Budget 2025 expectations: Labour Codes set to usher significant reforms

By Deepika Mathur and Priyanka Bhutada
Budget 2025 expectations: The forthcoming Labour Codes are all set to usher significant reforms in the country's labour laws, streamlining regulations and enhancing ease of doing business. The implementation of these codes is expected to influence budgetary decisions with extension of social security coverage to emerging workforce categories while focusing on employment generation and labour reforms. The codes should help businesses operate more efficiently, while enhancing workers’ protection and rights. Additionally, codes provide a consistent definition of 'wages' across all labor laws, thereby eliminating confusion and potential disputes on wage calculations.
A critical step was the formation of a committee with the objective of recommending a social security and benefits framework for gig and platform workers. As traditional employer-employee relationships fade, gig and platform work has become a key source of income for many. These workers, along with those in informal sectors like self-help groups and domestic work, need to be included in social security frameworks. The work here is unique – characterized by the absence of an employer-employee relationship, a transient workforce, variable earnings dependent upon hours worked and varying business models for the platforms which engage these workers. The Labour Codes aim to provide such workers with appropriate benefits through established mechanisms after considering the unique nature of work and evolving business models. Accordingly, the Budget may outline new policies and welfare schemes aimed at their protection, including social security benefits, fair working conditions and other workers’ rights.
To date, 34 states and Union Territories (UTs) have already released draft rules for at least two codes and the Labour Ministry expects all 36 states and UTs to frame rules on Labour Codes by this fiscal year end. Onboarding of states will pave the way for implementation of the codes during FY2025-26. For readiness, the government has already notified some provisions, such as giving effect to revised pension scheme, mandating Aadhaar for establishing identity for registration/ availing benefits under the Code, formation of advisory boards for fixation of minimum wages, etc.
The government has sought to engage the public and industry bodies through discussions and has also published a document, “New Labour Code for New India” to facilitate this. For over three months, the government has met to assess state governments’ readiness and harmonize draft rules under the Labour Codes.
The upcoming Budget is expected to outline a phased roadmap for implementing the Labour Codes. The government may choose to initially roll out two of the simpler codes—the Code on Wages and the Social Security Code—allowing for a more measured approach to labour reforms. The Budget should indicate a date of implementation preceded by finalization of central rules and clarification and issuance of state rules.
The 2025 Union Budget will play a critical role in shaping effective implementation of the Labour Codes and provide financial support, address key challenges related to worker welfare and compliance and promote formalization in the labour market. This will help make India’s workforce more competitive, inclusive, and well suited for a growing economy, with particular attention to emerging sectors like the gig economy. The success of these efforts will be pivotal in determining whether India can achieve sustainable growth while safeguarding the rights of its workers.
(Deepika Mathur is Executive Director, Deloitte India and Priyanka Bhutada is Manager, Deloitte India)