Four Labour CodesEffective 21 November 2025Full Rollout April 2026
⚑ Historic Reform: 29 Laws Consolidated into 4 Labour Codes
On 21 November 2025, the Government of India formally notified all four Labour Codes, replacing 29 central labour laws with a unified, modern framework. Full operational rollout — including Central and State rules — is targeted for April 1, 2026. This is the most sweeping overhaul of India's labour legislation since Independence, impacting every employer, HR team, and worker across the country.
1. Code on Wages, 2019
(consolidates 4 laws)
2. Industrial Relations Code, 2020
(consolidates 3 laws)
3. Code on Social Security, 2020
(consolidates 9 laws)
4. Occupational Safety, Health & Working Conditions Code, 2020
(consolidates 13 laws)
01
Why the Reform? Rationale & Objectives
India's pre-2025 labour framework consisted of nearly 30 central laws and hundreds of state-level regulations, many dating back to the colonial era. Overlapping definitions, inconsistent thresholds, and complex compliance requirements created significant administrative burdens for businesses and left large sections of the workforce unprotected.
1.1 Key Objectives of the Labour Codes
• Consolidate and rationalise 29 fragmented central labour laws into 4 comprehensive codes
• Create uniform definitions across all codes — wages, worker, employer, establishment
• Extend social security and statutory benefits to gig, platform, and unorganised sector workers
• Simplify compliance through digital registration, single returns, and unified inspection
• Promote ease of doing business and attract domestic and foreign investment
• Align India's labour framework with global standards and the Aatmanirbhar Bharat vision
• Replace 'Inspector Raj' with web-based, risk-based, algorithm-driven inspection mechanisms
• Provide flexibility to industry while strengthening protections for workers
1.2 Laws Replaced by Each Code
Labour Code
Laws Consolidated
Key Areas Covered
Code on Wages, 2019
Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965, Equal Remuneration Act 1976
EPF Act 1952, ESI Act 1948, Gratuity Act 1972, Maternity Benefit Act 1961, and 5 others
PF, ESI, gratuity, maternity, gig worker benefits
OSH&WC Code, 2020
Factories Act 1948, Contract Labour Act 1970, Inter-State Migrant Workmen Act 1979, and 10 others
Working hours, safety, health, contract labour, leave
02
Code on Wages, 2019
The Code on Wages establishes a single, unified framework for minimum wages, wage payment timelines, bonus entitlements, and equal remuneration across all sectors and establishments in India. The most transformative change is the new definition of 'Wages' and the landmark 50% Basic Pay Rule.
2.1 The 50% Wage Rule — Most Critical Change for Employers
The 50% Basic Pay Rule — What It Means
Under the new Wage Code, an employee's Basic Pay + Dearness Allowance must constitute at least 50% of the total Cost to Company (CTC). If allowances (HRA, Special Allowance, LTA, etc.) in aggregate exceed 50% of total remuneration, the excess is treated as 'wages' for computing statutory contributions.
Impact: This directly increases the wage base for calculating Provident Fund (PF), Gratuity, and ESI contributions — raising employer statutory costs by 5–15% for most organisations that historically kept basic pay artificially low.
Employer Action Required: Immediately conduct a full payroll audit and model revised CTC structures for all employees.
2.2 New Definition of 'Wages'
Included in 'Wages'
Basic Pay
Dearness Allowance (DA)
Any component not in the exclusion list
Excess allowances over 50% of total remuneration
Remuneration in kind up to 15% of total wages
Excluded from 'Wages'
House Rent Allowance (HRA)
Conveyance / Travel Allowance
Overtime Allowance
Employer PF / Pension Contribution
Performance-linked incentives (annual)
Gratuity Payments
Retrenchment Compensation
2.3 Minimum Wages & Floor Wage
• A national floor wage is mandated for the first time, below which no State can fix minimum wages
• Minimum wages fixed based on skill category: Unskilled, Semi-Skilled, Skilled, and Highly Skilled
• Based on a standard family consumption unit (employee + spouse + 2 children = 3 adult units)
• States must revise minimum wages at least once every 5 years
• Universal application: minimum wage applies to all employees across all sectors — no exclusions
2.4 Wage Payment Rules
• Wages must be paid on a fixed day — daily, weekly, fortnightly, or monthly (as applicable)
• Monthly wages must be paid by the 7th of the following month
• Payment must be through digital / bank transfer (cash payments permitted only in specified cases)
• Deductions from wages permitted only for specific reasons (PF, ESI, advances, fines with limits)
• Equal remuneration for men and women for same or similar nature of work — strictly enforced
2.5 Bonus Provisions
Applicability
20 or more employees
Eligibility Threshold
Earnings up to ₹21,000/mo
Minimum Bonus
8.33% or ₹100
Maximum Bonus
20% of annual wages
03
Industrial Relations Code, 2020
The Industrial Relations (IR) Code modernises the framework governing employment terms, trade unions, retrenchment, layoffs, strikes, lockouts, and dispute resolution. It introduces significant changes that affect both large enterprises and smaller establishments.
3.1 Fixed-Term Employment (FTE) — A Game Changer
Fixed-Term Employment: Key Benefits Now Extended
The IR Code formally recognises Fixed-Term Employment (FTE) as a distinct employment category. Fixed-term employees are now entitled to ALL benefits on par with permanent employees — proportionate to their tenure. This eliminates the earlier practice of using contract workers to avoid statutory benefit obligations.
▸ Gratuity after just 1 year of continuous service (vs. 5 years for permanent employees)
▸ ESI, PF, leave, and other statutory benefits — full parity with permanent employees
▸ No retrenchment compensation required at end of fixed term
▸ Eligibility for pro-rata bonus based on days worked
3.2 Standing Orders — Revised Threshold
•Applicable to all industrial establishments (including commercial establishments) with 300 or more workers
• Previous threshold varied from 50 to 100 workers — now unified at 300
• Employers may adopt Model Standing Orders and simply intimate the Certifying Officer
• Existing certified standing orders deemed valid to the extent not contrary to the new Code
• Standing orders must cover service conditions, working hours, leave, misconduct, and grievance redressal
3.3 Retrenchment, Layoffs & Closures
Action
Threshold for Prior Govt. Approval
Notice / Compensation
Retrenchment of Workers
300 or more workers (raised from 100)
1 month notice + 15 days wages per year of service
Layoff
300 or more workers
Compensation @ 50% of basic wages + DA for layoff period
Closure of Establishment
300 or more workers
3 months notice to government; 60 days notice to workers
Retrenchment Compensation Fund
Applies to all retrenchments
Employer credits 15 days' last-drawn wages to the Fund
Note: The threshold for prior government permission has been increased from 100 to 300 workers. This provides greater operational flexibility for medium-sized employers, while large establishments (300+ workers) still require government approval before any retrenchment, layoff, or closure.
3.4 Trade Unions & Collective Bargaining
• Minimum 7 persons required to form a trade union (unchanged)
•Negotiating Union: The union with 51% or more membership is recognised as the sole negotiating union
•Negotiating Council: Where no single union has 51%, a council of unions with at least 20% membership each
• Recognition of trade unions simplifies collective bargaining and reduces multi-union disputes
• Unions must maintain proper accounts and file annual returns with the Registrar
3.5 Strikes, Lockouts & Dispute Resolution
•60 days' advance notice mandatory before any strike or lockout in all industrial establishments
• Strike / lockout prohibited during pendency of conciliation, arbitration, or tribunal proceedings
• Conciliation Officer appointed for resolution of disputes — structured timelines
• Industrial Tribunal replaces the existing Labour Court structure
• Remote work (work from home) formally recognised in service sector with mutual consent
04
Code on Social Security, 2020
The Social Security Code is the most expansive of the four codes, consolidating 9 laws and dramatically extending coverage to gig workers, platform workers, and the unorganised sector for the first time in India's legislative history.
4.1 Provident Fund (EPF) — Key Changes
•Threshold: Establishments with 20 or more employees
•Employer contribution: 12% of wages (basic + DA) — higher base due to 50% Wage Rule
•Employee contribution: 12% of wages — take-home pay may reduce for some
• Wages for EPF now means the new broader statutory 'Wages' definition
• Fixed-term employees entitled to EPF from Day 1
• EPFO digital systems upgraded for real-time tracking
4.2 Employees' State Insurance (ESI) — Expanded Coverage
•ESIC threshold: 10 or more employees (unchanged)
•Hazardous sector: Even ONE employee triggers mandatory registration
•Wage ceiling: ₹21,000/month (₹25,000 for PWD)
•Rates: Employer 3.25%; Employee 0.75%
• Covers: medical, sickness, maternity, disablement, and dependants' benefits
•Geographical expansion: Extended to all districts across India
4.3 Gratuity — Revised Rules
Category
Eligibility Period
Calculation Formula
Permanent Employees
5 years of continuous service
15 days' wages × years of service
Fixed-Term Employees (FTE)
1 year of continuous service (pro-rata)
15 days' wages × years of service (proportionate)
Seasonal / Underground Mine Workers
5 seasons or 5 years
7 days' wages × years of service
Journalists
3 years of continuous service
As per Working Journalists Act provisions
Note: Gratuity calculation is effective from 21 November 2025 (date of Code commencement). Wages for gratuity now means the broader statutory 'Wages' definition, significantly increasing payouts for employees whose basic pay was historically suppressed.
4.4 Maternity Benefits
•Maternity leave: 26 weeks for women with up to 2 children
• 12 weeks of paid leave for women with more than 2 children
•Adoptive/Commissioning mothers: 12 weeks of leave
Historic Recognition Under the Social Security Code
For the first time in India, gig workers (app-based, freelancers) and platform workers (Ola, Uber, Swiggy, Zomato, Urban Company, etc.) are formally recognised as a distinct category of workers entitled to social security benefits.
Benefits Extended
▸ Life and disability insurance coverage
▸ Health and maternity benefits
▸ Old age protection / provident fund
▸ Education scheme for children
Platform Aggregator Obligations
▸ Contribute 1–2% of annual turnover to Social Security Fund
▸ Eligibility: 90+ days with one aggregator, or 120+ days across multiple
▸ Must register all platform workers on the government portal
05
Occupational Safety, Health & Working Conditions Code, 2020
The OSH&WC Code consolidates 13 laws into a single framework covering workplace safety, working hours, leave entitlements, and conditions of employment. It introduces universal appointment letters, gender-inclusive night shift provisions, and a complete overhaul of the inspection regime.
5.1 Working Hours & Overtime
Parameter
Rule Under OSH Code
Daily Working Hours
Maximum 8 hours per day (standard)
Weekly Working Hours
Maximum 48 hours per week
Daily Rest Interval
Minimum 30-minute rest after 5 continuous hours of work
Spread Over (Total Work Period)
Maximum 12 hours per day including rest intervals
Overtime Eligibility
Workers working beyond 8 hours/day or 48 hours/week
Overtime Pay Rate
Twice (2x) the normal rate of wages — mandatory
Weekly Off
Mandatory weekly rest day — at least 24 consecutive hours
Annual Leave (Earned Leave)
1 day for every 20 days worked (for adults)
Casual Leave
As per state rules and establishment policy
Leave Carry Forward
Unspent earned leave can be carried forward (limit per state rules)
5.2 Universal Appointment Letter — Mandatory
Every employer must issue a formal written Appointment Letter to every employee or worker at the time of appointment. This is now a statutory obligation under the OSH&WC Code, enforceable across all establishments regardless of size or sector.
Includes: Designation, nature of work, wages, hours, leave, notice period, and service conditions.
5.3 Women in the Workforce — Night Shift
• Permitted to work between 7 PM and 6 AM across all sectors
• Mandatory: Explicit written consent required
• Employer must ensure safety, secure transport, and lighting
• Separate washrooms and rest rooms mandatory
5.4 Digital & Inspection Reforms
• 'Inspector Raj' replaced with Inspector-cum-Facilitator
