- •The four Labour Codes came into force on 21 November 2025, consolidating 29 central labour laws.
- •The uniform definition of wages and the 50% cap on excluded allowances can raise PF and gratuity costs for many salary structures.
- •Employers should audit pay structures, issue appointment letters to all staff, and review fixed-term and contractor arrangements now — while checking state-level rules.
India's four Labour Codes — on Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions — came into force on 21 November 2025. For most employers, the immediate work is threefold: restructure salaries to comply with the new uniform definition of wages, issue written appointment letters to every worker, and re-examine fixed-term, contract and gig arrangements. The details depend heavily on state rules, so treat this checklist as a starting point, not legal advice.
We run payroll and compliance for clients across multiple states, and the questions we hear most are practical: what changes in the payslip, what paperwork is new, and where are the penalties. This guide answers those.
The four codes at a glance
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| Code | What it consolidates | Biggest practical change |
|---|---|---|
| Code on Wages, 2019 | Minimum wages, payment of wages, bonus, equal remuneration | Uniform definition of wages; national floor wage; timely payment rules extended to all employees |
| Industrial Relations Code, 2020 | Trade unions, standing orders, industrial disputes | Fixed-term employment recognised; higher thresholds for standing orders and retrenchment approvals |
| Code on Social Security, 2020 | PF, ESI, gratuity, maternity benefit and others | Gratuity for fixed-term staff after one year; social security framework for gig and platform workers |
| OSH & Working Conditions Code, 2020 | Factories, contract labour, inter-state migrants and more | Mandatory appointment letters; single registration and licence approach; annual health check-ups for certain workers |
1. Audit your salary structure against the new wage definition
This is the change with the largest cost impact. The codes define "wages" uniformly and specify exclusions such as HRA, conveyance, overtime, bonus and certain allowances. If those excluded components together exceed 50% of total remuneration, the excess is added back to wages. Because PF, gratuity and several other benefits are calculated on wages, structures with a low basic pay and heavy allowances will see contributions rise.
- Pull every active salary structure and calculate excluded components as a share of total remuneration.
- Flag structures where exclusions exceed 50% and model the revised wage base.
- Estimate the change in employer PF, gratuity provisioning and leave encashment.
- Decide whether to rebalance the CTC (keeping it constant, which may reduce take-home) or absorb the cost.
- Communicate changes to employees in writing before the payroll cycle in which they take effect.
2. Issue appointment letters to every worker
Under the OSH Code, appointment letters are mandatory for all employees, including those who were previously engaged informally. For businesses with large frontline, warehouse or retail teams, this is often the single biggest documentation gap. The letter should capture designation, wages, category of employment and social security details.
If you use a staffing partner, confirm they are issuing compliant letters to every deployed associate. At Mitra, every associate on our temporary staffing and contract staffing programmes receives a written appointment letter before deployment.
3. Revisit fixed-term and contract arrangements
Fixed-term employment is now formally recognised. Fixed-term employees must receive the same wages, working hours and benefits as comparable permanent staff, and they become eligible for gratuity on a pro-rata basis after one year of service rather than five. If you have been using rolling short contracts to avoid gratuity, that approach no longer works.
- List all fixed-term employees and their tenure; provision gratuity for those crossing one year.
- Align their pay and benefits with equivalent permanent roles.
- Review contract labour engagements against the OSH Code's licensing thresholds and core-activity restrictions in your state.
- Confirm your contractor's registration, licence and statutory remittances are current — principal employer liability still applies.
4. Plan for gig and platform worker contributions
The Code on Social Security brings gig and platform workers into a formal social security framework for the first time, with aggregators expected to contribute a small percentage of turnover, subject to a cap linked to payments made to such workers. Delivery, mobility and quick-commerce businesses should track central notifications closely and build the contribution into their cost models.
5. Update registrations, registers and returns
The codes move towards single registration, a common licence and simplified electronic registers and returns. In practice, the transition depends on when each state notifies its own rules and opens its portals. Until then, many employers are running both old and new formats in parallel.
- Map each establishment to its state and check which rules have been notified.
- Consolidate registers into the prescribed electronic formats where available.
- Track changes to working-hour limits, overtime rates and women's night-shift permissions, which vary by state.
- Keep audit-ready records — inspection is moving towards a facilitator model, but penalties for non-compliance remain.
6. Check full and final settlement timelines
Under the Code on Wages, wages due on resignation, dismissal or retrenchment must be paid within two working days. Many organisations still run 30- to 45-day full and final cycles. Re-engineer the exit process so the wage component is settled on time, even if reimbursements and other dues follow later.
7. Review working hours, leave and overtime policies
The codes set a framework for daily and weekly working hours, overtime at twice the ordinary rate of wages, and leave entitlements, while leaving many specifics to state rules. Several states have used this flexibility to allow longer daily shifts within a weekly cap, or to permit women to work night shifts with their consent and adequate safety and transport arrangements.
- Check your shift rosters against the daily and weekly limits notified in each state where you operate.
- Confirm overtime is calculated on the revised wage base, not on basic pay alone.
- Update leave policies for any changes to eligibility thresholds and carry-forward rules.
- Document consent, transport and safety arrangements for women employees on night shifts.
8. Hold your staffing and contractor partners to the same standard
If a meaningful share of your workforce is engaged through staffing partners or contractors, their compliance becomes your risk. Ask every partner for evidence of registration and licences under the new framework, monthly PF and ESI challans for your deployed associates, copies of appointment letters, and confirmation that wage structures follow the new definition. Build these checks into your monthly vendor governance rather than leaving them to an annual audit.
Where to start this month
If you do nothing else, run the wage-structure audit and close the appointment-letter gap. Those two actions address the largest cost exposure and the most common inspection finding. For multi-state employers, a compliance calendar per state is essential.
If payroll compliance is consuming your HR team's bandwidth, payroll outsourcing can take it off their plate entirely — we handle PF, ESI, PT, LWF and TDS filings with state-specific rules applied automatically. Our earlier piece on when payroll outsourcing actually saves money walks through the cost case, or you can request a quote for a compliance review.
Frequently asked questions
When did India's new Labour Codes come into force?+
All four Labour Codes — the Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code — came into force on 21 November 2025. Many operational details depend on rules notified by individual states, so implementation timelines for specific forms and portals can vary.
Will the new wage definition increase my PF costs?+
It can. If excluded allowances such as HRA and conveyance exceed 50% of total remuneration, the excess is treated as wages. Since PF and gratuity are calculated on wages, structures with low basic pay will see contributions rise. Model your existing structures before deciding whether to rebalance CTC or absorb the cost.
Are fixed-term employees now eligible for gratuity?+
Yes. Under the Code on Social Security, fixed-term employees become eligible for gratuity on a pro-rata basis after one year of continuous service, instead of the five years required for permanent employees. They must also receive wages and benefits on par with comparable permanent staff.
Do temporary and contract workers need appointment letters?+
Yes. The OSH Code makes appointment letters mandatory for all employees. If workers are engaged through a staffing company, the staffing company as employer of record must issue them — but as the principal employer, you should verify this is happening, since compliance gaps can still affect you.
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