New Labour Codes 2026: What Every Employer Needs to Know Before Rollout

India's four labour codes — the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions (OSH) Code — came into force nationwide on 21 November 2025, replacing 29 older central labour laws. The Ministry of Labour and Employment notified the final central rules on 8 May 2026, giving employers a settled rulebook to work from. However, uniform pan-India operational rollout is still catching up: several states, including Kerala and West Bengal, had not finalised their own state-specific rules as of mid-2026, which creates local uncertainty even though the central codes already legally apply.

If you run a business in India — a five-person startup or a factory with hundreds of workers — these codes touch how you calculate PF and gratuity, how many hours staff can work, what your appointment letters must say, and how you handle layoffs. Here's what's actually changed.

What exactly changed in how wages are calculated?

The Code on Wages now requires that basic pay (plus dearness allowance) make up at least 50% of an employee's total remuneration; if allowances push above 50%, the excess is added back into "wages" for statutory purposes. This matters because PF contributions and gratuity are both calculated on wages defined this way. Companies that structured salaries with a low basic and high allowances will typically see their PF and gratuity base — and therefore employer statutory costs — rise, even if total CTC stays the same. This applies to every establishment regardless of size or sector, and is being applied prospectively from 21 November 2025.

Are working hours and overtime rules different now?

Yes. The OSH Code sets a standard workday of 8 hours or 48 hours a week, with a daily spread-over cap of 12 hours — giving employers flexibility to run 4-day, 5-day, or 6-day work weeks as long as weekly hours stay within the limit. Overtime must be paid at twice the ordinary rate of wages (calculated on basic + DA).

What's new for appointment letters and fixed-term staff?

A written appointment letter is now mandatory for every worker in every establishment, with no minimum headcount exemption — this covers daily-wage and contract workers too. The letter must state whether the role is regular, fixed-term, or contractual, along with designation, wages, and social security applicability. Fixed-term employees must now receive wages, benefits, and gratuity (after completing one year of service) on par with permanent employees doing similar work — a real shift from the earlier practice of using fixed-term contracts to sidestep parity obligations.

Do the new codes change retrenchment and layoff rules?

Yes, for mid-sized businesses especially. Under the Industrial Relations Code, the employee-count threshold requiring prior government approval for layoffs, retrenchment, or closure has moved from 100 to 300 workers — so establishments with 100–299 workers can now retrench without prior government approval, though notice and compensation obligations still apply. The threshold for mandatory Standing Orders has similarly shifted from 100 to 300 workers.

How does this affect gig and platform workers?

The Code on Social Security formally brings gig and platform workers into the social security net for the first time, with aggregators required to contribute toward a social security fund and register worker data through government portals. Exact contribution percentages and eligibility-day thresholds are still being finalised in operational detail — treat any specific figures you see cited elsewhere with some caution until your state/sector rules are confirmed.

Key employer action items

• Audit salary structures to confirm basic pay meets the 50% threshold, and model the PF/gratuity cost impact
• Issue or update written appointment letters for every worker, including contract and fixed-term staff
• Review overtime tracking against the 8-hour/48-hour norm and 2x overtime rate
• Set up statutorily required grievance and works committees where your headcount triggers them
• Track your state's specific rule-notification status separately — central codes apply now, but state rules govern procedural details locally

Getting this right is an ongoing compliance exercise, not a one-time task — appointment letter formats, wage restructuring, and statutory registrations all need proper documentation to withstand inspection. BookMyTM helps businesses review employment documentation and statutory registrations against the new codes so compliance gaps don't turn into penalties later.