Impact of new labor codes on employee’s working hours, annual leave

For a while now, India has been in the process of introducing changes to labor laws. There are multiple drivers for these reforms. At the forefront comes the factor that we in India need a set of standards and detailed labor laws. Social equity, social security, and ease of doing business are other policy objectives driving these reforms.

The recent reforms are expected to culminate into four labor codes covering wages, social security, occupational safety, health and working conditions, and industrial relations. These new labor codes are authored basis International Labor Organization (ILO) standards and a consultative process involving various stakeholders.


The Parliament has passed ‘new labor laws’ recently which impact the employees’ working hours, paid leave days, and much more in every sector. 29 laws reformed and being clubbed into 4 key codes is indeed a revolutionary step in India’s journey of labor laws, and perhaps a progressive step for India Inc. These 4 new codes are expected to come into action from 1 July 2022.

The reformation of these laws will impact working conditions, salary, pension, and much more, encompassing the job scenarios here in India. These codes are regarded as revolutionary steps to help better manage work and strike a better work-life balance in both the organized and un-organized sectors. Here’s how the new labor codes are likely to impact our work life in terms of work hours and leaves:

Working Hours

The new labor codes permit offices and companies to not restrict the working hours to 7-8 hours per day. Regular work hours can now become 12 hours in a day. Should an organization choose to do so, the workdays would have to be capped at 4 days a week with 3 mandatory offs. In all, the week’s total working hours remain unaltered.

Eligibility for leave

Previously the laws required to have worked for a minimum of 240 workdays in a year to ask for leave. It has now been reduced to 180 workdays every year, translating to a change that employees can ask and take a day off with a minimum work record of 180 days in a year. However, the rule of 1 leave for every 20 workdays remains.

Four-day work week!

The media is abuzz on how the new labor codes can transform how India Inc. views work and perhaps make the four-day workweek a reality soon. Stories explore how employees would be eligible for 3 paid weekly offs should they choose to work for just 4 days a week, as opposed to the present working culture of mandatory 5 working days.

But there is a lot more to these codes that need to be comprehended, along with their implementation. Every establishment follows a set of rules as prescribed by their registered labor acts. Do all these acts allow room for a four-day workweek while working the same number of hours as a regular five or six-day week? Let’s take a closer look at these various acts.

Present working conditions

For companies registered under the Shops and Commercial Establishment Act (‘S&CE’) of the respective state, the provisions about hours of work, overtime wages, and weekly off as per the respective state’s S&CE Act would be applicable.

However, for companies registered under the Factories Act and following the prescribed rules, no adult worker shall be allowed to work for more than nine hours on any day and forty-eight hours in any week.

the way forward

With the working hours still being forty-eight hours a week and overtime limited to one hundred and twenty-five hours per quarter, organizations cannot have their employees work four days a week without paying them overtime for the additional work hours.

Hence, with the present format of the new labor codes, the S&E Act, and the Factories Act, a four-day work week is unachievable. One must be paid overtime upon exceeding the stipulated working hours for the day (This would work only for a limited extent as the overtime limit is one twenty-five hours per quarter in Karnataka), or companies must reduce working hours in a week (ie , below the statutory limit) as a matter of policy. Else the government should bring about an amendment to the provisions of the OSH Code to achieve a four-day workweek.

Several countries such as Spain, Japan, New Zealand, Ireland, Scotland, and Iceland have already implemented the four-day workweek on an experimental basis. However, this was possible only by reducing the number of weekly working hours. Nothing in the law in India prevents an employer from reducing the number of working hours in the week and, thereby, having a four-day work week. In India, the government may try and bring about an appropriate notification to explore the option of a four-day workweek on an experimental and voluntary basis.

A four-day work week in our corporate world, though it sounds exciting, is a concept that needs to be well-deliberated and well analysed, going in-depth into how it can impact the well-being of the people and their productivity. It needs careful execution with a well-thought plan, if at all.

Harish TR, SVP – Head of Human Resources, Maveric Systems

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