New Labour Codes: What Employers Must Change Now
The four new labour codes have been in force since 21 November 2025 and replace 29 older central laws. Central rules were notified in May 2026, but state rules are still catching up. We map your payroll, contracts and registrations to the codes and fix the gaps.
What it is
The new labour codes are four central laws that merge the older labour statutes: the Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code (OSH Code). All four came into force on 21 November 2025.
Central rules for the codes were notified on 8 and 9 May 2026. State rules are a separate matter. Haryana had only draft rules in mid-2026, so older state notifications continue to apply in places. We tell you which rule governs which part of your business today, then update your documents and payroll to match.
Who it applies to
Employers with 10 or more workers
The OSH Code registration and the ESIC coverage threshold both start at 10 workers. Say your Faridabad workshop grew from 8 to 14 people last year. Registrations that did not exist for you before may now be due.
Factories, contractors and service units
Manufacturing units, contractors supplying labour and IT or logistics firms all have different duties under the codes. A Faridabad engineering unit and a Gurugram software firm do not face the same checklist. A contractor placing guards in three buildings has a third one.
Startups and growing companies
Many startups have no HR team. Appointment letters, wage structure and PF or ESIC coverage are where new employers slip first.
Why it matters
Pay structures may need a rework
Under the Code on Wages, basic pay plus certain allowances must make up at least 50% of total remuneration. Here is the catch: a low-basic, high-allowance salary design can push your PF and gratuity liability up.
Paperwork is now mandatory
Every worker is entitled to a written appointment letter. Fixed-term employees become eligible for gratuity after one year of service, not five.
Inspections are changing
Inspectors now work as inspector-cum-facilitators. The approach is guidance first, but your records must still be in order when they visit.
Documents required
Business records
- Registration certificates (company, GST, shop or factory licence)
- Headcount by unit, including contract and fixed-term staff
- Existing PF, ESIC and labour welfare fund registrations
Payroll records
- Last 12 months of salary registers and payslips
- Salary structures with basic, allowances and special allowance
- Overtime and attendance records
HR documents
- Appointment letter and offer letter templates
- Service rules, leave policy and standing orders if you have them
- Contractor agreements and licence copies
How it works
Share your current setup
You share registrations, salary structures, contract formats and headcount. A short call tells us your sector, state and any contractors. In practice, most employers need about a day to pull these together.
Check each code against your business
We compare wages, hours, safety, social security and industrial relations duties with what you do today, using the central rules and the state position.
Fix the gaps in order of risk
We redraft appointment letters, suggest wage-structure changes for your approval, prepare registrations and update policies. Where a dispute needs a court or tribunal, a practising advocate handles it.
Keep you current as rules change
State rules are still being finalised. We tell you when a notification affects you and update your documents.
What changed in your day-to-day work
| Area | What the codes require |
|---|---|
| Wages | Remuneration test: at least 50% as wages. Overtime at twice the normal rate. |
| Appointment | Written appointment letter for every worker. |
| Gratuity | Fixed-term employees qualify after one year. |
| Health | Free annual health check-up for workers covered by the OSH Code. |
| Grievances | Grievance Redressal Committee where there are 20 or more workers. |
| PF | Wage ceiling raised to ₹25,000 from 17 September 2026 (earlier ₹15,000). |
Consider a small Ballabgarh manufacturer paying ₹12,000 basic on a ₹30,000 package. Under the 50% test, that structure needs a second look. Our payroll compliance team can rebuild your salary structure against these rules, and we prepare PF registration and ESIC registration where you are newly covered.
Timelines
21 November 2025
All four codes came into force. Employers are expected to comply with them from this date.
May 2026
Central rules for the codes were notified. Your forms and procedures should follow them. Check again each quarter.
17 September 2026
EPF wage ceiling went to ₹25,000. Existing members stay covered; new joiners above the ceiling may be excluded unless employer and employee jointly opt in.
What happens if you miss it
Penalty under the OSH Code
Section 94 sets a general penalty of ₹2 lakh to ₹3 lakh, plus ₹2,000 per day for a continuing contravention after conviction.
PF and ESIC dues grow
Late PF contributions attract interest at 12% a year. ESIC dues carry interest and damages as well.
Disputes and claims
Missing appointment letters or a wrong wage structure give employees a clear basis for a wage or gratuity claim.
Frequently asked questions
Did the four new labour codes replace all older labour laws?
No, they replace 29 central laws, but not every labour law. State laws such as the Shops and Establishments Acts and Labour Welfare Fund rules still apply until states change them. The four codes cover wages, industrial relations, social security and workplace safety. We check which old and new rules govern your business today, so you do not follow a repealed rule or miss a live one.
From which date do the labour codes apply?
The labour codes apply from 21 November 2025. Central rules were notified in May 2026. State rules vary, and Haryana had only draft rules in mid-2026. Until a state notifies its own rules, we apply the central framework with whatever state notification is still valid. We will tell you when your state position changes.
What is the 50% wage rule?
Under the Code on Wages, basic pay plus a few listed allowances must be at least 50% of total remuneration. If allowances exceed the other half, the excess is added back when calculating wages for gratuity and PF. For a salary with a very low basic, this can raise your contribution cost. We can model your structure before you decide.
Do I need an appointment letter for every employee?
Yes, the codes require a written appointment letter for every worker. It should state the designation, wage details and basic terms of work. If your older employees never got one, we can issue them now. This also protects you in a wage or termination dispute, because the terms are on paper.
When does a fixed-term employee get gratuity?
A fixed-term employee becomes eligible for gratuity after one year of service. Earlier, the usual qualifying period was five years of continuous service. The amount is worked out at 15 days of wages for each year of service. If you use fixed-term contracts, we will flag this in your budgeting and contract wording.
Does the PF wage ceiling change affect my payroll?
Yes, the EPF wage ceiling rose from ₹15,000 to ₹25,000 from 17 September 2026. Existing members continue to be covered. New joiners earning above the ceiling can be excluded unless employer and employee jointly choose to contribute. We recalculate your ECR and tell you how it changes your monthly outgo.
Is a small business with 10 employees covered?
Possibly. The ESIC and OSH Code registration thresholds start at 10 workers, while the PF threshold stays at 20 employees. A business with 12 workers may need ESIC and OSH registration but not PF. We check headcount, including contract workers, before telling you what applies.
Who represents us in a labour court or tribunal?
A practising advocate appears and signs the pleadings. Taxhint prepares the documents, coordinates the case file and keeps your compliance records organised. If you receive a notice, send it to us the same week. Early, well-organised replies resolve many matters without going to court.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Ready to begin?
Send us your salary structure and headcount. We will tell you what the new labour codes change for you and what to fix first.