The Silver Lining: What the New Labour Codes Actually Mean for Employees

Since the Ministry of Labour notified the new Draft Rules on December 31, 2025, HR groups are panicked about compliance, payroll teams are worried about the "50% calculation," and management is crunching the numbers on increased costs.

But in all this noise about "Employer Compliance," we are missing the most important stakeholder: The Employee.

I’ve spent the last few days reading the fine print of the Gazette notification, and I want to shift the perspective. Yes, these codes are tough on companies. But for the honest, hardworking employee, they are actually a massive upgrade.

If you look past the legal jargon, here is how the new rules quietly empower the workforce.

1. Your "Nest Egg" Just Got Bigger (The 50% Rule)

Let’s address the elephant in the room. You’ve probably heard that your "take-home salary" might go down. That’s true, but it’s only half the story.

For years, many companies structured salaries to keep Basic Pay low (sometimes as low as 30%) to reduce their PF liability. The new rules stop this game. By mandating that Basic Pay must be at least 50% of your total earnings, the government is effectively forcing a higher saving rate. 

The Human Side: Yes, you get slightly less cash in hand today. But your PF accumulation doubles. Your Gratuity (which is calculated on Basic) jumps up significantly. Think of it as "forced wealth creation" for your retired self.

2. The "48-Hour" Exit Promise

We’ve all seen it, if an employee resigns, then waits 45 days (or more) for their Full & Final (FnF) settlement. It’s frustrating and unfair.

The new Draft Rules under the Code on Wages are a game-changer here. They mandate that in case of resignation, dismissal, or removal, wages must be settled within two working days.

Imagine resigning on a Friday and having your dues cleared by Tuesday. This forces HR departments to be faster, digital and more employee-centric.

3. Contract Employees Are No Longer "Second Class"

This is personally my favorite change. In the dairy and manufacturing sectors, we see many "Fixed Term Employees" (FTEs). Previously, if an FTE worked for 4 years and 11 months, they got zero Gratuity because they missed the 5-year mark.

The new rules fix this injustice. Now, if you are on a fixed-term contract, you are eligible for Gratuity after just one year of service. It’s pro-rata, fair, and finally acknowledges that a year of hard work deserves long-term benefits, regardless of contract status.

4. A Safety Net for the Gig Economy

We all use Zomato, Swiggy, and Uber. But until now, those partners were "invisible" to the labour law.

The Code on Social Security finally brings them into the fold. The draft rules propose a dedicated Social Security Fund for gig workers. It’s a start, but it’s a historic one—ensuring that the people who power our convenience economy finally get health and maternity benefits.

5. The "Reskilling" Allowance

In a volatile job market, getting laid off is a terrifying prospect. The Industrial Relations Code introduces a concept called the "Worker Reskilling Fund."

If an employee is retrenched, the employer has to contribute 15 days of wages to this fund. This isn't severance; it's specifically meant to help that worker learn a new trade or skill during their unemployment gap. It changes the narrative from just "firing" to "enabling the next step."

My Say..

Change is always uncomfortable. As an HR professional, I know the next few months will be chaotic as we update policies and payroll software before the likely April 2026 deadline.

But when I look at these rules through the eyes of an employee especially the lower-wage staff or contract workers, I see a framework that is fairer, safer and more secure.

What do you think? Is the trade-off between "Lower Take-Home" and "Higher Savings" worth it for you?

Disclaimer: These insights are based on the Draft Rules notified on Dec 31, 2025. Final provisions may vary.

By HR Mit - A HR Professional