New Labour Codes in India: Key Changes To Leave, Salary and Working Hours Explained
India’s new labour codes, replacing over 40 laws, are now in effect, bringing changes to leave rules, salaries and work policies. Employees can carry forward only 30 days of leave, with excess to be encashed. The reforms also introduce flexibility in working hours and may impact PF contributions and take-home pay.
Mumbai, April 1: India’s new labour framework, replacing more than 40 existing laws with four consolidated codes, has come into effect with the start of the new financial year. The reforms, approved by Parliament and notified in November 2025, are expected to significantly impact employee benefits, including leave policies, take-home salaries and provident fund contributions.
Companies across sectors are now required to align their internal policies with the updated rules. The changes aim to simplify compliance for employers while standardising labour practices across the country. 8th Pay Commission Fitment Factor: Will Minimum Basic Pay Jump From INR 18,000 to INR 46,000? Check Details.
Revised Leave Rules and Encashment
One of the key changes relates to earned leave. Under the new rules, employees can carry forward a maximum of 30 days of leave to the next year. Any leave beyond this limit must be encashed within the same year. This provision is intended to ensure employees either utilise their leave or receive monetary compensation instead of letting it lapse.
However, exceptions have been built into the system. If an employee’s leave request is denied due to work requirements, the unused leave can be carried forward without any upper limit. 8th Pay Commission Update: When Will Salaries Rise and Arrears Be Paid?
No Penalty for Denied Leave
The revised framework ensures that employees are not disadvantaged if leave is refused by the employer.
In such cases, the leave balance will not be subject to the 30-day cap, allowing workers to retain their entitlement. This provision is aimed at protecting employees from losing leave due to operational constraints beyond their control.
Working Hours and Flexibility
The new rules retain the standard working hours at eight hours per day and 48 hours per week.
At the same time, the framework introduces greater flexibility in how these hours are structured. Employers may adopt more flexible schedules, depending on operational needs and mutual agreements with employees.
Overtime provisions have also been made more adaptable, potentially allowing employees to earn additional compensation based on weekly workload distribution.
The labour codes are also expected to influence salary structures, particularly components such as provident fund contributions and take-home pay. While detailed implementation may vary by company, the changes are likely to standardise wage definitions and alter how benefits are calculated, affecting both employers and employees.
(The above story first appeared on LatestLY on Apr 01, 2026 04:14 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).