This article has been published on the website of International Employment Lawyer (IEL) at India in 2025 – the year ahead – International Employment Lawyer

Employers in India must prepare for significant changes across the employment and labour law landscape.

As we enter the second month of 2025, the employment and labour law landscape in India is on the brink of transformative change. Several legislative, judicial, and policy-driven developments are set to shape how employers strategise their operations, compliance, and workforce management.

Here we intend to provide a comprehensive outlook highlighting critical changes and their implications for employers.

Boosting employment and workforce development

The 2024-2025 Union Budget outlines a series of employment-centric initiatives aimed at addressing skill enhancement, and the formalisation of the labour market. These include direct financial support for first-time employees entering the formal workforce, monetary incentives for employers hiring new workers based on their contributions to the social security system during the initial four years of employment, and a focus on job creation in the manufacturing sector. Over 40 million youth in India are expected to benefit from these programmes over the next five years.

The government also proposes a revamp of Industrial Training Institutes across India to align skill development programmes with industry requirements and plans to facilitate paid internships for 10 million youth in top companies.

Further, to boost participation in the workforce by women, the government plans to set up women’s hostels and creches, and organise women-specific skill development programmes. Other measures include launching a more comprehensive e-Shram portal (the online compliance management portal launched in 2021) by integrating all labour-specific portals to help candidates find suitable employment and skill enhancement opportunities.

For employers, the Union Budget emphasises workforce expansion, through incentives for hiring and skill purposes. Measures like Employees’ Provident Fund Organisation-linked benefits and revamped compliance portals aim to streamline processes – as well as increase regulatory oversight.

Labour Codes

In 2019, the government’s “Ease of Doing Business” initiative, along with the recommendations from the Second National Commission on Labour, led to the introduction of four labour codes: the Code on Wages, 2019; the Code on Social Security, 2020; the Occupational Safety, Health, and Working Conditions Code, 2020; and the Industrial Relations Code, 2020. These codes consolidate 29 central labour laws into a more streamlined framework.

Although both parliament and the president have approved the codes, they have not yet come into effect. News reports suggest the codes are likely to be implemented in a phased manner, from 1 April.

The new Labour Codes are likely to be implemented in a phased manner, from 1 April

The government has also released draft rules for the codes, and most states have developed their own rules – meaning businesses with operations in multiple states may see compliance requirements differ across regions.

All 36 states and union territories are expected to complete harmonisation and pre-publication of draft rules under the codes by 31 March.

Prevention of sexual harassment at work

In February 2024, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Amendment Bill, 2024 was introduced, proposing significant changes to the existing Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The proposed amendments include extending the limitation period for filing complaints from three months to one year, with no cap on extensions if the Internal or Local Committee (bodies established under the POSH Act to receive, investigate, and resolve complaints of sexual harassment in the workplace) finds valid reasons for the delay.

Additionally, the amendment seeks to remove the mechanism that currently allows women to settle complaints through a process of conciliation, to avoid potential pressure or coercion on the complainant. This amendment was introduced after a similar bill in 2022, which also proposed changes to the current timeline for filing complaints under the act.

For employers, these amendments could require changes in internal policies and procedures related to the handling of sexual harassment complaints. The extended timeline for filing complaints would mean employers must ensure continued readiness to address complaints over a longer period, and the removal of conciliation mechanisms might shift the focus entirely to formal investigations. As a result, businesses will need to be prepared for these potential changes and ensure their workplace policies comply with the revised law once enacted.

Gig workers

The number of gig workers has been rapidly increasing, driven by the rise of platform-based services in cities across India. A recent survey conducted in eight cities revealed that over 83% of cab drivers work more than ten hours a day, and nearly all respondents reported experiencing physical and mental health issues. This highlights the urgent need for reforms aimed at improving the welfare of gig workers.

The Code on Social Security was introduced in September 2020 to address these issues, but it is yet to be brought into effect. It is expected to provide gig workers with social security, minimum remuneration, and health and safety protections.

Several state governments have followed suit with their own initiatives to improve gig worker welfare. Karnataka, inspired by Rajasthan’s 2023 legislation, has introduced a draft bill that includes provisions to protect the rights of gig workers, and imposes obligations on aggregators regarding social security, occupational health and safety, and working conditions of such gig-workers in the state.

Jharkhand has also introduced a draft bill, and the Ministry of Labour and Employment, in September of 2024, issued an advisory accompanied by a standard operating procedure urging aggregators to voluntarily register with the e-Shram portal, which aims to create an integrated database for workers and access to welfare schemes.

These developments suggest a more comprehensive legal framework for gig workers’ welfare could be established, signalling potential changes in employer obligations in the near future.

New data protection regime

After years of deliberation and anticipation, India’s Digital Personal Data Protection Act, 2023 (DPDP Act) finally received Presidential assent in August 2023. Yet, despite this monumental step, the law remains largely ineffective. With no clear date for its enforcement, the government has drafted the Digital Personal Data Protection Rules, 2025, up for public consultation and feedback until 18 February.

 A new EPFO wage ceiling will mean higher mandatory contributions for employers

Expected to be unveiled in the coming months, this law will replace the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (SPDI Rules).

Unlike the SPDI Rules, the DPDP Act will apply uniformly to all personal data. Important for employers to note that the DPDP Act permits employers to process employee data “for purposes of employment” without express employee consent, and to process employee data from loss or liability (such as prevention of corporate espionage, etc) or for providing services or benefits to employee. However, the jury is still out regarding if this specific carve out of “for purposes of employment” is absolute, or will have certain conditionalities attached to it.

Once implemented, employers will be required to revisit and revise their data handling practices to align with the DPDP Act and corresponding rules.

Wage ceiling under the EPFO

News reports suggest the Indian government may soon raise the wage ceiling for mandatory coverage under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) and the Employees’ State Insurance Act, 1948 (ESIC Act) schemes to INR 30,000 (approximately US$ 350) per month, bringing millions of additional employees under the social security umbrella.

Currently, the wage ceiling for the EPF is set at INR 15,000 (around US$180) per month and for ESIC at INR 21,000 (approximately US$250) per month. As per news reports, this change is expected to be finalised after deliberations at the EPFO’s Central Board of Trustees meeting in 2025, with the potential to extend social security coverage to around ten million more workers.

In addition, reports suggest the Ministry of Labour and Employment is exploring transformative reforms under a EPFO 3.0 initiative, which includes reviewing the current 12% employee contribution cap. Employees may soon be allowed to increase their EPF contributions beyond the mandatory limit to boost savings, with employer contributions remaining capped based on wage.

Other potential reforms under EPFO 3.0 include a proposal to allow employees to convert their provident fund balance into a pension at any time, subject to their consent. Moreover, the government is planning to introduce a provident fund-linked card, similar to a debit card, enabling subscribers to withdraw up to 50% of their total deposit directly from ATMs. These measures, expected to be announced by mid-2025, signal a major overhaul in EPFO services, aiming to align with evolving employee needs and financial aspirations.

For employers, this proposed wage ceiling increase will mean higher mandatory contributions to both EPF and ESIC, as both employees and employers are required to contribute a percentage of wages to these funds. As a result, employers will need to revise payroll systems to accommodate the new thresholds and increased contributions, potentially raising operational costs.

Women in night shifts

In a step towards fostering a more inclusive workforce, multiple states are progressively issuing notifications that allow the employment of female employees in night shifts. Over recent years, states such as Maharashtra, Haryana, Karnataka, Telangana, Tamil Nadu, and Odisha have amended existing laws or granted exemptions to enable commercial establishments and factories to hire women for night shift work.

However, these provisions come with certain conditions that employers must adhere to. The engagement of female employees in night shifts, among other conditions, requires their written consent and the provision of adequate safety and security measures to ensure a secure working environment.

Among other things, employers must obtain written consent from female employees, provide proper infrastructure (eg, well-lit corridors, and transport), and ensure the presence of sufficient security personnel. These measures not only support the empowerment of female workers but also highlight the need for employers to invest in additional infrastructure and security, ensuring a safe and inclusive environment for all employees.

Conclusion

Employers in India must prepare for significant changes across the employment and labour law landscape. Key developments include the anticipated implementation of the Labour Codes, amendments to the POSH Act, a new data protection regime, and increased obligations under the EPF and ESI acts.

Initiatives under the Union Budget and state-specific reforms for gig workers and women in night shifts further highlight the need for compliance and inclusivity. Employers should proactively review their policies, payroll systems, and workplace practices to align with these developments and ensure readiness to mitigate potential risks.