The world of work is continually subject to evolution and transformation due to socio-economic changes and advancements in technology. From the rise of artificial intelligence (AI) use in employment decisions, adoption of hybrid work models, return-to-office mandates and four-day working week pilots, greater focus on pay equity and transparency, to change in the regulatory framework governing data privacy and protection of gig worker rights, the year 2024 has seen a flurry of changes in employment law across the globe.
The International Labour Organisation (ILO) reports that 2024 witnessed a historically low global unemployment rate of 4.9%, coupled with decelerating employment growth. The global focus has transitioned from pandemic recovery to addressing structural vulnerabilities, such as sluggish productivity growth, spatial inequalities, and the increasing influence of AI on the future of work. National elections in major economies, including the United States and India significantly altered the political landscape. Understanding and anticipating the effect of these trends is crucial for businesses, policymakers, employers, and employees in navigating the employment scenario for this year and beyond.
In this piece, we outline some of the major employment law trends that are likely to shape and impact the Indian employment law landscape in the year 2025.
Organizations are focused on bringing a seismic shift in workplace arrangements in 2025 by adopting return-to-office measures and ending the era of remote work. Reportedly, several technological giants have made it mandatory for employees to work from offices which consequentially led to an increase in employee attrition rates due to reduced flexibility. With a focus on employee retention, organizations have launched employee engagement initiatives to incentivize employees to return to offices, including hybrid working models. Striking a balance between productivity, collaboration, and employee well-being remains a priority for employers navigating the post-pandemic work environment. While implementing such hybrid models, it is important for employers to evaluate and take steps to mitigate associated risks including breach of obligations in relation to data confidentiality, protection of proprietary information, moonlighting, and non-solicitation.
The Digital Personal Data Protection Act, 2023 (“DPDPA”) which regulates processing of digital personal data of individuals in India is likely to come into force in 2025. Draft rules under the DPDPA, were released on 3 January 2025 for public consultation, which aim to facilitate the implementation of the DPDPA. As processors of employee personal data, employers may need to review and revisit their data handling systems and methods with respect to collection, storage, retention, transfer, and erasure of data to ensure statutory compliance and a seamless transition to the new data protection regime.
India has always been a jurisdiction that restricts implementation of post-termination non-competes irrespective of reasonability of duration and geographical area. The legal position on enforcing post-termination restrictive covenants in employment agreements in India remains the same. i.e., they continue to be unenforceable (except in some cases of non-solicitation and breach of confidential information). This trend is currently gaining momentum across the globe, including in several states in the United States enacting bans on non-compete clauses. Notably, on April 23, 2024, the Federal Trade Commission (“FTC”) issued a final rule banning non-compete clauses in employment agreements, citing them as unfair methods of competition. However, the FTC rule is currently unenforceable on account of a nation-wide injunction (issued by the United States District Court for the Northern District of Texas on August 20, 2024), which stands under appeal by the FTC. In the United Kingdom, the government in 2023 announced its intention to limit the period of all non-compete agreements to 3 months. In the Netherlands, a new bill is expected to take effect in early 2025 which proposes to limit the duration of non-compete clauses to one year. The validity of these clauses will be subject to geographical restrictions, and employers will be required to provide mandatory compensation (of up to half of the employee’s monthly salary for each month the non-compete is effective) to employees when invoking the non-compete clause. Therefore, it is extremely important for employers to form robust policies and practices to safeguard confidential data and build attractive employee incentive mechanisms to retain employees and minimize any risks to their business interests.
With changes in work environments and nature of employer-employee engagements, 2025 is likely to witness an increase in organizational restructuring and workforce reductions. The rise of digital technologies, automation, and remote work models are pushing companies to reorganize teams and processes to capitalize on these advancements. In 2024, India has experienced significant job cuts, particularly in the tech sector. Reportedly, more than 1,49,000 IT professionals have lost their jobs in 2024, owing to ongoing economic challenges and restructuring efforts within the industry. This figure marks a substantial increase from the previous year, indicating a persistent trend of workforce reductions. Recently, companies have been seen to be increasingly turning to “quiet hiring,” a practice where they redeploy existing employees to fill skills gaps or meet project demands, rather than hiring externally.
On the other hand, there has also been a rise in employee litigation and unfair termination claims, along with social media backlashes in the context of ‘employment terminations’ that are not implemented in a legally compliant, respectful, and ethical manner. Employees are also seen to be using social media platforms to voice their grievances and share experiences, resulting in public backlash against employers. As a result, in addition to conforming with the statutory compliances, employers are working towards implementing workforce reduction measures in a respectful and inclusive manner to ensure minimized costs of litigation and any reputational damage. Employers are also focusing on maintaining a positive workplace culture and engaging in proactive communication to mitigate the risks associated with workforce reductions and terminations.
A multitude of notifications have been issued in the recent years in relation to statutory compliances regarding women working in night shifts and engaging apprentices which implies a higher likelihood of strong enforcement of such laws by Indian labour authorities in 2025. Employers may need to shift their focus to revise their internal policies and practices to comply with the laws and closely monitor any notifications issued by labour departments from time to time. In March 2024, the Ministry of Skill Development and Entrepreneurship issued notices to 180,000 companies asking them to comply with provisions of the Apprentices Act, 1961 and to engage apprentices, as prescribed under the law.
The importance of fostering diverse, equitable and inclusive workplaces is gaining momentum globally, with a notable emphasis on strategic reassessment, technology integration, and inclusive leadership. In 2024, 85% of leaders reported having an estimated budget for D&I initiatives, with 45% anticipating increased investment in D&I for the next financial year. Developments in 2024 include increased emphasis on trans-inclusion, mental health initiatives, elder care support, pet-friendly policies, updated health and safety regulations, robust anti-harassment policies, and reproductive health and sexual wellness programs. Additionally, D&I initiatives might become part of environmental, social and governance (ESG) reporting, requiring companies to demonstrate ethical labour practices and fair wages. The draft Equality (Race and Disability) Bill in the UK, expected in Spring 2025, aims to strengthen pay equity and workplace inclusivity through measures like extending equal pay protections to persons with disabilities and ethnic minorities, and mandatory pay gap reporting for employers having at least 250 employees. As such, policies and practices aimed at eliminating biases and fostering inclusivity, such as equal opportunity policies for transgender persons, persons with disability and other protected category employees are expected to be at the forefront of organizational strategies in 2025.
The major evolution and advancement in AI in 2024 have made it the new buzzword in the world. AI tools continue to influence and transform workplaces by increasing automation of routine tasks. While some routine tasks may be taken over by machines, there will be an increased demand for skills related to managing and developing AI systems like creative thinking. Striking a balance between human expertise and technological capabilities will be crucial for businesses. Inclusive AI-driven hiring and performance monitoring requires diverse data sets, to avoid skewed outcomes by representing a broad spectrum of candidates. This requires active inclusion of factors like gender, ethnicity, and educational background in algorithm design for a fair and diverse decision-making. A practice that may help is to loop in and establish feedback mechanisms involving inputs from diverse backgrounds for continuous improvement, ensuring the evolution of more inclusive AI models.
Unlike previously, employee motivation is no longer restricted to higher salary or heavy bonus, it is much beyond these monetary benefits. In the wake of the widespread trend of employees resigning, commonly referred to as 'the Great Resignation', tailoring retention incentives for the workforce has become crucial. A universal approach is inadequate. A diverse range of compensations including cash, stocks, cryptocurrency, non-fungible tokens, phantom stocks (notional shares), employee stock options and other equity-linked incentives are now offered by companies, especially in the technology industry to retain employees and keep them motivated at their jobs. With the notification of the Foreign Exchange Management (Overseas Investment) Rules, 2022, the Indian overseas investment framework has allowed foreign entities to implement employee stock option plan (ESOP) on a globally uniform basis for all its subsidiaries and permits Indian employees of such subsidiaries to enjoy benefits of such stock options. In addition to this, there is a growing recognition of the importance of holistic employee incentive mechanisms which include job counselling, gym membership, fitness vouchers, mental health support and assistance programs, etc.
There has been a dramatic rise in new and creative forms of workforce structuring which are adopted. These new forms of engagements include consultancy agreements, platform work, freelance and gig-worker engagements falling outside traditional employee-employer relationships and contract labour arrangements. Globally, multiple jurisdictions are increasingly recognizing the need to provide gig workers with similar protections and benefits as traditional employees while maintaining the flexibility of the gig economy. Examples include recent regulations in British Columbia establishing minimum employment standards and worker protections for app-based workers, Singapore's Platform Workers Act (which comes into effect in 2025) aiming to balance worker protection with platform economy innovation, and the European Union's platform work directive boosting protections and transparency for gig workers.
In India, the State of Rajasthan has passed the Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023, to regulate the engagement of gig workers and aims to provide social security and other benefits to platform-based gig workers. In 2024, the State of Karnataka released a draft of the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Bill, 2024, along similar lines. This is a significant step towards protecting the rights of gig workers which will be a precedent for other states to follow suit and take similar initiatives which may trigger additional compliance requirements for organizations engaging gig workers. These new forms of workforce engagements may also require re-evaluation of traditional employer-employee engagement models from a new lens.
The exercise of implementation of labour codes consolidating a host of important labour legislations on wages, industrial relations, social security and occupational safety, welfare and working conditions is likely to be brought to a successful completion in 2025. While many states have issued draft rules under all the labour codes, a few states and union territories are yet to notify their draft rules under the labour codes. Keeping in mind the upcoming implementation of labour codes, the Ministry of Labour & Employment has identified reforms such as single registration, single return, and firm-based common licenses with five years validity, which are expected to be prioritized and carried out in 2025. Employers would need to relook and modify their internal policies to be compliant with the new labour codes once they come into effect.
In the year 2025, we look forward to seeing a slew of positive changes in the Indian employment law landscape. Along with the implementation of the new labour codes, 2025 brings in the hope in terms of regulating gig economy and protecting gig workers who are deprived of their rights unlike regular employees including maximum work hours and leave entitlements, protection against discrimination and harassment and social security benefits. The evolving employment landscape also underscores the importance of adapting to technological advancements, particularly the integration of AI in workplace practices. This year's trends underscore a departure from conventional practices, spotlighting the innovative and inclusive strategies adopted by trailblazing organizations and are a clear indication that workplaces and workplace practices will continue to develop in 2025. We are hopeful to see a progressive shuffle of labour laws and welfare policies which would motivate employers to embrace innovation, foster equity and diversity in workplaces and seamlessly navigate the labour market for years to come.
