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Ten months after India's four labour codes came into force, employers are applying them across pay, benefits, contract labour, working hours and social security. They are also responding to new state rules as these take effect. Drawing on industry experience, this report examines implementation to date, the questions that remain and how organisations are working towards sustained compliance.
The new labour codes have consolidated 29 central labour laws into four areas: wages, social security, industrial relations, and workplace safety and conditions. The goal is to simplify compliance and enhance worker protection. Although central rules were notified in May 2026, states and union territories have adopted their own rules at varying paces. This means that employers with multiple locations must verify applicable regulations at each site.
The codes, however, do not address all workplace obligations. Employers must also comply with other relevant laws, such as state shops and establishments laws and regulations on workplace sexual harassment. Effective labour code compliance, therefore, begins with a thorough understanding of all applicable rules.
The labour codes influence how employers calculate pay and benefits, manage worker categories, and maintain workplace records. Changes to the definition of "wages" can impact multiple types of payments.
The wage definition framework specifies which elements of an employee's pay qualify as wages for legal purposes. This figure is used to calculate provident fund contributions, gratuity, bonuses, and other payments.
The codes allow certain pay components to be excluded. If those exclusions exceed 50% of total remuneration, the excess is added back when calculating wages.
Employers should review allowances, reimbursements, and other pay components and assess how the wage definition affects each employee group and their pay.
Changes to payroll calculations can impact employment letters, policies, and budgets. Documenting the treatment of each pay component and applying these decisions in payroll systems ensures consistent payment calculations. There is, however, uncertainty regarding the valuation of certain employee benefits. Employers should monitor new guidance and update their calculations as necessary.
Employers need to determine which rules apply to each individual. The codes distinguish between an "employee" and a "worker," with certain protections specific to workers. Accurate workforce classification is therefore essential.
Classification should be based on the actual work performed, not just job titles. Employers should assess whether the individual supervises others, makes key decisions, or has authority over hiring and discipline.
Reviews should include both current roles and new hires. If an individual's duties change, their classification should be reassessed. Keeping a brief written record of each decision supports consistent rule application.
Employers need accurate attendance records to apply the rules on working hours, overtime, weekly rest and leave. They should check how managers approve overtime and how payroll calculates the amount due.
Under the labour codes, overtime is calculated against the prescribed daily or weekly hours, whichever gives the worker the greater benefit. Employers should also review leave rules alongside the state laws that apply to each workplace.
HR, managers and payroll teams need to work from the same attendance and overtime records. Managers should record their approvals so payroll can calculate the correct payment. Clear records also help employers check whether workers have received the overtime they are owed.
The Code on Wages gives employers two working days to pay wages due when an employee leaves in specified circumstances, including resignation and dismissal. Meeting this deadline may require coordinated action across several teams:
confirms the employee’s last working day and applicable leave
validate attendance and outstanding approvals
calculates wages, leave and applicable deductions
approves and processes the payment
Organisations have been reviewing the process from notice of departure through to final payment. The scope of the deadline remains an open question. Further guidance would help employers determine whether it applies only to statutory "wages" or to the entire final settlement.
Contract labour governance is how an organisation decides where to use contract workers, checks its contractors, and responds when something goes wrong. The report highlights restrictions on the use of contract workers for core business activities in establishments subject to the relevant rule. There are exceptions, but whether one applies depends on the facts.
Employers should document the reasons they believe a particular arrangement is allowed. They should also know which contractors work at each site and check evidence of wages, bonuses, social security and working conditions. If a contractor fails to meet an obligation, the organisation needs a clear way to spot the problem and act on it. This calls for cooperation between the teams that hire contractors, manage sites and oversee compliance. Regular checks are more useful than a contract signed once and then filed away.
The provident fund and the Employees' State Insurance (ESI) remain central to social security. The report explains that employee coverage, wage calculations and payroll records influence the contributions made under both systems.
During 2026, the government introduced new provident fund, pension and insurance schemes. The notified monthly wage ceiling for provident fund purposes rose to INR 25,000 in September 2026. For ESI, coverage now uses wages as defined under the Code on Social Security. As the report explains, an employee's total monthly pay may exceed INR 21,000, while their wages under the statutory definition remain within the applicable ESI coverage limit.
Fixed-term employment is another focus. The report states that fixed-term employees receive the same wages and benefits as comparable permanent employees doing the same or similar work. They qualify for gratuity after completing one year of service.
The labour codes recognise gig and platform workers within India's social security framework. Organisations are reviewing these arrangements to determine which workers fall within the statutory categories and what information they must maintain for registration. The requirements for gig workforce compliance continue to evolve. Further guidance on registration, contributions, benefits and the interaction between central and state frameworks would support consistent implementation.
The report also examines areas beyond pay and social security. Under the Occupational Safety, Health and Working Conditions Code, organisations are reviewing appointment letters, safety responsibilities, incident reporting and location-level arrangements. Some are using this work to improve and digitise employee records.
Provisions relating to crèche support and safeguards for women working before 6 am or after 7 pm are prompting reviews of workplace facilities, transport and safety arrangements. The report places these measures within the wider goal of supporting women's participation in the workforce. Under the Industrial Relations Code, employers are considering grievance processes, standing orders and ways for employees to raise concerns. These measures form part of workforce governance across a wider range of organisations than those with unionised workforces alone.
Since the four labour codes came into force on 21 November 2025, organisations have moved from understanding the rules to assessing their impact, updating practices and testing the results. Key areas of labour code readiness include:
Its next phase is sustained adoption. That calls for the codes to become part of regular workplace practices and governance, supported by clearer guidance, stronger systems and continued discussion among government, employers, workers and industry bodies. A lasting labour law compliance framework will depend on how consistently organisations apply the requirements in everyday work. The report presents that as the path from reform to readiness.
In our August edition of Labour Law Insights, key updates include the notification of bonus calculation ceilings under the Code on Wages, 2019; the notification of final rules under certain Labour Codes by the Governments of Andhra Pradesh, Ladakh, and Rajasthan; expanded digitisation efforts by the ESIC; and continued EPFO outreach under the Amnesty Scheme 2026.
In our latest edition of Labour Law Insights, we continue to share updates around the implementation of Labour Codes. In addition, we also have a section on Labour welfare and policy developments talking about new labour welfare rules. Apart from these, the edition covers our regular updates – state-wise labour law releases, EPFO and social security updates, and important judgements. As always, we have provided our insights on each of these updates to help your decision making and compliance.
Following the release of the Labour Codes last year the Central and state governments have started executing various measures for its implementation.
