India’s Labour Codes are not simply a legal update for the HR department. They affect how organisations structure wages, maintain employment records, manage contractors, provide social security and create safe workplaces. For business leaders, the real task is to turn legislation into consistent, day-to-day routines.
The four Labour Codes (the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020) came into force on 21 November 2025, consolidating 29 central labour laws. The Ministry of Labour and Employment notified the Central Rules under all four codes on 8 May 2026. Employers should still verify the rules and notifications that apply to their establishment, sector and state before changing policies or payroll.
The four Labour Codes at a glance
| Code | Brings together | What employers feel first |
|---|---|---|
| Code on Wages, 2019 | Payment of wages, minimum wages, bonus and equal remuneration | One definition of wages; timely payment |
| Industrial Relations Code, 2020 | Trade unions, standing orders and industrial disputes | Fixed-term employment; retrenchment thresholds |
| Code on Social Security, 2020 | Provident fund, employees’ state insurance, gratuity, maternity benefit and related laws | Gratuity for fixed-term staff; gig and platform workers |
| Occupational Safety, Health and Working Conditions (OSH) Code, 2020 | Factories, contract labour, inter-state migrant workers and related laws | Registration, working hours, overtime and contract labour |
Why implementation matters more than awareness
A company may have circulated an internal note about the codes and still have gaps in payroll configuration, employee documentation or contractor records. Compliance depends on how the rules are applied every day: what the appointment letter says, how wages are calculated, whether records are complete, who checks contractor obligations and how exceptions are resolved.
So the first step is not to download a generic checklist. It is to understand your own workforce and operating model.
Five areas employers should review
1. Wage structures and payroll configuration
All four codes share one definition of wages. Certain components, such as house rent allowance, conveyance, overtime and the employer’s provident fund contribution, are excluded. But if the excluded components together exceed 50% of total remuneration, the excess is added back and treated as wages.
Salary structures that keep basic pay low and allowances high may therefore see wage-linked costs, such as gratuity and leave encashment, rise. Do not restructure salaries because of a social-media post or a one-size-fits-all calculator. Model the impact for each employee category, test payroll outputs and take professional advice before making changes.
2. Appointment letters and personnel records
Every employee must now receive an appointment letter, and the Central Rules under the OSH Code prescribe its particulars, including designation, type of employment and skill category. If frontline or contract workers are still onboarded without written letters, this is the first gap to close.
Check that employment terms and personnel records are complete, consistent and current across locations, business units and employment categories. A document that sits in a shared folder but is incomplete, outdated or inconsistent with what actually happens is not a reliable control.
3. Social security, fixed-term staff and contractors
Map permanent employees, fixed-term workers, contract labour and other categories correctly, then review social-security coverage, registrations, contributions and supporting records for each.
- Fixed-term employees are entitled to the same wages and benefits as permanent employees doing the same or similar work, and become eligible for gratuity after one year of service rather than five.
- Gig and platform workers are recognised for the first time. Aggregators contribute 1–2% of annual turnover towards their social security, capped at 5% of the amount paid or payable to these workers.
- Contract labour now sits in a common framework under the OSH Code, including limits on contract labour in core activities except in specified circumstances.
Where a contractor supplies workers, clarify the responsibilities of the principal employer and the contractor, define the documents and reports you need, and check compliance regularly rather than relying only on contractual assurances.
4. Working hours, safety and working conditions
Under the Central Rules, working time is capped at 48 hours a week. Overtime is paid at not less than twice the ordinary rate of wages and is capped at 144 hours in a quarter. States set the rules for establishments under their jurisdiction, so check each location before changing shift patterns.
Review safety, leave, health and welfare arrangements against the requirements for each establishment. Manufacturing plants, warehouses, offices and field operations have different risk profiles, and policies must show up in induction, supervisor training, incident reporting and site routines.
5. Employee relations and governance
Prior government permission for lay-off, retrenchment and closure now applies to industrial establishments with 300 or more workers, up from 100. An employer that retrenches a worker must also transfer 15 days’ last-drawn wages to a worker re-skilling fund within ten days.
Check grievance channels, disciplinary processes and separation documentation, and assign clear ownership across HR, finance, legal, operations, procurement and site leadership. Compliance becomes fragile when every function assumes another team is responsible.
A step-by-step readiness plan
- Map your workforce: locations, headcount, worker categories, contractors and existing registrations.
- Assess the gaps against the requirements that apply to each establishment.
- Prioritise by legal exposure, employee impact and operational urgency.
- Update policies and contracts, including appointment letters and fixed-term contracts.
- Configure payroll and HR systems, and re-run payroll against the 50% wage rule before go-live.
- Train the managers who must apply the changes, and keep evidence that controls are working.
- Schedule periodic checks. A one-time review cannot catch every change in headcount, location, job category or notification.
Common mistakes to avoid
- Assuming one national checklist answers every state- and sector-specific question.
- Changing compensation before modelling the employee and employer impact.
- Treating outsourced work as a transfer of every compliance responsibility.
- Relying on headlines or simplified online claims where the actual provision includes conditions or exceptions.
Frequently asked questions
When did the Labour Codes come into force?
All four Labour Codes came into force on 21 November 2025. The Central Government notified its rules under the codes on 8 May 2026; states notify their own rules for establishments under their jurisdiction.
Do the Central Rules apply to my business?
The Central Rules apply where the Central Government is the appropriate government. For most private employers, the detailed obligations come from the rules of the state where each establishment operates, so check each location.
Does the 50% wage rule change our salary costs?
It can. If excluded allowances exceed half of total remuneration, the excess counts as wages, which can raise wage-linked costs such as gratuity and leave encashment. Model the effect for each salary band before your next revision cycle.
How TNSL can help
Our HR Centre of Excellence runs Labour Code readiness reviews as a defined HR project: policy and contract updates, salary-structure impact modelling and audits. Our HR Shared Services team then runs payroll and statutory compliance on a calendar, with audit-ready records.
Sources: Ministry of Labour and Employment, notifications bringing the Labour Codes into force (21 November 2025) and the Central Rules (8 May 2026).