The Ministry of Labour and Employment is planning to implement the four new Labour Codes from April 1. This date matches the start of the new financial year, which makes it easier for companies to adjust their salary structures and financial planning.
The main concern is the possible increase in Provident Fund (PF) and gratuity costs due to changes in how wages are calculated under the new system.
Why the Government Prefers an April Rollout
The draft rules for the Labour Codes are likely to be finalized by mid-February. However, many industry groups have asked the government to delay implementation.
February and March are the last months of the financial year. Introducing major salary and compliance changes during this period could create accounting and budgeting problems for companies.
Starting from April 1 gives businesses a fresh financial year to make adjustments smoothly.
The Four Labour Codes Covered
The rollout includes these four major labour laws:
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Code on Wages
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Code on Social Security
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Industrial Relations Code
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Code on Occupational Safety, Health and Working Conditions
Draft rules for these Codes were issued on December 31, and the government asked stakeholders to send suggestions within 30 to 45 days.
The Labour Codes were passed earlier, but they can only come into effect after the final rules are officially notified.
How Salary Structure Changes May Affect PF and Gratuity
One of the biggest changes is the new definition of wages.
Under the new rules, allowances cannot be more than 50 percent of total salary. This means a larger part of an employee’s salary will be counted as “wages.”
Because PF and gratuity are calculated on wages, this could lead to:
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Higher PF contributions from both employers and employees
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Higher gratuity payments in the long term
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Possible changes in take-home salary
This is one reason companies want the new rules to begin from April, when annual salary revisions usually happen.
Possible Benefits for Gig and Platform Workers
The government is also reviewing social security rules for gig and platform workers.
Right now, a worker must complete:
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90 days with one platform, or
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120 days across multiple platforms in a year
Officials are considering reducing this requirement so more gig workers can qualify for benefits like health insurance, life cover, and accident insurance.
SPREE Scheme Brings More Workers Into Social Security
The government also shared updates about the SPREE scheme. This scheme helps employers and employees register under the Employees’ State Insurance (ESI) system without penalties.
So far, the scheme has added:
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1.03 crore new employees to ESIC
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Around 1.17 lakh employers
The scheme is active from July 1, 2025 to January 31, 2026. It gives previously unregistered workers a chance to join the social security system without facing old dues or legal action.
EPFO Gives More Flexibility for PF Withdrawals
The government has also introduced changes in EPFO rules. PF members can now withdraw up to 75 percent of their PF balance, while keeping at least 25 percent saved for retirement.
This step is meant to help workers during financial emergencies while still protecting long-term savings.
What Employees and Employers Should Expect
If the Labour Codes start from April 1:
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Companies may revise salary structures
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PF and gratuity contributions could increase
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Payroll systems may need updates
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Employees might see small changes in take-home pay
In the long run, the new Labour Codes aim to simplify labour laws and expand social security coverage across India.
April 1 is being seen as the most practical date to begin these changes without disrupting the current financial year.
