India’s New Labour Codes, effective 21 November 2025, represent one of the most consequential overhauls of workforce governance in decades. By consolidating 29 central laws into four streamlined codes covering wages, social security, industrial relations, and occupational safety, the government has moved decisively toward a modern, technology-enabled regulatory framework. For India’s technology services sector – which employs more than five million professionals and anchors the country’s global delivery leadership – the reforms are not merely administrative. They signal a structural shift with implications for compliance, talent, cost, governance, and long-term competitiveness.
Compliance
The most immediate shift arises from changes to compliance boundaries. For years, technology services companies operated primarily under state Shops and Establishments Acts, often benefitting from exemptions around working hours, overtime, and holiday norms. The expanded definition of “establishment” under the Occupational Safety and Health Code now brings these companies squarely within a unified national compliance structure. Although states must clarify how existing IT/ITeS exemptions will interact with prescriptive norms on rest periods, overtime, and shift flexibility, the direction of travel is unambiguous: a move toward greater uniformity and predictability. For a sector operating across dozens of delivery locations and multiple state jurisdictions, this creates a rare opportunity to standardise policies, reduce regulatory ambiguity, and build stronger governance systems that can withstand scrutiny from global clients.
A more nuanced shift lies in the broadened definition of “worker,” a change that could extend statutory benefits and working-time norms to categories such as developers, analysts, engineers, and project specialists. For 24X7 delivery models typical of BPO and tech operations, this requires rethinking shift planning, weekend staffing, and overtime governance. Yet, far from constraining operational freedom, this realignment can signal the maturity of the industry, placing IT services alongside global peers who offer uniform workplace protections and equitable benefits across roles. Indeed, stronger statutory protections can enhance employee trust and aid talent retention.
People supply chain
The business impact also extends to the way tech companies manage outsourced or contract-driven work. The definition of contract labour has been narrowed to exclude workers who are permanent employees of the contractor and who already receive periodic increments, social security benefits, and welfare support. This reduces the compliance burden on technology services companies that frequently source talent on a time-and-materials basis from established service providers. However, the new restriction on deploying contract labour for core activities introduces a significant operational constraint. Contractors relying on independent professionals, gig workers, or fixed-term employees may find it difficult to deploy such talent for long-term projects involving core activities of the end client, potentially tightening resource availability for tech firms and their global clients. The change may force companies to revisit sourcing strategies, deepen vendor due diligence, and create more sustainable workforce pipelines.
Cost structures
The most material implication, however, will surface in compensation structures. The new uniform definition of “wages” requires that at least half of total compensation be classified as basic pay, with allowances capped accordingly. This recalibration will raise statutory outlays for Provident Fund, gratuity, and overtime, particularly for large delivery centres with thousands of employees. While take-home salaries may reduce for some categories of staff, retirement and long-term social security benefits will increase – a shift that companies must communicate transparently to avoid morale or attrition related risks. For globally mobile talent on deputation or cross-border assignments, compensation planning and social-security contributions will need fresh alignment, even as this offers greater clarity and fairness in employment contracts.
Social security coverage itself is widening dramatically. Gig workers, platform workers, and fixed-term employees – integral to India’s emerging digital economy – are now expressly covered under the Codes. Aggregators must contribute a percentage of turnover to dedicated welfare funds, raising cost structures for firms that rely on flexible workforce models. At the same time, the Wage Code’s alignment with global labour norms on gender pay equity reinforces the industry’s commitment to fair wage practices. With wages now defined to include components such as conveyance allowance, HRA, and compensation under settlements, compliance audits will require more rigour and precision.
Corporate governance
Governance expectations are evolving in parallel. The Industrial Relations Code introduces a formal, services sector specific, labour-relations framework for the first time. Companies with 300 or more workers must implement certified Standing Orders that codify rules on conduct, remote work, digital behaviour, and grievance redressal – areas historically managed through internal HR policies. This change brings service-sector employers closer to global governance expectations around transparency, fairness, and worker voice. At the same time, the Code increases operational flexibility: the threshold for prior government approval for layoffs or closure has been raised from 100 to 300 workers, and fixed-term employment is fully recognised in law. For project-led environments such as IT, consulting, and digital transformation services, this offers clarity and agility in workforce planning. Yet the flexibility comes with responsibility. Employers must now contribute an amount equivalent to 15 days’ wages to a Worker Reskilling Fund for every retrenched employee, signalling a policy pivot toward reintegration and future employability.
Competitive advantage
Taken together, the streamlined codes are less about restricting employer flexibility and more about aligning India’s labour market with global expectations of equity, transparency and long-term security. For tech companies, the reforms demand investment – upgrading payroll systems, automating compliance, redesigning compensation, and strengthening HR governance. But these investments are not mere overheads. They can convert regulation into strategic advantage. Companies that digitise compliance, build resilient workforce frameworks, and align talent practices with ESG imperatives will position themselves as trusted partners in an era when labour standards increasingly shape global sourcing decisions.
The New Labour Codes signal a decisive move toward a more mature, predictable, and equitable labour ecosystem. For India’s tech sector, the real issue is not whether compliance will increase costs – it certainly will. The opportunity lies in how companies respond: by viewing these reforms not as a limitation but as a springboard for transformation. Organizations that embrace the changes early, communicate with clarity, and embed governance into their talent strategy will unlock new advantages – managing risk effectively, attracting top talent, and strengthening India’s position as the world’s most trusted technology innovation and delivery hub.
(Views expressed are personal.)
Disclaimer
Views expressed above are the author’s own.
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