Home / Labour Codes
Compliance practice
Four codes.
Twenty-nine
laws replaced.
India’s four labour codes came into force in November 2025, consolidating twenty-nine central labour statutes and changing what an employer owes almost every person on its payroll. For most corporates the cost sits in one definition — and it is not in the code they expect.
The exposure is in the wage definition, not the headlines.
Most coverage of the codes has been about working hours and the four-day week. Those are flexibilities. The liability is elsewhere, and it is retrospective in effect on every salary structure built over the last two decades.
“Wages” now means something different
The codes adopt a single definition of wages across all four, and require that the components excluded from it do not exceed a prescribed share of total remuneration. Indian salary structures were built the other way round — a small basic, and allowances carrying the rest — precisely to contain provident fund, gratuity and bonus liability. Restoring the balance raises all three at once, for every employee, and the arithmetic runs into crores before anyone has renegotiated a single contract.
Gratuity arrives four years early for fixed-term staff
Fixed-term employment is now expressly recognised, and gratuity accrues to a fixed-term employee after a materially shorter period than the five years that applied under the Payment of Gratuity Act. Organisations that moved headcount onto fixed-term contracts to stay flexible have acquired a provisioning obligation they did not model.
Contractors are not the shield they were
Contract labour, gig and platform work are brought within the social security architecture, with obligations that reach the principal employer and, for aggregators, a contribution measured against turnover. A workforce strategy built on the assumption that engagement through a vendor ends the exposure needs to be re-tested against the codes rather than against the previous Acts.
Thresholds moved in both directions
Some obligations relaxed — the headcount at which standing orders and prior approval for retrenchment or closure apply has risen. Others tightened, including written appointment letters for every employee. Establishments frequently discover they have crossed out of one regime and into another without noticing, because nobody re-ran the counts after the codes commenced.
Code on Wages, 2019
Wages, bonus and equal remuneration
Subsumes the Payment of Wages Act, the Minimum Wages Act, the Payment of Bonus Act and the Equal Remuneration Act. Introduces the common wage definition, a statutory floor wage, and equal remuneration obligations across gender. This is the code that reprices your salary structure.
Industrial Relations Code, 2020
Employment terms, unions and separation
Subsumes the Industrial Disputes Act, the Trade Unions Act and the Industrial Employment (Standing Orders) Act. Governs standing orders, recognition of negotiating unions, fixed-term employment, retrenchment, layoff and closure, and the machinery for resolving disputes.
Code on Social Security, 2020
Provident fund, gratuity, insurance and the gig economy
Subsumes nine enactments including the EPF Act, the ESI Act, the Payment of Gratuity Act and the Maternity Benefit Act. Extends coverage to gig workers, platform workers and the unorganised sector, and places obligations on aggregators.
OSH & Working Conditions Code, 2020
Safety, hours, and conditions of work
Subsumes thirteen enactments including the Factories Act, the Contract Labour Act and the Inter-State Migrant Workmen Act. Governs registration and licensing, working hours and overtime, employment of women across shifts, welfare facilities, health examinations and contractor compliance.
Since commencement
What follows now
The codes are central; much of the operative detail sits in rules framed by each State, and those are being notified on their own timetables. A group operating across states does not have one compliance position — it has as many as it has establishments, and they will not commence together.
Whether the codes reach you is settled. What they cost you is not.
| If you are… | Where the exposure concentrates | The first questions we ask |
|---|---|---|
| A corporate with a conventional salary structure | The wage definition. Provident fund, gratuity and bonus are all computed on a base that is now larger for most employees. | What proportion of total remuneration is currently basic, across each grade — and what does the provision look like once it is corrected? |
| A manufacturer or establishment with workmen | Standing orders, contractor licensing, safety and welfare obligations, and the headcount thresholds that determine which apply. | Have the counts been re-run since commencement, including contract labour, and does each site sit where you assume it does? |
| An employer of contract or outsourced labour | Principal employer obligations, licensing of contractors, and social security contributions that do not stop at the vendor. | Do your vendor contracts allocate the code obligations, and could you evidence the contractor’s compliance if asked? |
| A platform or aggregator | Social security for gig and platform workers, with contributions measured against turnover rather than headcount. | Which of your workers are gig or platform workers as defined, and has anyone modelled the contribution? |
| A group operating across several states | Divergent State rules, separate registrations and returns, and commencement on different dates in different places. | Do you have one compliance calendar or several, and who owns the ones outside your head-office state? |
| Using fixed-term employment | Gratuity accruing far earlier than under the previous regime, and statutory parity of benefits with permanent staff. | How many fixed-term employees are on the books, and has the shortened gratuity accrual been provisioned for? |
This table is a summary written for orientation. It is not legal advice and is not a substitute for advice on your establishments and your workforce.
The Incept Labour Code Readiness Framework
Six stages. The first two decide the number the board actually needs, which is why we do not begin with policy documents.
Stage 01
Establishment mapping
Every establishment, its State, its headcount by category — permanent, fixed-term, contract, apprentice — and the thresholds each one now sits above or below. Groups routinely find sites they had not counted and contractors nobody had listed.
Stage 02
Cost impact of the wage definition
Restructure each grade against the new definition and quantify the movement in provident fund, gratuity and bonus, with the provisioning consequence stated as a figure. This is the stage a board will actually read, and it should come before any policy is drafted.
Stage 03
Contracts and letters
Appointment letters for every employee, restructured salary annexures, fixed-term terms carrying statutory parity, and vendor agreements that allocate principal-employer risk rather than assuming it away.
Stage 04
Policies and standing orders
Standing orders where the threshold is crossed, together with the working hours, overtime, leave, women-in-all-shifts and health examination positions — drafted to the State rules that actually apply, not to a national template.
Stage 05
Registrations, returns and records
Registrations and licences under each code, the consolidated returns and registers, and a compliance calendar per State. The single-return promise is real, but only once the underlying registrations are correct.
Stage 06
Inspection and dispute readiness
What an inspector-cum-facilitator will ask for and whether you can produce it, plus representation when the questions become contentious — before the authorities, the tribunals and, on appeal, the courts.
What clients instruct us to do
Advisory and implementation
- Applicability and gap assessments across establishments and States
- Wage restructuring and the cost impact on PF, gratuity and bonus
- Appointment letters, salary annexures and fixed-term documentation
- Standing orders, drafting and certification
- Contract labour arrangements and principal-employer risk allocation
- Gig and platform worker classification and aggregator obligations
- Registrations, licences, registers and the compliance calendar
- Board and HR briefings on what changed and what it costs
Contentious and transactional
- Inspections, notices and departmental proceedings
- Retrenchment, layoff and closure, including approvals where required
- Trade union recognition and negotiating council questions
- Industrial disputes before the tribunals and the courts
- Labour due diligence on acquisitions, including provisioning exposure
- Employee transfer and harmonisation on business transfers
- Social security recovery and contribution disputes
Run alongside the codes
Yes, and this is the single largest financial consequence of the codes for most corporates. The common wage definition limits how much of total remuneration can sit outside “wages”. Structures built around a low basic and a large allowance component — which is to say most Indian structures — have to be rebalanced, and provident fund, gratuity and bonus all rise together when they are.
The rebalancing is not only a payroll exercise. It affects cost to company, take-home pay, employee communication and, where the workforce is unionised, the terms on which any change can be made at all.
More than under the previous regime. Principal employer obligations run through the codes, contractors require licensing, and social security coverage has been extended in ways that do not stop at the vendor’s boundary. Where a contractor defaults, the exposure has a tendency to travel upward.
The practical protection is contractual and evidentiary: vendor agreements that allocate the obligations explicitly, and a records regime that lets you demonstrate the contractor’s compliance rather than assume it.
No. The codes are central legislation, but a great deal of operative detail — thresholds, forms, registers, procedural requirements — sits in rules framed by each State, and those are being notified on their own timetables. A multi-state group has as many compliance positions as it has establishments.
In practice this is the part that defeats internal teams: not the law, but keeping six or twelve divergent calendars current when each State moves separately.
It is a flexibility, not an entitlement, and it is subject to the daily hour limits and the overtime provisions. Compressing the week does not reduce the weekly hours owed, and overtime is payable at the enhanced statutory rate once thresholds are crossed.
It has attracted attention disproportionate to its financial significance. We would not advise a board to spend time on it before the wage restructuring exercise is complete.
For a single-establishment employer with a contained workforce, mapping and the cost impact assessment typically run four to six weeks, with documentation and registrations over the following quarter. For a multi-state group with contract labour and several thousand employees, the mapping stage alone can take that long, and the State-by-State work runs beyond it.
We would rather scope honestly than quote a number that requires us to skip the establishment mapping, because every later stage depends on it being right.
The notice itself, the establishment’s registrations and licences, the registers and returns for the period in question, and the contractor records if contract labour is involved. Our first task is usually to establish what can actually be produced, because the gap between what a policy says and what the records show is where proceedings begin.
For matters already listed, telephone the numbers on our contact page rather than using the enquiry form.
Start a conversation
Tell us the problem.
We will tell you, plainly,
where you stand.
Whether it is a tariff order to be appealed, a hearing already listed, or a notice that has just been served, we will tell you where you stand before you instruct us.