Kerala’s Labour Laws in 2025: Navigating New Pay Tiers, Hours, and Social Security

THIRUVANANTHAPURAM, November 30, 2025. The year 2025 marks a turning point for Kerala’s workforce and the businesses that hire them, as big changes will happen to minimum wages, working hours, and full employee benefits. These changes, which are partly due to revisions at the state level and, crucially, the upcoming national implementation of the four new Labour Codes, are essentially reshaping the relationship between employers and employees in this southern state, which has, for decades, championed strong workers’ rights. It’s a complicated picture, certainly, made up of Kerala’s current progressive laws and the massive, all-encompassing structure of the new Central Codes that are now coming into effect.

The main goal of this move is clear: to ensure workers have a better quality of life, to establish a more consistent, some might say standardized, compliance mechanism for employers, and, very importantly, to extend a vital social security net to workers in the growing unorganised sector and the flexible gig economy. But, as is often the case with such big, foundational changes, not everything is clear, which has caused some understandable confusion and, frankly, a few operational headaches for businesses trying to keep up with the shifting regulations.

Minimum Wage Revisions: Factoring in the Cost of Living

Kerala, known for its high human development indices, has always maintained an aggressive stance on minimum wages, which are routinely changed to reflect the Cost of Living Index (CPI). So, even though the national codes are starting to take effect this year, the state’s regular Dearness Allowance (DA) revisions remain a very important part of how much employees are compensated.

For 2025, the State Government’s Minimum Wages Advisory Board has not only ordered regular, CPI-linked adjustments but, perhaps more interestingly, has specifically highlighted certain key sectors for immediate attention. We’re talking about areas where the pressure has really built up, where economic realities and worker advocacy demand a higher base rate for sustenance.

Sector-Specific Wage Adjustments and Projections

The most recent preliminary figures and suggestions from the Advisory Board show a clear intent to raise the minimum floor wage, especially for those workers who’ve been hit hard by post-pandemic inflation and the general rising cost of living in Kerala:

• Agriculture Sector: Daily wages are now expected to fall in the range of ₹600 to ₹800. This is very important because agriculture has always been a key sector in the state’s economy, even as it modernizes.
• Construction Sector: With Kerala’s infrastructure boom continuing unabated, the proposed pay range for construction workers sits at ₹700 to ₹900 per day. One must consider the physically demanding nature of this work, too.
• Tourism & Hospitality: Following the post-pandemic surge in travel, the industry is seeing recommendations for higher pay, approximately ₹800 to ₹1,000 per day, to formally recognize the essential contribution these workers make to the service economy.
• Plantation Sector: This historically significant sector, involving tea, coffee, and rubber estates, is looking at a revised daily wage of around ₹550 to ₹750, an attempt to balance industry sustainability with worker welfare.
• IT Sector (Entry-Level): Reflecting Kerala’s growing digital footprint, entry-level salaries in the IT sector are estimated to be between ₹15,000 and ₹18,000 per month. While not strictly “minimum wage,” this sets a crucial and often market-driven standard in a high-skill domain.

The Skill-Based Categorization: Simplifying Wage Structure

Here’s where the state is preparing for a major structural change in its wage policy, one that promises simplification. In line with the new Code on Wages, 2019, Kerala is moving away from its traditional, often complicated model for fixing minimum wages by sector, which currently has 84 different employment categories, each with its own schedule, a compliance nightmare if you think about it.

Instead, the draft rules are looking to simplify this by categorizing occupations into four main groups based on the intrinsic skill level required:

1. Unskilled Workers
2. Semi-Skilled Workers
3. Skilled Workers
4. Highly Skilled Workers

This transition is hugely important because it promises a uniform floor wage across different industries for jobs requiring similar skills, which should, in theory, dramatically reduce ambiguity and wage-related disputes. However, Labour Department officials have already stated that transitioning from the old, granular system to this new, broad classification will likely cause a fair number of disagreements at first, as businesses and workers try to map existing roles onto the new, simplified categories.

Working Hours, Overtime, and the 48-Hour Standard

The core of Kerala’s labour regulation remains anchored in the Kerala Shops and Commercial Establishments Act, 1960, and the Factories Act, 1948, but these are now being rigorously aligned with the national Occupational Safety, Health and Working Conditions Code (OSHWC Code), 2020.

Daily and Weekly Hour Limits

The standard for working hours is very clear and a key protection for the employee: 8 hours per day and a maximum of 48 hours per week. For most establishments, this standard is not negotiable.

• Rest Intervals: Workers must be granted a mandatory rest break of at least 30 minutes after every 5 hours of continuous work. Some older state rules are even more generous, providing a full one-hour break after four hours, a much-needed physical and mental break, truthfully.
• Maximum Spread-Over: The total daily work period, including all rest intervals, cannot exceed 10.5 hours. This rule is a crucial safeguard against excessively long days, even with breaks factored in.
• Weekly Off: Every employee is entitled to one whole day as a paid holiday each week, a basic right for well-being.

Overtime Compensation: Double the Normal Rate

Any work performed beyond the standard 8 hours a day or 48 hours a week must, by law, be compensated at a rate of twice the ordinary wage rate. It’s the law, plain and simple, and employers must manage their workforce effectively to avoid this significant expense.

Mandatory Night Shifts for Women: Safety First

In a forward-thinking move that harmonizes with the OSHWC Code, women employees are now legally permitted to work night shifts across all establishments, including factories and commercial outlets. This is a big step for gender equality in the workplace. However, and this is the crucial part, it is strictly subject to two conditions:

• The employee’s written consent must be obtained; it cannot be imposed as a mandatory condition.
• Mandated safety measures must be fully implemented, including secure transportation from the workplace to their residence, and sufficient security arrangements at the work location.

Enhanced Employee Benefits and Social Security

Kerala has always prided itself on providing robust social security, even for workers in the informal economy, through various state-run welfare boards. Now, the new Code on Social Security, 2020, is set to universalize and strengthen these benefits, creating an even wider, more resilient safety net.

Leave Entitlements: Paid Time Off

The rules governing annual leave, sick leave, and casual leave are quite precise and worker-friendly:

• Earned Leave (Annual Leave): Employees earn one day of paid annual leave for every 20 days worked, effectively accumulating 12 days per year of continuous service. Unused leave can usually be carried forward, often up to 30 to 45 days, depending on the establishment’s policy.
• Sick Leave and Casual Leave: Employees are typically entitled to up to 12 days of paid sick leave and 12 days of paid casual leave per year, though specific rules can vary slightly based on the governing state act.
• National and Festival Holidays: Working on a designated public holiday mandates either double the regular wages or a compensatory paid day off in addition to the regular weekly off, a fair reward for working on a holiday, wouldn’t you say?

Maternity Benefits: Critical Support for Mothers

The provisions here are quite comprehensive, largely mirroring the central Maternity Benefit Act:

• Paid Leave: A total of 26 weeks of paid maternity leave is provided for women employees, applicable for up to two surviving children.
• Reduced Entitlement: For the third child onwards, the paid leave entitlement is reduced to 12 weeks.
• Complications: In the event of complications arising from childbirth, an additional one month of paid leave is mandated, recognizing the unpredictable nature of health.

The Social Security Expansion: Gig Workers and the Unorganised Sector

This is perhaps the most revolutionary aspect of the new national Labour Codes: the formal, statutory recognition and mandatory inclusion of workers in the unorganised sector, including those in the rapidly evolving gig and platform economy.

Mandatory Statutory Contributions (EPF & ESI)

The familiar framework of the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) is being streamlined and expanded to cover more workers.

• EPF (Employee Provident Fund): This is mandatory for establishments with 20 or more employees. Both the employer and the employee contribute 12% of the employee’s basic wages (now defined more strictly under the Code on Wages) into the fund, guaranteeing a lump sum retirement savings and pension.
• ESI (Employee State Insurance): This scheme provides medical care and various cash benefits (like sickness and maternity) and is mandatory for establishments with 10 or more employees and for workers with monthly wages up to ₹21,000. The contribution is split between the employer and the employee.

Welfare Funds for Gig and Platform Workers

For the very first time, platform aggregators, the companies behind your food delivery, ride-hailing, or e-commerce services, are now required to contribute towards a dedicated social security fund for their gig and platform workers. The contribution is mandated at 1% to 2% of their annual turnover, though it’s capped at 5% of the total amount paid to gig workers. This is a groundbreaking move, creating a tangible security system for a workforce previously existing in a legal grey area.

“We had a lot of workers, like my son, who drive for the app-based taxis, and they had absolutely no security,” said Smt. Lakshmi Amma, a retired teacher in Kochi, is reflecting on the situation. “Now, with this fund, it’s not perfect, but it’s a start, you know? It gives them something to fall back on.”

Other Key Welfare Provisions

In addition to the financial and medical security, the laws also mandate crucial workplace facilities, ensuring a baseline standard of working conditions:

• Crèche Facilities: Must be provided in establishments where 30 or more women employees are working, addressing a critical need for working mothers.
• Restrooms and Break Rooms: Essential for all establishments to ensure a healthy working environment, which impacts productivity.
• Health Checks: A significant new requirement under the OSHWC Code is the provision of annual free health check-ups for workers aged 40 or older in specific hazardous industries, demonstrating a proactive approach to worker health.

Implications for Employers and Employees

The dual nature of the reforms, Kerala’s existing strong laws, and the new national codes now taking effect, present both opportunities and, admittedly, definite challenges.

For Employers: Compliance and Payroll Restructuring

The most immediate challenge for employers stems from the new, uniform definition of “Wages” under the Code on Wages, 2019. The rule explicitly states that allowances cannot exceed 50% of total compensation, meaning Basic Pay must constitute at least 50% of the gross salary.

This has two major, unavoidable implications:

1. Increased Statutory Costs: A higher basic pay automatically raises the base amount for calculating EPF and Gratuity contributions. While an employee’s take-home salary might drop slightly, their retirement benefits will see a definite jump, consequently increasing the employer’s overall cost-to-company (CTC).
2. Compliance Overlap: Navigating the specific state laws, such as the Kerala Shops and Commercial Establishments Act, alongside the new Central Codes can be tricky, as there are points of overlap, especially concerning leave and holidays. Expert legal consultation, really, is no longer optional, but a compliance necessity.

For Employees: Greater Protection and Formalization

For the vast majority of Kerala’s workforce, especially those who’ve long toiled in the unorganised sector, the outlook is overwhelmingly positive, promising a move toward more structured employment:

• Universal Minimum Wage: Every worker, regardless of sector or skill, is now entitled to a statutory minimum wage floor.
• Formal Appointment Letters: It’s now mandatory for employers to issue formal appointment letters, a simple but powerful tool for establishing the terms of employment and a worker’s rights in writing.
• Portability of Benefits: The new social security framework is designed to be Aadhaar-linked and portable, meaning that migrant workers, who form a substantial, essential part of Kerala’s workforce, can access their benefits no matter where they are in the country. This is huge, truly a game-changer for a highly mobile labour market.

The Enforcement Reality and Penalties

Laws, of course, are only effective if they are properly enforced. Kerala has a long history of robust trade union activity and labour mobilization, which generally ensures greater compliance compared to many other states. However, the penalties for non-compliance are severe and have been significantly revised upward:

• Minimum Wage Violations: Employers failing to pay minimum wages face substantial fines, which can range from ₹5,000 to ₹50,000, with the possibility of imprisonment for repeat offenders, signaling a zero-tolerance policy.
• Dispute Redressal: Workers or their respective unions can file complaints directly with the Labour Commissioner’s office, which can result in the employer being forced to pay back wages, sometimes with interest accrued.

Looking Ahead: A Modernized Workforce Framework

The year 2025 in Kerala is truly about embracing a modernized, more consolidated framework for labour. It’s not just a collection of new rules; it’s a re-imagining of the social contract between capital and labour, one that explicitly recognizes the needs of a 21st-century workforce, including the digitally-enabled gig workers.

Will the transition be seamless? Probably not; there will be bumps in the road, particularly as businesses re-engineer their payroll and compensation structures to adhere to the 50% basic pay rule. But the intent is clear: to ensure dignity of labour, timely wages, and a comprehensive safety net, further solidifying Kerala’s place as a leader in worker welfare across the country. The state government, as Labour Minister V. Sivankutty has assured, will undoubtedly continue its consultation with trade unions and employer bodies to iron out the creases, ensuring the implementation is, above all, pro-worker without being unnecessarily anti-industry.