New labour codes in India: a practical summary for HR teams

The new labour codes are 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 (the OSH Code). Together they replaced 29 central labour laws and have been in force since 21 November 2025. For HR and payroll, the biggest changes are one definition of wages, gratuity for fixed-term employees after one year, appointment letters for every worker, and new headcount thresholds for standing orders, retrenchment and contract labour.

This guide summarises each Code: what it replaced, what changed in practice and what is still being notified. It deliberately does not repeat the wage definition, which our guide to the 50% wage rule under the Labour Codes covers in full. For pay deadlines and permitted deductions, see wage payment deadlines and deductions.

What are the four labour codes?

Each Code consolidates a group of older Acts. The old Acts are repealed, but the Ministry of Labour has said that rules under them continue during the transition to the extent they are consistent with the Codes.

Code	Central laws it replaced	Where HR feels it most
Code on Wages, 2019	Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965; Equal Remuneration Act, 1976	Wage definition, minimum wages, pay deadlines, deductions, bonus
Industrial Relations Code, 2020	Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946; Industrial Disputes Act, 1947	Fixed-term employment, standing orders, grievance committees, retrenchment, strikes
Code on Social Security, 2020	Nine Acts, including the EPF and MP Act, 1952, the ESI Act, 1948, the Payment of Gratuity Act, 1972, the Maternity Benefit Act, 1961 and the Employees' Compensation Act, 1923	PF, ESI, gratuity, maternity, gig and platform workers
OSH Code, 2020	Thirteen Acts, including the Factories Act, 1948, the Contract Labour (Regulation and Abolition) Act, 1970 and the Inter-State Migrant Workmen Act, 1979	Appointment letters, working hours, annual leave, contract labour, women at night

The remaining Acts folded into the Code on Social Security are the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, the Cine Workers Welfare Fund Act, 1981, the Building and Other Construction Workers' Welfare Cess Act, 1996 and the Unorganised Workers' Social Security Act, 2008. The OSH Code also absorbed the Mines Act, the Plantations Labour Act, the two working journalists Acts, and the laws on motor transport, beedi and cigar, sales promotion, cine and cinema theatre, dock and building construction workers.

What changed under the Code on Wages?

• One definition of wages across all four Codes, with excluded components capped at 50% of total remuneration. This is the single largest payroll change; see the linked guide above.
• Minimum wages for all employees. Minimum wages used to apply only to scheduled employments. They now apply to every employee, and the Central Government sets a floor wage below which no state can fix its minimum. Our minimum wages guide covers the detail.
• Payment deadlines. Monthly wages must be paid before the end of the 7th day of the following month, and wages due on resignation, removal, dismissal, retrenchment or closure within two working days.
• Deductions only for the listed purposes, capped at 50% of wages in a wage period.
• Equal remuneration without gender discrimination, including in recruitment and conditions of employment, with transgender persons expressly covered.
• Statutory bonus moved into the Code, with the familiar 8.33% minimum and 20% maximum.

What changed under the Industrial Relations Code?

• "Worker" excludes people employed mainly in a managerial or administrative capacity, and supervisors drawing wages above ₹18,000 a month (or a higher amount the Central Government notifies). Many IR Code duties apply only to workers, so classify by actual duties.
• Fixed-term employment is recognised for all sectors, with parity of wages and benefits. See our guide to fixed term employment.
• Standing orders are required for industrial establishments with 300 or more workers, up from 100 under the 1946 Act. See standing orders under the IR Code.
• Prior government permission for lay-off, retrenchment and closure applies at 300 or more workers, up from 100.
• A worker reskilling fund: on retrenchment, the employer contributes 15 days' wages last drawn. Our guide to retrenchment compensation explains the arithmetic.
• Grievance Redressal Committees for industrial establishments with 20 or more workers. See grievance redressal committee.
• Strike and lock-out notice of 60 days now applies to all industrial establishments, not only public utility services.
• A negotiating union: a union with 51% or more of the workers as members is recognised as the sole negotiating union; otherwise a negotiating council is formed.

What changed under the Code on Social Security?

• Gratuity for fixed-term employees after one year of service, instead of five. The ₹20 lakh ceiling and the 15-day formula are unchanged.
• ESI and EPF continue largely as before, under the Code. The EPF wage ceiling is ₹25,000 a month from 17 September 2026 (₹15,000 before), and the ESI wage limit remains ₹21,000.
• Gig and platform workers are defined for the first time, with aggregators contributing to a social security fund. See gig workers social security.
• Employees' compensation extends to accidents while commuting between residence and workplace, subject to the conditions in the Code.
• Aadhaar-based registration of employees and beneficiaries, and a career centre framework replacing the old vacancy-notification law.

What changed under the OSH Code?

• Appointment letters must be issued to every employee. Many factories and contractors never issued them to workers; that gap is now a compliance failure.
• Annual health check-up free of cost for workers of the age the government prescribes.
• Working hours and overtime: a daily cap of 8 hours and weekly limits as notified, with overtime at twice the rate of wages and with the worker's consent.
• Annual leave after 180 days of work in a calendar year, at one day for every 20 days worked.
• Women at night: women may work night shifts with their consent and the safety conditions the government prescribes. Our guide to night shift for women employees covers the conditions.
• Single registration for an establishment, and a single licence for contractors across states.

Which thresholds changed under the Codes?

Requirement	Before 21 Nov 2025	Under the Codes
Certified standing orders	100 workmen (lower in some states)	300 workers, or as notified
Prior permission for lay-off, retrenchment, closure	100 workmen	300 workers, or as notified
Contract labour provisions	20 contract workers	50 contract workers
"Factory" definition	10 workers with power, 20 without	20 workers with power, 40 without
Annual leave eligibility	240 days worked	180 days worked
Gratuity for fixed-term employees	5 years of continuous service	1 year
Strike notice	Public utility services only	All industrial establishments
Minimum wages	Scheduled employments only	All employees

Worked example: one exit, before and after

A fixed-term employee on a 14-month project contract leaves when the contract expires. Monthly wages, as defined under the Codes, are ₹30,000.

1. Gratuity. Under the 1972 Act, nothing was payable with less than five years of service. Under the Code on Social Security, one year is enough: ₹30,000 × 15 × 1 ÷ 26 = ₹17,308.
2. Notice and retrenchment compensation. Neither applies. Expiry of a fixed-term contract is not retrenchment under the IR Code.
3. Timing. The final wages are due within two working days of the last day, so the F&F cannot sit in a queue for 45 days.

For a quick figure, use our gratuity calculator. Whether the two remaining months count towards gratuity on a pro-rata basis is a point to confirm against the rules that apply to you.

What is still being notified by states?

The Codes are in force, but each one works through rules, and labour is a concurrent subject. Both the Central Government and every state make rules for establishments within their jurisdiction. Notification has been progressive, so the position differs by state and by Code.

Area	What to verify	Where
State rules under each Code	Whether your state has final rules, and which earlier rules still apply	State labour department
Model standing orders	The version notified for your sector and state	Ministry of Labour and Employment
Working hours, overtime and leave	Daily and weekly limits, spread-over, encashment	State rules under the OSH Code
Gig and platform schemes	Contribution rate actually notified, registration process	e-Shram and Ministry notifications
PF and ESI operations	Wage base for contributions, forms, returns	EPFO and ESIC
Registers and returns	The consolidated forms that replace the old ones	State rules; see statutory registers under the Labour Codes

Treat any summary, including this one, as a starting point. If you operate in several states, keep a location matrix of which rules are final and review it every quarter.

What should HR and payroll do now?

1. Re-test every pay structure against the wage definition and fix the basis for PF, gratuity, bonus and leave encashment.
2. Classify the workforce into workers and non-workers by actual duties, since the IR Code thresholds count workers.
3. Recount headcount per establishment against the 20, 50 and 300 thresholds for grievance committees, contract labour, standing orders and prior permission.
4. Issue appointment letters to every employee who does not have one, including long-serving workers.
5. Update gratuity rules for fixed-term employees in payroll and in the F&F worksheet.
6. Review contractor arrangements against the OSH Code contract labour provisions; our contract labour checklist helps.
7. Rework the employee handbook so that policies do not contradict standing orders or the Codes; see employee handbook in India.
8. Set up a tracker for state rule notifications, owned by one person in HR.

Common mistakes

• Assuming the Codes changed nothing until state rules arrive. The Codes themselves have applied since 21 November 2025.
• Applying IR Code thresholds to total headcount instead of the number of workers.
• Paying gratuity to fixed-term employees only after five years.
• Leaving appointment letters out for factory, warehouse or contract-converted staff.
• Settling F&F on the old 30 to 45 day cycle.
• Copying another state's rules because they were notified first.

FAQs

When did the new labour codes come into force? All four Codes came into force on 21 November 2025. Rules under them are being notified progressively by the Central Government and the states.

How many laws did the four labour codes replace? Twenty-nine central laws: four under the Code on Wages, three under the IR Code, nine under the Code on Social Security and thirteen under the OSH Code.

Do the labour codes apply to IT and services companies? Yes. The Code on Wages and the Code on Social Security apply to establishments of every kind, and the IR Code's definition of industry is broad. Coverage of a specific provision depends on headcount, the number of workers and the state rules.

Are old rules under the repealed Acts still valid? The Ministry of Labour has said earlier rules continue during the transition to the extent they are consistent with the Codes. Check your state's position for each Code.

Do the labour codes reduce take-home salary? They can, where Basic is low and the wage definition raises PF. The effect depends on the pay structure and whether PF is paid on capped wages.

How NeevHR helps

NeevHR payroll runs pay structures and statutory deductions per employee group, and the full and final settlement worksheet computes gratuity, leave encashment and recoveries in one step. Employee records hold employment types on an effective-dated timeline, and statutory compliance tracks every PF, ESI, PT, LWF and TDS filing. To see it with your own structures, book a demo.

This article provides general information for educational purposes. Statutory rules, thresholds, rates and filing requirements may change; verify with the relevant authority or a qualified professional. Last reviewed: 27 Oct 2026.