New Labor Code 2025: 4-Day Week & Salary Changes

New Labor Code 2025: 4-Day Workweek, 3 Days Off, and Key Salary Reforms

The upcoming New Labor Code 2025 is expected to bring transformative changes to India’s workforce landscape. Set to be introduced in Budget 2025, these reforms aim to simplify existing labor laws, enhance employee benefits, and foster business-friendly policies.

Among the most talked-about features are the potential 4-day workweek, increased Provident Fund (PF) contributions, and a phased implementation plan that gives flexibility to companies of different sizes.

Phased Implementation of the New Labor Code 2025

To ensure a smooth transition, the government plans to roll out the labor code in three stages:

Phase 1: Companies with over 500 employees must comply first.
Phase 2: Medium-sized businesses with 100–500 employees will follow.
Phase 3: Small enterprises with fewer than 100 employees will get up to two years to adapt.

This staggered approach is designed to support MSMEs, which make up over 85% of India’s business ecosystem.

Key Highlights of the New Labor Codes

The reforms not only consolidate 29 existing labor laws into four primary codes, but also aim to simplify compliance for employers while strengthening protections for workers.

Firstly, the Code on Wages ensures minimum wages and timely salary payments for all employees, thereby promoting income security.
Secondly, the Social Security Code enhances benefits such as Provident Fund (PF), gratuity, and maternity leave, which encourages long-term financial well-being.
In addition, the Industrial Relations Code simplifies dispute resolution processes, making it easier for businesses to manage employee concerns efficiently.
Lastly, the Occupational Safety, Health, and Working Conditions Code focuses on creating safer and healthier workplaces, thus improving overall employee satisfaction and productivity.

Overall, these changes seek to create a balance between employee welfare and employer flexibility. Moreover, they are designed to boost India’s ease of doing business by reducing legal complexity and encouraging transparency.’s ease of doing business.”

Will the 4-Day Workweek Become a Reality?

The New Labor Code 2025 proposes a 4-day workweek, offering employees three days of rest. However, this shift will involve longer working hours during the four days to meet weekly targets.

Other key changes include:

Higher PF Contributions: Promotes long-term savings but may slightly reduce monthly take-home salaries.
Improved Work-Life Balance: Encourages healthier professional and personal lives.
Optional for Employers: Not mandatory—implementation depends on industry-specific needs and employer discretion.

Impact on MSMEs and Small Businesses

Micro, small, and medium enterprises will receive a two-year window to comply with the new rules. This extended timeline minimizes disruption and helps businesses prepare for regulatory adjustments without financial strain.

State Governments’ Role in Implementation

The Labor Ministry is actively engaging with states to finalize draft rules. Key updates include:

Focus on Code on Wages and Social Security Code in Phase 1.
All states, including Delhi and West Bengal, are expected to finalize draft regulations by March 2025.
Continued dialogue with states to ensure uniform nationwide implementation.

What Does the New Labor Code Mean for India?

For Employees: Stronger social security, better work-life balance, and greater long-term savings.
For Employers: Simplified compliance, greater flexibility, and smoother workforce management.
For the Economy: Improved investment climate, better labor market structure, and alignment with global standards.

FAQs on New Labor Code 2025

What is the New Labor Code 2025?

It combines 29 labor laws into four comprehensive codes on wages, social security, industrial relations, and workplace safety.

Will everyone get a 4-day workweek?

The 4-day workweek is an option, not a rule—it will depend on employer decisions and industry needs.

When will it be implemented?

Phased implementation starts in the next financial year, with full compliance expected within two years.

How are MSMEs affected?

MSMEs get up to two years to align with the reforms, ensuring a smooth transition.

How is the government involving states?

The Ministry of Labor is coordinating with all states to complete regulation drafts by March 2025.