuity limit of ₹20 lakh is the tax exemption limit for gratuity payments received by an employee, which was increased from ₹10 lakh in 2018. This means that any gratuity amount exceeding the ₹20 lakh limit will be added to your taxable income and taxed according to your income tax slab.

The gratuity period has been reduced from 5 years to 1 year. Employees in both the organized and unorganized sectors will now be eligible for gratuity upon completing one year of service. Previously, five years of service were required to be eligible for gratuity. Fixed-term employees are now eligible for gratuity even without the five-year service requirement, making this benefit more inclusive.

One day off for every 20 days worked.
Under the Occupational Safety, Health, and Working Conditions (OSH) Code, the government has made it easier for employees to accrue paid leave. This has resulted in two major changes.

Leave eligibility after 180 days instead of 240 days.
Previously, an employee had to complete 240 working days to be eligible for annual leave. Now, eligibility will start from 180 days, allowing new employees to avail of leave benefits sooner. One day off will be available for every 20 days of work. Employees will now accrue one day of leave for every 20 days worked, making leave accumulation faster and more equitable. This reform will be particularly beneficial for contract workers, seasonal workers, and migrant workers.

Doubling Overtime Wages
Perhaps one of the most impactful reforms for daily wage workers and industrial workers is the strengthening of overtime laws. Under the new labor codes, any work performed beyond the prescribed working hours must be paid at double the normal wage rate. Employers must maintain transparent records of overtime. Workers cannot be made to work overtime without their consent. Double-rate overtime has existed in principle for a long time, but its enforcement was weak and inconsistent. With clear provisions, strict compliance systems, and web-based monitoring mechanisms, workers now have a strong legal claim to fair overtime compensation. In industries that regularly rely on long shifts—manufacturing, textiles, logistics, security services, and hospitality—this reform will significantly impact wage payments.

Minimum wage security for all
A national minimum wage to avoid regional disparities
Minimum wage is revised every five years
Equal pay for men and women
Mandatory timely payment of wages
This ensures that gig workers, platform workers, daily wage laborers, and workers in small shops or establishments are not deprived of wage security.

Strong social security coverage
Expansion of ESIC coverage from 566 districts to all districts
EPF benefits for organized, unorganized, and self-employed workers
A national database of unorganized workers for easier benefit distribution
A new social security fund for gig and platform workers
These changes aim to ensure that informal workers also have access to structured financial security.

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