New labour codes: Pay and benefit parity for IT workers on contracts

The Centre on Friday implemented four new labour codes, marking the biggest overhaul of workers’ laws in decades. The government says the move aims to simplify rules and improve worker protection.

One of India’s largest employment-generating sectors, the IT and ITES industry, now faces a major overhaul of employment norms under the new codes. A key feature of the reforms is that fixed-term employees must now receive the same benefits as permanent staff, including provident fund, ESIC, insurance, and other social security entitlements, for the duration of their contract.

“With the new codes, fixed-term employees must now receive the same benefits as permanent employees for the duration of their contract. Rules around working hours and overtime also become more uniform, which is important in an industry where extended workdays, weekend work and high-pressure project cycles are common,” said Harpreet Singh Saluja, President of the IT and ITES sector workers’ union, Nascent Information Technology Employees Senate (NITES).

The four new labour codes are effective immediately. According to the Ministry of Labour & Employment, prior to the new rules, there was no mandatory compliance for employers paying wages.

The codes also mandate that IT companies give ‘equal pay for equal work’, while strengthening the participation of women in the workforce. Companies are further required to provide facilities for women to work night shifts, giving them more opportunities to earn higher wages, aimed at boosting financial stability, morale, and workforce participation.

According to the Ministry of Labour & Employment, prior to these reforms, there was no mandatory compliance for employers on timely wage payments.

Under the new framework, IT companies will have to ensure all employees receive social security benefits, including provident fund, ESIC, insurance, and gratuity. This addresses a long-standing demand from the sector, where large portions of the workforce operate on fixed-term contracts, vendor arrangements, or project-based deployments.

The codes also direct companies to ensure the timely resolution of harassment, discrimination, and wage-related issues, while issuing mandatory appointment letters and guaranteeing social security benefits for fixed-term employees.

The IT sector will witness significant changes, as a large portion of the industry works through fixed-term contracts, vendor arrangements, staffing agencies and project-based deployments, Saluja added.

Saluja, however, also warned that misuse of fixed-term roles, probation extensions, forced resignations and classifying employees as “consultants” to avoid benefits is already widespread. “If rules are not framed and enforced carefully, companies may restructure contracts to bypass obligations,” he said, adding that NITES will monitor implementation closely.

Salaries by the 7th

The reforms aim to bring greater transparency in salary payments, with companies now required to pay employees by the 7th of every month. This is expected to improve trust between workers and employers and reduce financial stress.

Additionally, the codes expand labour protections and social security coverage, modernizing practices that were previously fragmented across 29 separate labour laws. The government says the reforms will help build a future-ready workforce, better aligned with evolving work patterns, while supporting both worker welfare and productivity.

Big change for IT companies?

For the IT and ITES sectors, the changes mean a more uniform approach to wages, benefits, and work conditions, particularly for contract staff who were previously at a disadvantage compared to permanent employees. Companies now face a clear legal framework for compliance, which could also encourage better gender inclusivity and overall workforce participation.

In a statement, IT industry body Nasscom said eventual full implementation of the new codes can bring greater predictability and transparency.

“As rules are finalised, Nasscom will focus on supporting a smooth and practical transition for the industry,” the statement said. “A key priority will be to help ensure that the central framework under the Codes is harmonised with state level requirements, including shops and establishments laws, so that overlapping obligations and unintended compliance challenges do not arise.”

With the implementation of the four labour codes on 21 November, India takes a decisive step towards modernising its labour regulations, ensuring fixed-term employees enjoy parity with permanent staff and creating a more transparent, secure, and equitable workplace for millions of workers.