DECODING INDIA’S NEW LABOUR CODES: A UNIFIED COMPLIANCE GUIDE FOR CORPORATE PROFESSIONALS
Introduction
It lays the foundation for a future ready workforce and stronger, resilient industries driving labour reforms for Aatmanirbhar Bharat. The enforcement of India’s four comprehensive Labour Codes marks the most historical legislative shift in employment law since Independence. Each code addresses distinct domain of employment regulation. Effective from 21st November 2025, with final central rules notified on 8th May 2026, the Ministry of Labour and Employment has consolidated 29 existing labour laws into 4 streamlined codes. All prior enactments stand repealed.
For Practising Company Secretaries and corporate advisors, transitioning clients to this new regulatory architecture is a matter of critical operational urgency. Non-compliance no longer carries minor penalties; it exposes corporate entities to severe systemic risk.
- The Code on Wages, 2019: The 50% Remuneration Rule
The Code on Wages, 2019 standardizes the definition of “wages” u/s 2(y) across all industries to eliminate arbitrary allowance structures and mandates a National Floor level minimum wage below which no state can fix the minimum wages. Key compliance obligations include:
- The 50% Wages Threshold: The code introduces a unified definition of ‘wages’ that includes basic pay, dearness allowance (DA), and retaining allowance must constitute at least 50% of the total Cost to Company (CTC).
- The Allowance Cap: Excluded components (such as HRA, conveyance, bonus and special allowance etc.) cannot cumulatively exceed 50% of the total remuneration. Any access is deemed wages. This directly impacts PF contribution calculation, gratuity computation and bonus eligibility.
- Minimum Wages: Every employer must pay at least the applicable minimum wages as notified by the appropriate government (Central or State). The Code mandates revision of minimum wages every five years. Employers operating in multiple states must track state-specific minimum wage notifications and update payroll accordingly.
- Overtime Treatment: Employers shall pay for every hour or for part of an hour so worked in excess, at an overtime rate which shall not be less than twice the normal rate of wages for all consent-based overtime work.
- Strict Salary Release Deadlines: The employer shall pay or cause to be paid wages to the employees, engaged on –
- daily basis, at the end of the shift;
- weekly basis, on the last working day of the week, that is to say, before the weekly holiday;
- fortnightly basis, before the end of the second day after the end of the fortnight;
- monthly basis, before the expiry of the seventh day of the succeeding month.
- The Code on Social Security, 2020: Expanded Welfare and Gratuity Re-fits
The Social Security Code (SSC) modernizes benefit delivery while placing stringent time blocks on statutory investigations. It is arguably the most impactful of the four codes for employment, as it expands the ambit of social security to gig workers, platform workers and the unorganized sector, while also amending the provision governing EPF, ESI, gratuity & maternity benefits.
- Fixed-Term Gratuity Pro-Rata: Fixed-term (contract) employees are now eligible for pro-rata gratuity after completing just 1 year of continuous service, even if they have not completed five years of continuous service. This eliminates the previous irregularity where short-tenure fixed-term employees were excluded from gratuity.
- Employees Provident Fund (EPF): The SSC retains the EPF framework but aligns with the definition of wages under the Code on Wages, 2019, meaning the PF contributions must be calculated on the expanded wage base.
- Reduced Litigation Deposits: To appeal an order before the EPFO Tribunal, employers are required to deposit only 25% of the disputed amount, a significant reduction from the prior 75% in The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
- Maternity Benefits: The SSC preserve the 26-week paid maternity leave and additionally, it mandates the provision of creche facilities for establishments with 50 or more employees and enable the government to extend maternity benefits to home-based workers.
- The Industrial Relations Code, 2020: Operational Redefinitions
The Industrial Relations Code, 2020 completely adjusts the parameters of workplace handling and dispute systems.
- Standing Orders Threshold: The mandatory requirement to formulate and certify Model Standing Orders now applies only to establishments with 300 or more workers, offering major administrative relief to MSMEs. Establishment below this threshold may adopt a model standing order notified by government. The Certified standing orders must cover terms of employment, working hours, disciplinary proceedings, and governance redressal.
- Trade Unions: The code introduces a new concept of – Sole Negotiating Union – Where only one Trade Union of workers registered under the code is functioning in an industrial establishment, then employer may recognise such Trade Union as sole negotiating union of the workers.
If more than one Trade Union of workers registered under the code then, the Trade Union having fifty-one per cent or more workers on the muster roll of that industrial establishment, then employer may recognise such Trade Union as sole negotiating union of the workers.
- Direct Tribunal Access: Workers can now approach Industrial Tribunals directly after a failed conciliation, completely bypassing long-drawn government referral methods.
- The Occupational Safety, Health and Working Conditions Code, 2020
The OSH Code, 2020 consolidates compliance by replacing a mountain of scattered state and central permits with a unified filing platform and it expands the definition of establishment and introduces uniform norms for working hours, safety & contractor regulation.
- The Single-Window Paradigm: Multiple overlapping licenses and registrations are replaced by a single electronic registration, single operating license, and single annual return.
- Working hours: No worker shall be required to work for more than 8 hours a day and 48 hours a week. Overtime is permissible up to 144 hours per quarter with double rate overtime wages.
- Gender-Neutral Workplace Access: Women are legally permitted to work night shifts across all sectors, including underground mining and hazardous operations, subject to explicit written consent and prescribed safety protocols (CCTV, secure transport).
- Mandatory Safety Committees: Factories employing 500 or more workers must appoint a qualified safety officer. The Safety Committee shall consist of an equal number of members representing the employer and the workers, which shall not exceed twenty. The committee reviews safety measures and reports on accidental trends.
- Free Annual Health Check-ups: Every employer of dock work, building or other construction work shall arrange to conduct free of cost medical examinations for employee, who has completed forty years of age.
- Mandatory Appointment Letters: Every employer is legally obligated to issue formal, standardized appointment letters to all workers upon hiring to establish a clear employment history.
Conclusion: The Transition Role of PCS
The four new labour codes mark the biggest shift in India’s employment laws in decades. By replacing a strict, punitive system with a guidance-based model, the government is putting the responsibility for compliance directly on businesses. Companies can no longer afford to sit back and wait while individual states finalize their local guidelines.
To prevent operational disruptions, management and Company Secretaries must take immediate action. This means restructuring salary setups to meet new wage definitions, upgrading digital tracking tools, and implementing stronger safety protocols for women. Ultimately, true compliance is no longer just about passing inspections, it is about building a modern, self-regulated workplace.
For any further query or consultations, please connect with us:
J. K. Gupta & Associates
(Company Secretaries & Insolvency Professionals)
Email: cs@jkgupta.com; Mobile: 9953887741
Delhi || Noida