New Labour Code 2025: India’s Work Culture Set for a Major Overhaul with 4-Day Work Week and Salary Restructure

India is all set to experience a dramatic shift in its work culture, thanks to the introduction of the New Labour Code 2025. With the government looking to simplify and modernize labour laws, the new code brings in landmark changes such as a 4-day work week, a 3-day weekend, and a revamped salary structure. Aimed at improving work-life balance, increasing efficiency, and ensuring better compliance, the code is expected to significantly impact both employers and employees across all sectors.

What is the New Labour Code 2025?

The New Labour Code consolidates 29 central labour laws into four broad labour codes:

1. Code on Wages
2. Code on Social Security
3. Industrial Relations Code
4. Occupational Safety, Health, and Working Conditions Code

This comprehensive reform seeks to safeguard workers’ rights while offering employers greater flexibility in operations. It also aims to reduce ambiguity in wage, social security, and occupational safety norms.

4-Day Work Week: A Game Changer

One of the standout features of this reform is the option for a 4-day work week. Under this model, employees can choose to work 12 hours per day for four days, reaching the statutory 48-hour weekly limit, and take the remaining three days off. However, it is not mandatory and will be adopted only if both the employer and the employee agree.

Key Highlights of the 4-Day Work Model:

• Total work hours in a week remain unchanged at 48 hours.
• Employees can enjoy a 3-day weekend.
• Only applicable upon mutual consent.
• Offers better flexibility and improves work-life balance.

This option is especially attractive for companies focused on outcome-based work and where flexible schedules are manageable.

Big Shift in Salary Structure

The Labour Code 2025 also proposes major revisions to how salaries are structured. According to the new norms:

• The basic salary must constitute at least 50% of the total cost to the company (CTC).
• With a higher basic pay, contributions to the Provident Fund (PF) and gratuity will also increase.
• While this may slightly reduce the monthly take-home salary, long-term savings and retirement benefits will significantly improve.

Comparison of Current vs. New Salary Structure:

Component	Current System	New System (Post-Code)
Basic Pay	~30-40% of CTC	Minimum 50% of CTC
HRA & Allowances	~50-60% of CTC	Reduced to accommodate new basic
PF Contribution (Employer)	12% of Basic	12% of Higher Basic Pay
Gratuity	Lower	Higher
Take-Home Salary	Higher	Slightly Reduced
Retirement Benefits	Lower	Significantly Higher
Tax Planning	Less Structured	Better Scope for Planning

Implications for Employees and Employers

For Employees:

• Better work-life balance with extended weekends.
• Improved retirement benefits due to higher employer contributions.
• Clarity in pay structure.
• Possibility of reduced in-hand pay, offset by long-term financial gains.

For Employers:

• Increased financial liability from higher contributions to PF and gratuity.
• Need for HR and payroll system overhauls.
• Greater compliance responsibilities.
• Potential for higher employee satisfaction and retention.

New Working Hour Provisions

Apart from the optional 4-day week, the new code includes additional reforms related to working hours, overtime, and leave policies:

Provision	Details
Weekly Work Hours	Capped at 48 hours
Daily Maximum Hours	Up to 12 hours (with breaks)
Overtime Pay	Double the regular rate
Night Shift Rules	Enhanced safety and compensation
Shift Intervals	Minimum 12-hour gap between shifts
Leave Encashment	Better structured under new guidelines
Weekly Off	Minimum one mandatory rest day
Work From Home	Can be formalized by company policy

Sector-Wise Adaptation

Different sectors will respond to the New Labour Code based on their operational needs:

Industry	Likely Adoption	Adjustments Required
IT & Tech	Likely to adopt early	Flexible contracts, shift policies
Manufacturing	Slow adoption	Depends on the government department’s rules
Retail/Services	Mixed response	HR upgrades needed
Startups	Highly adaptable	Agile HR and payroll systems
Public Sector	Gradual adoption	Depends on government department rules
Logistics	Limited adoption	Depends on the government department’s rules

Pros and Cons of the New Labour Code

Pros:

• Stronger retirement corpus for workers.
• Improved work-life balance in urban environments.
• Transparent salary structure.
• Aligns India with global work standards.

Cons:

• Short-term confusion due to restructuring.
• Not practical for all industries.
• Increased financial burden on employers.
• Technology and HR systems must be upgraded.

Final Verdict

The New Labour Code 2025 marks a pivotal moment in India’s labour reform journey. While it brings exciting possibilities like a 4-day work week and better financial security for employees, it also demands readiness and adaptability from employers. Companies will need to revisit their payroll, compliance, and HR frameworks to stay aligned with the changes.

Both employers and employees are encouraged to proactively engage with their HR departments or legal experts to ensure a smooth transition. The actual implementation may vary depending on state policies and specific industry requirements, so staying informed through official sources remains crucial.