1 What do the Labour Codes cover?
India’s Labour Codes consolidate and repeal 29 central labour statutes into four comprehensive codes governing wages, industrial relations, social security, and workplace safety:
The Code on Wages, 2019 – minimum wages, equal pay, and payment timelines, for all employees;
The Industrial Relations Code, 2020 – trade unions, standing orders, and industrial disputes;
The Code on Social Security, 2020 – provident fund (PF), gratuity, maternity benefit, insurance, and gig worker welfare; and
The Occupational Safety, Health and Working Conditions Code, 2020 – registration, licensing, safety, and working conditions.
The Labour Codes broaden statutory protections by extending coverage to fixed-term, contract, gig, and platform workers, resulting in a more uniform compliance framework across establishments.
2 When do the Labour Codes take effect?
The Labour Codes came into force on November 21 2025, and the central government subsequently notified the Central Rules, together with the Model Standing Orders, on May 8 2026. The Central Rules primarily apply where the central government is the “appropriate government”, including sectors such as banking, telecommunications, and railways. Most private employers, however, must comply with the Labour Codes alongside the rules notified by the relevant state government.
State-level implementation remains gradual. While several states and union territories – including Gujarat and Puducherry, as well as most north-eastern states – have notified rules under one or more of the Labour Codes, many states are yet to do so, and their rules remain in draft form.
3 What is changing on wages and benefits?
The Labour Codes introduce significant reforms to employee remuneration and statutory benefits, including:
Wages – wages (basic pay and dearness allowance) must constitute at least 50% of total remuneration, increasing the base for PF, gratuity, and bonus calculations;
Fixed-term gratuity – fixed-term employees become entitled to gratuity after one year of service;
Final settlement – final settlements must generally be completed within two working days of resignation, dismissal, or retrenchment; and
Social security – coverage expands to gig and platform workers through a dedicated fund financed partly by aggregator contributions, while Employees’ State Insurance coverage extends nationwide.
4 What is changing in workforce management?
The Labour Codes also reshape workforce management and compliance obligations.
Contract labour – threshold increased from 20 to 50 workers. While contract labour remains prohibited for core activities, the Labour Codes define “core activity” only in broad terms as activities for which an establishment is set up or that are essential to its business. The appropriate government may further notify whether an activity is core or otherwise.
Standing orders – threshold increased from 100 to 300 workers, reducing standing order requirements for many establishments.
Registration – a unified electronic registration and licensing regime is introduced for factories, contract labour, and notified activities.
Enforcement – penalties are harmonised, with fines of up to INR 2 million (approximately $20,000) and imprisonment for up to three years, while the Code on Social Security, 2020 prescribes even stricter sanctions for certain contribution defaults.
5 How should employers prepare?
With the Labour Codes and Central Rules in force, but many state rules still pending, employers should adopt a phased approach to compliance. Existing state rules continue to apply until replaced, but only to the extent they are consistent with the Labour Codes.
Priority actions include:
Restructuring salary packages to comply with the 50% wage rule;
Reviewing fixed-term, contract, and gig worker arrangements;
Carefully assessing contract labour engagements where functions may be regarded as essential to the business;
Verifying contractor compliance;
Updating employment policies on working hours, leave, and overtime; and
Training human resources, legal, and payroll teams.
Employers operating across multiple states should closely monitor state-specific developments as additional state rules are notified.
