The four labour codes (wages, industrial relations, social security, and occupational safety, health and working conditions) took effect on 21 November 2025 and replaced 29 central labour laws. They require written appointment letters, extend gratuity to fixed-term staff after one year and widen social security coverage, and the new definition of wages changes payroll calculations. States make their own rules under the codes, and as of mid-2026 several states had not finished doing so, so compliance must be checked state by state.
What the labour codes changed
The central government brought 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 into force on 21 November 2025, rationalising 29 existing laws. Every worker must receive an appointment letter, a national floor wage sets the base below which no minimum wage may fall, and employers must provide free annual health check-ups to workers over 40.
Fixed-term employees become eligible for gratuity after one year instead of five. Women may work night shifts with their consent and required safety measures, and social security coverage extends to gig and platform workers.123456
Payroll effects
Under the Code on Wages, basic pay, dearness allowance and retaining allowance must make up at least 50% of total remuneration; excluded allowances above 50% are added back into wages. Because wages are the base for provident fund, gratuity and other contributions, a salary structure built on a low basic component will usually cost more under the codes.
Provident fund is contributed at 12% by the employer and 12% by the employee, calculated on the new wage base. Working time is capped at 48 hours a week, with overtime paid at twice the ordinary rate; a four-day week is permitted but not required.789
Central rules and state rules
The codes are central laws, but labour is administered jointly, and each state notifies its own rules for establishments within its territory. As of May 2026, states such as Maharashtra, Gujarat, Karnataka and Madhya Pradesh, and the union territory of Delhi, had notified rules under all four codes, while others, including West Bengal, had not.
For a multi-state employer this means registrations, returns and inspections can differ by location. Check each state's notified rules, and any transitional position where rules are pending, before finalising handbooks and contracts.10
| Topic | Position under the codes | Why it matters |
|---|---|---|
| Commencement | In force from 21 November 2025; 29 laws rationalised | Older Act-based policies need updating |
| Appointment letters | Mandatory for all workers | Issue written terms at hiring |
| Gratuity for fixed-term staff | After one year instead of five | Accrue for fixed-term contracts |
| Definition of wages | Basic, dearness and retaining allowance at least 50% of remuneration | Raises contribution base for many structures |
| Working time | 48 hours a week; overtime at twice the ordinary rate | Review shift patterns and overtime pay |
| Health check-ups | Free annual check-up for workers over 40 | Budget and schedule for eligible staff |
How it works, step by step
- Register with EPFO and ESIC (available through SPICe+ for new companies)11EPFO and ESIC via Ministry of Corporate Affairs
- Issue written appointment letters to every worker2Employer (labour codes)
- Restructure pay so that wages meet the 50% test, then calculate contributions on that base78Employer (Code on Wages, 2019)
- Check the rules notified by each state where staff work10State labour departments
No timings or fees are shown unless an official source states them.
Documents usually needed
- Appointment letters for all workers
- Salary structure analysis against the 50% wages test
- EPFO and ESIC registrations
- State registrations and returns under the applicable state rules
- Fixed-term contracts with gratuity provisions
Common mistakes
- Keeping a salary structure with a low basic component, so that excluded allowances are added back and contributions are underpaid.
- Not accruing gratuity for fixed-term employees after one year of service.
- Applying one set of rules across all states when state rules differ or are still pending.
- Relying on handbooks drafted under the repealed Acts.
- Not issuing appointment letters to all categories of worker.
When the business crosses borders
- Foreign staff on Indian payroll are generally within provident fund rules; check whether a social security agreement with the home country gives relief.
- Social security coverage of gig and platform workers matters for foreign platforms engaging workers in India.
- Employment visa conditions for foreign staff must be checked before the start date.
Questions businesses ask
Are the labour codes fully in force?
The four codes took effect on 21 November 2025. Implementation still depends on state rules, which several states had not notified as of May 2026.110
Will the codes increase our payroll cost?
Often, yes. The 50% wages test widens the base for provident fund and gratuity where basic pay is a small share of total pay, and fixed-term staff now qualify for gratuity after one year.37
Can we move to a four-day week?
It is permitted but not required, provided the 48-hour weekly limit is observed.9
What this guide does not yet confirm
These points need checking with a qualified local professional in India before you rely on them.
- Employment visa conditions for foreign nationals (including any minimum salary), registration with immigration authorities and the Immigration and Foreigners Act, 2025 were not source-checked.
- Provident fund wage ceiling, applicability threshold and rules for international workers were not confirmed on the EPFO site, which could not be reached.
- ESIC wage threshold and contribution rates were not confirmed.
- The status of the final central rules under the codes and the state-by-state position after May 2026 were not confirmed on official gazettes; the state table relies on a secondary source.
- Termination notice, retrenchment and leave entitlements under the codes and state shops and establishments laws were not covered.
- Professional tax, a state levy, was not covered.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 19 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
The four labour codes (Code on Wages, 2019; Industrial Relations Code, 2020; Code on Social Security, 2020; Occupational Safety, Health and Working Conditions Code, 2020) took effect on 21 November 2025, rationalising 29 existing labour laws. Central laws; states notify their own rules for implementation in their territory.
The labour codes make appointment letters mandatory for all workers. Central labour codes.
Fixed-term employees become eligible for gratuity after one year of service instead of five. Code on Social Security, 2020. Permanent employees keep the five-year threshold.
The labour codes set a national floor wage so that no worker receives a wage below the minimum living standard. Code on Wages, 2019. Minimum wages are fixed by the appropriate government (central or state) at or above the floor.
The floor wage amount was not confirmed.
Employers must provide a free annual health check-up to all workers above the age of 40. Central labour codes.
Under the labour codes women may work night shifts, subject to their consent and required safety measures, and social security coverage extends to gig and platform workers. Central labour codes; detailed conditions are set in central and state rules.
Under the Code on Wages, basic pay, dearness allowance and retaining allowance must make up at least 50% of total remuneration, and excluded allowances above 50% are added back into wages. Section 2(y), Code on Wages, 2019; wages are the base for contributions and benefits under the codes.
Secondary source (last verified 8 May 2026); the Code text and the Ministry's FAQs of 16 March 2026 could not yet be checked.
Provident fund contributions are 12% by the employer and 12% by the employee, calculated on wages as defined under the codes. Employees' Provident Fund; wage ceilings and applicability thresholds not confirmed.
Secondary source; the EPFO site could not be reached.
Working hours are capped at 48 hours a week, with overtime paid at twice the ordinary rate, and a four-day week is permitted but not mandated. Occupational Safety, Health and Working Conditions Code, 2020; state rules set detailed spread-over and rest rules.
Secondary source; the Code text could not yet be checked.
As of May 2026, rules under all four labour codes had been notified by Maharashtra, Gujarat, Karnataka, Madhya Pradesh and Delhi, while West Bengal had notified none and other states were part-way. State-level rules; position changes as states notify further rules.
Secondary source (last verified 8 May 2026), with some internal inconsistencies for Tamil Nadu; check each state's gazette for the current position.
SPICe+ is the Ministry of Corporate Affairs' integrated web form for incorporating a company, with Part A for name reservation and Part B covering incorporation, director identification numbers, PAN and TAN, EPFO and ESIC registration, GSTIN and opening a bank account, filed with linked eMoA, eAoA and AGILE-PRO-S forms. Professional tax registration through the form applies to new companies in Maharashtra and Karnataka only (a state-level registration). Central filing.
Questions on this topic
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