The Indian government recently announced major labour reforms that impact everyone, from employees to large companies and MSMEs. For decades, the country operated under older labour laws created between the 1930s and 1950s, which no longer reflected the needs of a modern workforce.
To bridge this gap, the government has introduced a significant overhaul aimed at making the system clearer, more efficient, and better aligned with today’s economic realities. The reforms intend not only to support workers and improve the ease of doing business but also to modernise India’s labour framework.
Let us break down these new developments and understand how they may shape the economy and the stock market.
What’s Happening?
India has rolled out a major update to its labour system by consolidating 29 older and scattered laws into a simplified, modern structure. The four new labour codes came into effect on November 21, 2025, covering wages, industrial relations, social security, and workplace safety.
The aim is to make the system easier for businesses to follow while strengthening worker protection. The government believes this shift will help build a workforce better prepared for a rapidly evolving economy. It also supports the broader goal of fostering a productive and self-reliant India under the Aatmanirbhar Bharat vision.
Changes for Businesses & Workers
Fixed-Term Employees: Fixed-term staff now receive the same benefits as permanent workers. They are entitled to equal pay and become eligible for gratuity after one year, encouraging direct hiring.
Gig and Platform Workers: Gig and platform workers receive formal recognition under social security. Aggregators must contribute to their welfare, and a universal account number ensures portability of benefits.
Contract Workers: Contract workers gain stronger protection with benefits similar to permanent staff. They receive gratuity after one year and must be provided with health cover and annual medical check-ups.
Women Workers: Women gain wider opportunities and stronger protection, with equal pay and the right to work in any role, including night shifts, subject to safety measures. Grievance committees must include women.
Youth Workers: Young workers get formal job recognition through mandatory appointment letters. Minimum wages and paid leave are guaranteed, supported by a national floor wage to meet basic living needs.
MSME Workers: MSME employees receive standardised minimum wages and better facilities. Working hours, overtime rules, and timely wage payments are now consistent across all units.
Textile Workers: Textile workers receive equal wages and welfare benefits. Dues can be claimed for up to three years, and overtime is paid at double the normal rate.
Mine Workers: Mining employees benefit from stronger safety norms, mandatory health check-ups, and defined working hours. Certain commute-related accidents may now be considered work-related.
Beedi and Cigar Workers: Workers receive minimum wages, fixed working hours, and overtime at double rates. Bonus eligibility begins after thirty working days.
Plantation Workers: Workers receive improved safety and social security. They are covered under ESIC, and education support for children is mandatory.
Audio Visual and Digital Media Workers: Media and digital workers gain formal recognition through mandatory appointment letters and timely wages. Overtime requires consent and must be paid at double rates.
Hazardous Industry Workers: Workers in high-risk sectors must undergo compulsory health check-ups and are protected by national safety standards. Women can work in hazardous roles with adequate safeguards.
IT and ITES Workers: IT staff benefit from timely salary payments, equal pay, and improved dispute resolution. Women can work night shifts with safety arrangements.
Dock Workers: Dock workers gain legal recognition with mandatory appointment letters and coverage under PF, pension, and insurance. Health and safety facilities are compulsory.
Export Sector Workers: Workers in export-focused units receive PF, gratuity, and social security benefits. Paid leave begins after 180 days, and women can work night shifts with proper safeguards.
What Does This Mean to Investors?
According to Mint, experts believe the new labour codes will significantly affect labour-intensive sectors such as chemicals and paints, oil, automobiles and auto ancillaries, pharmaceuticals, and metals. Stronger workplace standards and better job security are expected to boost employee performance, which could support long-term stability and productivity for companies, eventually influencing their financials and share prices.
Companies with major manufacturing operations, such as Asian Paints, Hero MotoCorp, Bajaj Auto, L&T, Cipla, Dr. Reddy’s, Aurobindo Pharma, Tata Steel, JSW Steel, and Reliance Industries, may witness short-term volatility as they adjust to the new norms.
What’s Next?
The new labour codes are expected to reshape cost structures across several industries. As reported by Business Standard, real estate developers anticipate a rise in labour costs by 5% to 10% over the next year, since labour accounts for nearly one-fourth of total project expenses. Industry leaders believe this increase will gradually unfold over the next 12–18 months and may influence project planning and execution timelines.
The gig and platform economy will experience changes too. Companies involved in food delivery, ride-hailing, and e-commerce, including Swiggy and Zomato, will now contribute up to 2% of their annual turnover towards worker welfare, impacting profitability. According to PIB, India’s gig workforce is expanding rapidly and is projected to grow from 10 million to over 23.5 million by the end of the decade.
Markets will closely monitor how these reforms affect company costs and productivity. Manufacturing-linked sectors are likely to reflect the earliest signs of impact.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
