Enterprise Enquiries:
Follow Us
How can businesses prepare for India’s Labour Codes without overlooking state-specific obligations?
India’s four Labour Codes represent a major restructuring of the country’s labour-law framework. For employers, however, consolidation is not the same as automatic compliance. Payroll calculations, employee benefits, industrial relations, contractor management and workplace safety all require careful review against the provisions and rules applicable to each establishment.
The Codes came into force on 21 November 2025. By 2026, employers have moved beyond monitoring the reform announcement: they need to assess how the legal framework applies to their workforce, locations and operating model.
The most important first step is to distinguish the national commencement of the Codes from the rules, notifications and administrative procedures that apply to a particular establishment.
The four Codes consolidate 29 central labour laws into a unified framework covering wages, industrial relations, social security, occupational safety and working conditions.
| Labour Code | What it covers | Key employer review areas |
| Code on Wages, 2019 | Minimum wages, wage payment, bonus and equal remuneration | Wage definition, minimum-wage coverage, payroll calculations, wage periods and bonus eligibility |
| Industrial Relations Code, 2020 | Trade unions, standing orders, industrial disputes, lay-off, retrenchment and closure | Grievance mechanisms, union processes, standing orders and workforce-reduction procedures |
| Code on Social Security, 2020 | EPF, ESI, gratuity, maternity benefits, employee compensation and additional worker categories | Coverage, contribution calculations, gratuity, fixed-term employment and records |
| Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC Code) | Workplace safety, health, working conditions, factories, contract labour and migrant workers | Registration, licensing, working hours, welfare, contractor labour and reporting |
The consolidation is intended to simplify the framework, but employers should not assume that every prior procedure, threshold or administrative requirement has disappeared. Applicable rules and transitional provisions must be checked alongside the Codes.
The four Labour Codes came into force nationally on 21 November 2025. The Ministry subsequently published draft Central Rules on 30 December 2025 and lists Central Rules notified on 8 May 2026.
This does not establish that every rule, form or administrative procedure is identical across India. Labour is in the Concurrent List, and the appropriate Government may be the Central or State Government depending on the establishment.
The Ministry’s employer handbook is a useful reference, but it states that the Codes prevail if there is a discrepancy. It primarily addresses establishments for which the Central Government is the appropriate Government.
For publication and compliance planning, use this distinction:
The Codes are in force nationally. The applicable rules, forms, and administrative procedures depend on the appropriate Government and the notifications applicable to the establishment.
Employers should check the relevant Gazette notifications, state rules, and savings or transitional provisions before changing operational processes.
The Code on Wages consolidates provisions relating to minimum wages, payment of wages, bonus and equal remuneration. Its definition of wages is particularly important for payroll teams.
Section 2(y) defines wages to include basic pay, dearness allowance and retaining allowance, while listing specified exclusions. If the excluded components exceed 50% of total remuneration, the excess is added back to wages for statutory purposes.
This is a cap on exclusions, not a requirement that basic salary must always equal exactly 50% of CTC. The statutory calculation depends on the wage definition and the components included in the relevant remuneration structure.
The Ministry’s additional FAQs dated 16 March 2026 clarify several elements of the calculation:
Employers should read the Ministry’s clarifications with the statutory text rather than relying on simplified salary-structure illustrations.
Employer action: Recalculate wage components using the statutory definition, then test PF, gratuity, overtime and other wage-linked calculations separately. Avoid blanket advice that “basic must be 50% of CTC.”
The Code on Wages extends statutory minimum-wage protection broadly and provides for timely payment of wages. Minimum wages are set by the appropriate Government and are distinct from the statutory definition of wages.
Employers should verify the current minimum-wage notification for the relevant state, occupation, skill category, and zone. They should also review wage periods, payment deadlines, deductions, overtime treatment and bonus eligibility under applicable notifications.
The Industrial Relations Code addresses trade unions, negotiating mechanisms, standing orders and industrial disputes. Its provisions may affect how employers manage employee representation, workplace grievances and workforce changes.
Employers should review whether their establishment is covered by standing-order requirements and whether current documents and processes align with the applicable provisions. Grievance redressal, disciplinary procedures, trade-union recognition and negotiating mechanisms should also be assessed.
The Code’s special chapter ( Industrial Relations Code, Section 77 ) governing lay-off, retrenchment and closure applies to specified industrial establishments employing 300 or more workers on average per working day in the preceding 12 months, or a higher number notified by the appropriate Government.
The threshold should not be treated as a universal rule for every establishment or every workforce decision. Employers must verify the establishment definition, worker count, applicable notifications and required procedure before acting.
Employer action: Review standing orders, grievance and disciplinary processes, workforce-reduction procedures, notice requirements and compensation obligations with qualified counsel before implementation.
The Code on Social Security consolidates provisions relating to EPF, ESI, gratuity, maternity benefits, employee compensation and social security for additional worker categories.
The revised wage definition is relevant to wage-linked calculations, but coverage and contribution obligations must still be checked under applicable provisions, schemes, thresholds and notifications.
Employers should review:
The Code also provides a framework for social security relating to gig, platform and unorganised workers. Employers should avoid assuming that every provision creates the same direct obligation for every business; applicability depends on the relevant category and legal mechanism.
The OSHWC Code addresses occupational safety, health, working conditions, working hours, welfare, factories, contract labour and inter-state migrant workers.
The practical requirements may depend on the establishment category and applicable rules. Employers should review shift patterns, overtime, weekly rest, leave, safety training, risk controls, PPE, incident reporting and health examinations where required.
They should also verify welfare facilities and safeguards for women working in permitted conditions, including night work, as well as applicable obligations relating to inter-state migrant workers.
The OSHWC Code restricts contract labour in core activities, subject to specified exceptions. These include circumstances where the activity is ordinarily carried out through contractors, does not require full-time workers for the major portion of the working day or longer periods, or involves a sudden increase in work that must be completed within a specified time.
The principal employer also has statutory responsibilities. Under Section 55, if a contractor fails to pay wages or makes a short payment, the principal employer is liable to pay the full amount or unpaid balance to the contract labour and may recover it from the contractor.
Employer action: Map contractor roles against core and non-core activities, verify registration and licensing applicability, reconcile attendance and wage payments, and retain evidence of statutory contributions and corrective action.
The reform is substantial, but statistics should be used with their original definitions and limitations.
| Evidence | What it tells employers |
| 29 central labour laws consolidated into four Codes | The scale of the legal restructuring |
| 266,931 factories registered in ASI 2024–25, compared with 260,061 in 2023–24 | The scale of the registered factory sector; ASI is not a census of every business |
| 16,653,810 workers in ASI 2024–25 | Workforce scale in the ASI-defined factory sector |
| 2,373 fatal and non-fatal factory injuries reported in 2023 | The continuing importance of safety systems and incident reporting; reporting coverage may vary |
| 73% of surveyed employers expected compliance simplification published by V.V. Giri National Labour Institute study | Employer expectations, not measured realized savings |
The V.V. Giri National Labour Institute perception study also reported employer sentiment in favour of regulatory clarity, workforce flexibility and digital tools. These findings should be presented as survey perceptions rather than proof that compliance costs have already fallen or that all employers share the same view.
The reform’s stated direction includes a more facilitative compliance system. At the CII Annual Business Summit on 12 May 2026, Union Minister Mansukh Mandaviya described the Codes as seeking to replace the traditional inspection system with a “facilitative compliance ecosystem.”
That statement signals policy direction; it should not be read as a guarantee that inspections or enforcement will operate identically in every state or establishment.
For payroll interpretation, a useful legal-analysis framing from Luthra and Luthra Law Offices India, published by Legal 500, is that the 50% rule is a “cap on exclusions, not a ceiling on wages.” This is commentary on the statutory framework, not statutory wording.
A practical readiness review should connect each legal requirement to an accountable owner, evidence, and review date.
| Workstream | Recommended review |
| Jurisdiction | Identify the appropriate Government and verify Central or State rules and notifications for every establishment |
| Payroll | Reassess wage components, exclusions, overtime, minimum wages, and bonus calculations |
| Social security | Reconcile employee coverage, PF/ESI calculations, gratuity and related records |
| Employment documentation | Review appointment letters, policies, standing orders and grievance procedures |
| Industrial relations | Check union and negotiating mechanisms, workforce thresholds and reduction procedures |
| Contract labour | Map contractor roles, core activities, licensing applicability, wages and contributions |
| Safety and welfare | Review working hours, leave, risk controls, training, PPE and reporting |
| Records and governance | Maintain a compliance register, supporting evidence, responsible owners and periodic review |
For multi-state employers, a single national checklist may be useful as a baseline, but it should be supported by a jurisdiction-wise register that captures state-specific rules and notifications.
CQUEL provides compliance-related services and technology, including compliance audits and contract labour management solutions. Employers evaluating support should confirm the precise scope, locations, deliverables and applicable legal-review arrangements before engagement.
A structured readiness review can help an organisation identify areas requiring attention, organise supporting records and coordinate follow-up across HR, payroll, operations and contractors. No external provider can guarantee compliance without considering the employer’s facts, applicable law and implementation.
Explore CQUEL’s services, Contract Labour Management System, Compliance Updates or contact CQUEL to discuss a labour-code compliance review.
Yes. The four Codes came into force nationally on 21 November 2025. Employers should still verify the applicable rules, notifications, and procedures for their establishment.
The Ministry’s 2026 employer handbook lists Central Rules notified on 8 May 2026. Confirm the relevant Gazette notification and provisions before relying on a specific rule or notification number.
No. The appropriate Government and applicable rules depend on the establishment and jurisdiction. Employers should check the relevant State Gazette as well as Central notifications where applicable.
The Code on Wages limits specified exclusions from wages. If the excluded components exceed 50% of total remuneration, the excess is added back to wages for statutory purposes.
Not as a blanket rule. The statutory calculation concerns the definition of wages and specified exclusions; it is not a universal instruction that basic salary must equal 50% of CTC.
The Social Security Code consolidates the framework, and the wage definition may affect wage-linked calculations. Employers must verify applicable schemes, coverage, thresholds, contribution rules, and notifications before changing calculations.
The special chapter governing lay-off, retrenchment and closure applies to specified industrial establishments with 300 or more workers on average per working day in the preceding 12 months, or a higher number notified by the appropriate Government. Applicability and procedure require establishment-specific review.
It provides a framework for contract labour, including restrictions in core activities subject to exceptions, and responsibilities for principal employers. Employers should review the activity, contractor arrangement, applicable thresholds and rules.
Identify the appropriate Government for each establishment, build a jurisdiction-wise register of applicable rules and notifications, and then review payroll, social security, employment documents, contractor arrangements and safety controls.
The contents of this article are for information purposes only, and nothing in this article should be construed as legal advice.
Subscribe to receive new articles, compliance insights, and expert interpretations.
