New Labour Codes India 2026: What Is In Force and What HR Must Do

The four codes at a glance

The Code on Wages 2019 merges the Payment of Wages, Minimum Wages, Payment of Bonus and Equal Remuneration Acts, and carries the two provisions HR teams feel daily: the 50% wage definition and the 2-working-day F&F deadline under Section 17(2). The Code on Social Security 2020 folds in nine laws including EPF, ESI, gratuity and maternity benefit, and creates a social-security category for gig and platform workers. The OSH Code 2020 takes over factories, contract labour and working-conditions law: mandatory appointment letters, working hours, leave accrual at 180 days, annual health checks. The Industrial Relations Code 2020 rewrites standing orders, strikes, retrenchment and union recognition, with key thresholds moving from 100 to 300 workers.

The 50% rule resets PF, gratuity and take-home

"Wages" now means Basic + DA + retention allowance, with a hard cap: excluded components (HRA, conveyance, employer PF, bonus, overtime, commission) cannot exceed 50% of total remuneration. Any excess is deemed wages, so PF, gratuity, bonus and leave encashment are computed on the deemed figure whether or not the structure changes on paper. Most Indian structures were built with Basic at 30-40% of CTC precisely to keep statutory outgo small. Push Basic from 35% to 50% of a ₹6 lakh CTC and monthly PF rises about 43% on each side, gratuity accrual rises in the same proportion, and take-home dips because more salary routes through PF. Model exact numbers with the labour code CTC restructure calculator.

Gig workers and fixed-term staff

Fixed-term employees earn gratuity on a pro-rata basis after one year of service; the five-year qualifying rule no longer protects employers rolling people over on 11-month contracts. Gig and platform workers get a statutory social-security fund financed by aggregator contributions of 1-2% of annual turnover, capped at 5% of amounts paid to those workers. Businesses engaging delivery riders, drivers or marketplace freelancers through a platform model carry this new line item.

Hours, leave and letters under the OSH Code

Appointment letters are mandatory for every employee, existing staff included. Annual leave eligibility drops from 240 days worked to 180. Overtime needs written consent and pays double the ordinary rate. Women may work night shifts in any establishment with consent and prescribed safeguards. Free annual health check-ups apply to workers above the notified age. Inspections move to an inspector-cum-facilitator model with web-based, document-first checks.

Employer checklist for FY 2026-27

• Restructure CTC so Basic + DA is at least 50% and re-issue compensation letters; size the PF and gratuity delta per employee first.
• Re-project gratuity liability including pro-rata accrual for fixed-term contracts longer than a year.
• Issue appointment letters to all employees who never got one.
• Move F&F settlement to a 2-working-day SLA from last working day.
• Update leave policy for 180-day eligibility, overtime consent forms and night-shift consent for women.
• Map which states have notified rules under each code and set effective dates per work location.

The state-rules caveat

In force nationally does not mean identical everywhere. Labour is a concurrent subject, so each state notifies its own rules on hours, registers, licences and thresholds, and a few provisions wait on those rules. Through 2026 the practical position: the codes and central rules apply, state rules are landing in batches, and multi-state payroll teams need a per-state effective-date matrix rather than one switch-over date.