The companies across sectors are adopting a calibrated approach to compliance, as four new Labour Codes, constrained by the lack of detailed notifications from state governments and enforcement authorities.
While the Centre has notified the Codes, implementation on the ground remains limited, with most organisations currently restricting compliance changes to wage restructuring and adjustments linked to provident fund (PF), Employees’ State Insurance Corporation (ESIC) and gratuity. Since labour is a concurrent subject, full operationalisation hinges on state-level rules, many of which are still awaited.
“While the announcement of new labour codes has been made effective on November 21, 2025, there are limited notifications released by the authorities; hence, the compliance as of date is restricted to modifications in wage structures, PF, ESIC and Gratuity,” said Mahesh Krishna, Managing Director, Core Integra.
He added, “Since labour law compliances are also a State subject, notifications from respective authorities are awaited for implementation. It is expected that most States and respective authorities may use the transition period of 12 months granted in the announcement for making necessary changes.”
According to legal experts, one of the biggest challenges for employers has been navigating regulatory uncertainty arising from staggered and non-uniform notifications across states. “Employers face multiple pain points in complying with the new Labour codes. Key issues include uncertainty because many state-level rules are still pending or divergent, making uniform application difficult,” said Alay Razvi, Managing Partner, Accord Juris.
He added that the redefining of wage structures to match the expanded definition of ‘wages’ has led to higher statutory outflows for PF, ESI, gratuity and bonus. Organisations must also overhaul HR policies, contracts and payroll systems, while integrating large-scale contractor, gig and fixed-term workforce data into a single, digital-compliance framework.
Alongside regulatory challenges, cost implications remain a key concern for employers, particularly in the initial phase of transition.
He flagged that the compliance costs arise from upgrading HRMS and payroll platforms, introducing digital registers, and building internal processes for single registration, unified returns and real-time reporting. “Compliance costs arise from upgrading HRMS and payroll platforms, introducing digital registers, and building internal processes for single registration, unified returns and real‑time reporting. There are also indirect costs around training, legal advisory, policy redesign and periodic audits, particularly for large and multi‑state establishments,” Razvi added.
The new labour codes are set to open the doors to digital transformation and alter the existing manner. Krishna, relying on the PF and ESIC portals, said that, “A Reg Tech platform capable of processing transactions would soon become a hygiene requirement for almost all the Companies. We foresee integration of Reg Tech platforms with Government portals being enabled in the near future.”
Legal experts, however, view the rollout as an evolving reform process rather than a one-time switch. “The rollout of the four Labour Codes, namely the Code on Wages, 2019, Industrial Relations Code, 2020, Code on Social Security, 2020, and Occupational Safety, Health and Working Conditions Code, 2020, may be viewed as an ongoing and evolving reform process, wherein certain transitional challenges are naturally attendant to a shift of this magnitude,” said Tushar Kumar, Advocate, Supreme Court of India.
He highlights that the principal areas of concern have largely centred around the pace and uniformity of notification across States, alongside the need for greater clarity in certain definitional constructs, particularly those bearing upon wage computation and employee classification. “Further, while the Codes envisage a streamlined, technology-driven compliance framework, the operationalisation of such systems is still stabilising in parts, necessitating a calibrated and adaptive approach from stakeholders,” he added.
Kumar added that although the transition involves front-loaded adjustments, the long-term intent is to simplify compliance and enhance governance. “From a cost standpoint, the introduction of the Codes entails a degree of front-loaded adjustment as organisations realign internal structures to the new statutory framework. This includes recalibration of wage structures in light of the revised definition of ‘wages,’ investments in compliance systems and processes, and the updating of contractual and policy documentation,” he added.
He highlighted that certain sectors may also experience incremental financial commitments on account of expanded social security coverage. “However, these costs are best understood as part of a broader transition towards a more formalised, transparent, and harmonised labour ecosystem, which, in the medium to long term, is expected to yield efficiencies, reduce multiplicity of compliances, and enhance regulatory certainty,” Kumar said.
Mahesh Krishna agrees that the deployment of the code may look like additional costs. However, this would result in efficiency, simplicity in adherence and lower cost of compliance.
Meanwhile, companies are expected to turn to regulatory technology (RegTech) platforms to future-proof compliance as the Codes move towards fuller implementation.
With government portals such as PF and ESIC having undergone rapid digitalisation in recent years, industry participants expect RegTech platforms capable of processing transactions and integrating with government systems to soon become a baseline requirement rather than a value-add.
In the near term, most employers are expected to use the transition window to realign systems, policies and cost structures, while awaiting clearer direction from state authorities on the final contours of compliance under the new labour regime.
