Payroll and Compliance Awareness
India’s four Labour Codes: what employers must act on now
The Codes took effect on 21 November 2025 and Central Rules were notified on 8 May 2026 — but most large states are still catching up. Here is what changes and what to do.
From 29 laws to four Codes
On 21 November 2025 the Government made the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020 and the Occupational Safety, Health and Working Conditions (OSH) Code 2020 effective, consolidating 29 central labour laws. The Ministry of Labour published a compliance handbook for employers in February 2026, and the final Central Rules under all four Codes were notified on 8 May 2026 after draft rules were consulted on in December 2025.
Who follows Central Rules vs State Rules
Central Rules apply mainly where the Centre is the “appropriate government” — banking, insurance, telecom, mines, oilfields, major ports, air transport, railways and central PSUs and their contractors. The key exception is the Social Security (Central) Rules, which also apply to establishments with branches in more than one state. Everyone else follows their state’s rules — and as of 1 October 2026 only about 10 states and UTs had notified them. Maharashtra, Karnataka, Tamil Nadu, Telangana, Haryana and Punjab were still pending.
The changes HR teams feel first
A uniform definition of “wages” where allowances above 50% of total remuneration are added back to wages — this pushes up PF, gratuity and leave encashment calculations for many CTC structures. Mandatory appointment letters in a notified format with statutory disclosures. Normal working hours of 8 a day / 48 a week with overtime at twice the ordinary rate. Gratuity for fixed-term employees after one year. Registration of gig and platform workers, a unified annual return due by end-February, and stronger safeguards for women, including night shifts with consent and safety measures.
Mind the state gaps
Where states have not notified rules, older state laws such as Shops & Establishments Acts continue to matter. For example, leave carry-forward under the Codes (30 days) differs from Maharashtra’s Shops & Establishments rules (45 days). Multi-location employers need a location-by-location view rather than a single national policy.
A practical 30-day checklist
1) Re-test every salary structure against the 50% wages rule. 2) Issue or update appointment letters in the prescribed format. 3) Review fixed-term contracts for gratuity. 4) Map each location to Central or State rules and track pending state notifications. 5) Refresh attendance, overtime and leave policies. 6) Brief payroll partners and confirm interpretations with qualified legal advisers.
Sources
This article is general information, not legal, tax, or regulated statutory advice. Requirements vary by business and location; seek appropriately qualified advice where needed.