India is consolidating 29 central labour laws into four Labour Codes. All four have been enacted but are yet to be notified into force — states are finalising their rules. When they take effect, they will fundamentally change how Indian employers manage wages, industrial relations, social security, and occupational safety. Here is what you need to prepare.
The four codes: a map
The four Labour Codes consolidate over two dozen existing laws:
- Code on Wages 2019 — consolidates the Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act. Introduces a universal minimum wage floor and redefines "wages."
- Industrial Relations Code 2020 — consolidates the Industrial Disputes Act, Trade Unions Act, and Industrial Employment (Standing Orders) Act. Raises the threshold for standing orders, redefines retrenchment, and introduces fixed-term employment.
- Code on Social Security 2020 — consolidates EPF, ESI, Gratuity Act, Maternity Benefit Act, and others. Extends social security to gig workers and platform workers for the first time.
- Occupational Safety, Health and Working Conditions Code 2020 (OSH Code) — consolidates 13 laws including the Factories Act. Expands coverage to all establishments with 10+ workers.
Code on Wages: the wage definition change
The most immediate operational impact is the new definition of "wages" under the Code on Wages — it will include basic pay and dearness allowance, but exclude certain specific allowances (like HRA, conveyance, overtime). Allowances excluded from wages are capped at 50% of total remuneration.
Many Indian employers currently structure compensation with a low basic salary and high allowances to reduce PF and gratuity liability. The new cap will force restructuring across large parts of the organised sector.
This means PF contributions (calculated on "wages") will increase significantly for employers who have suppressed basic pay. Employers should model their PF liability impact before the Code is notified.
Industrial Relations Code: fixed-term employment
The IR Code introduces statutory fixed-term employment (FTE) across all sectors — not just certain industries. Key features:
- Fixed-term employees are entitled to all benefits including gratuity on a pro-rata basis if the term is 1 year or more
- No notice period required for non-renewal at the end of the fixed term
- Fixed-term employees cannot be converted to permanent employees — each contract terminates by efflux of time
For employers in IT, ITES, and project-based industries, FTE provides a flexible alternative to contract labour — but comes with gratuity and benefit costs that pure contract arrangements avoided.
Social Security Code: gig and platform workers
For the first time, gig workers (e.g., Swiggy delivery partners, Ola drivers) and platform workers are recognised as a category entitled to social security benefits — administered through a central government welfare scheme. Companies employing gig workers may need to contribute to a Social Security Fund.
For traditional employers, the Code broadly maintains existing PF and ESI frameworks but unifies registration, returns, and compliance through a single portal.
OSH Code: expanded coverage
The OSH Code extends occupational health and safety obligations to all establishments with 10 or more workers — including offices, IT companies, and commercial establishments that were previously covered only under state Shops & Establishments Acts. Key new obligations include:
- Annual health examinations for workers in hazardous processes
- Welfare officer and safety officer appointments at larger establishments
- Working hours cap: 8 hours per day, 48 per week; overtime ceiling
- Appointment of safety committees for hazardous establishments
What employers should do now
Even before the Codes are notified, employers should:
- Wage restructuring impact analysis — model PF and gratuity liability under the new wages definition
- Contract review — employment contracts, standing orders, and offer letters will need revision on notification
- Gig worker categorisation — assess whether the company has gig or platform workers and what social security obligations may arise
- HR policy audit — leave policies, working hours, overtime payment, and annual bonus must align to the new Codes
- State rule monitoring — the Codes are central law but states notify their own rules; Telangana, Karnataka, Maharashtra, Delhi, and Tamil Nadu rules will each vary
DeccanBridge guidance
Our employment and labour law team has prepared Four Labour Code readiness audits for employers across India. We map your current HR and payroll policies against the new Codes, identify high-risk gaps, and prepare transition plans — before notification catches you unprepared.
Contact: connect@deccanbridge.com or +91 94922 01497.