HR Compliance Checklist 2025–26: Are You Ready for India's New Labour Codes?

India's labour law landscape is in the middle of its most significant transformation in seven decades. The four new Labour Codes — enacted by Parliament between 2019 and 2020 — consolidate 29 existing central laws into a unified framework that will change how employers hire, pay, manage, and exit employees. The central government notification of the commencement date is pending as of June 2026. But the Codes are law. States are framing rules. And employers who wait for the notification before preparing will find themselves scrambling.

This checklist serves two purposes simultaneously. It tells you where you stand under the laws that apply today. And it flags — clearly, for every area — what the Labour Codes will change, so you can begin restructuring your HR framework now rather than after the fact.

Understanding the Four Labour Codes — Current Status

Before examining compliance obligations, every employer needs to understand the architecture of the reform — what the Codes are, what they replace, and what their current legal status means for your business.

Mandatory Registrations & Licences

The first compliance layer is registration — every establishment must be formally recognised by the applicable authorities before it begins operations, and registrations must be maintained, renewed, and updated as the business grows.

Wages, Payroll & Statutory Payments

Payroll compliance involves precise calculations, deductions, contributions, and remittances — each governed by its own statute, its own deadlines, and its own consequences for default. The Labour Codes make significant changes to the foundational definition of "wages" that will affect every downstream calculation.

EPF — Employees' Provident Fund

The employer's contribution is 12% of basic wages plus dearness allowance, matched by the employee. Both contributions must reach EPFO by the 15th of the following month. Delayed remittance attracts interest at 12% per annum plus damages of up to 25% of arrears.

• Every employee is enrolled from the date of joining — not from confirmation or completion of probation
• Employees earning above ₹15,000 per month may opt out only if they were not previously EPF members
• Contract workers engaged through a contractor are the contractor's obligation — but the principal employer is liable if the contractor defaults
• Monthly ECR challan filed; annual returns (Form 3A/6A) submitted by 30th April

ESIC — Employees' State Insurance

Employees earning up to ₹21,000 per month must be covered where the Act applies. Employer contribution: 3.25% of wages; employee contribution: 0.75%. Both must be remitted by the 15th of the following month. ESIC non-compliance is a criminal offence carrying imprisonment up to two years.

Minimum Wages

India has no single minimum wage. Rates are set state-by-state and industry-by-industry, revised typically every six months via variable dearness allowance. Paying below the applicable minimum is illegal — even where the employee consents. Monitoring is required for every state and every worker category.

Statutory Bonus

The Payment of Bonus Act applies to establishments with 20+ employees. Every employee earning up to ₹21,000 per month is eligible. Minimum statutory bonus: 8.33% of salary (or ₹100 if higher); maximum: 20%. Bonus must be paid within 8 months of the close of the accounting year. Late payment or non-payment attracts imprisonment up to 6 months.

Gratuity

Gratuity is payable to an employee who has completed 5 years of continuous service upon separation. Formula: 15 × last drawn salary × years of service ÷ 26. Must be paid within 30 days of it becoming due. Delayed payment attracts interest. The 5-year condition is waived in case of death or disablement.

Wage Structure Overhaul — The 50% Rule Action Required Now

This is the single most impactful change the Labour Codes will make to Indian employers' day-to-day operations — and the one that requires the most lead time to prepare for. It will affect every offer letter, every CTC sheet, every PF contribution, every gratuity liability, and every bonus calculation in your organisation.

The Code on Wages 2019 introduces a uniform definition of "wages" applicable across all calculations — EPF, ESI, gratuity, bonus, and leave encashment. "Wages" includes basic pay and dearness allowance. It excludes HRA, overtime, conveyance allowance, and other specified allowances. But crucially, the Code provides that all excluded components together cannot exceed 50% of total remuneration. This means at least 50% of an employee's CTC must consist of "wages" under the Code definition.

• Audit every active employee's current CTC structure — calculate what percentage constitutes "wages" under the Code on Wages definition
• Model the incremental EPF liability if wages are grossed up to 50% of CTC for all employees below ₹15,000 basic
• Recalculate gratuity provisions in your balance sheet based on revised wage definitions
• Revise all standard offer letter templates and salary annexures before the commencement date
• Ensure your payroll software can handle the new wage definition and recalculate all statutory deductions correctly from day one
• Communicate CTC restructuring to employees well in advance — restructuring should be cost-neutral to the employee (take-home is not reduced) even though the component mix changes

Employment Contracts & Appointment Letters

Under current law, the obligation to issue a written appointment letter exists in some sector-specific statutes and certain state S&E Acts, but is not a universal central obligation. This changes fundamentally under the Labour Codes.

Under current law, even without a universal statutory mandate, an employment contract that clearly defines the terms of employment is essential protection. The checklist applies today:

• Every employee — including contractual, part-time, and probationary — has a signed appointment letter or employment contract on file
• The employment contract clearly specifies: designation, department, reporting structure, place of work, CTC, notice period, and applicable leave entitlements
• The contract contains a legally enforceable confidentiality clause and, where relevant, an IP assignment clause
• Non-compete or non-solicitation clauses (where included) are time-bound and geographically limited — India courts do not enforce unreasonably broad post-employment restraints
• The contract distinguishes correctly between probation and confirmed service for the purposes of applicable statutory entitlements
• Fixed-term contracts clearly state the period of employment and basis of termination — and do not use language that implies permanence

Fixed-Term Employment — The New Framework Coming

The Industrial Relations Code 2020 introduces fixed-term employment as a formally recognised category of employment in Indian law for the first time. This is one of the most commercially significant changes for employers — and one that requires immediate policy attention.

Under the Code, fixed-term employees are entitled to:

• All statutory benefits on a pro-rata basis — EPF, ESIC, bonus, and all other applicable entitlements from the first day of employment
• Gratuity on a pro-rata basis regardless of the length of service — the 5-year continuous service condition that applies to permanent employees does not apply to fixed-term employees
• The same wages and working conditions as permanent employees performing the same or similar work
• A written fixed-term contract specifying the period of employment — and no right to re-engagement expectation after the fixed term ends, provided the contract terms are followed

• Develop a standard fixed-term employment contract template that complies with the IR Code requirements
• Build pro-rata gratuity provision into project costing for all fixed-term engagements
• Review all existing contractual and project-based workers — determine which should be transitioned to fixed-term contracts on notification
• Train HR and finance teams on the statutory benefit obligations for fixed-term employees

Social Security — EPF, ESIC, Gratuity & Gig Workers

The Code on Social Security 2020 consolidates nine existing social security laws and extends the framework in two significant directions — broadened definitions and extended coverage to non-traditional workers.

EPF & ESIC — Continuity with Expansion

The EPF threshold remains at 20 employees. The definition of "employee" has been expanded and clarified under the Code — employers should review whether any workers currently excluded from EPF enrollment will be brought within coverage under the new definition. ESIC coverage is extended to additional sectors and geographical areas; the wage ceiling will be re-notified.

Gratuity — Critical Changes

Under current law (Payment of Gratuity Act 1972), gratuity is payable after 5 years of continuous service. Under the Social Security Code:

Gig Workers & Platform Workers — New Coverage

The Social Security Code recognises gig workers (app-based, task-based workers not in traditional employment) and platform workers (those working through online platforms) as a distinct category and brings them within the social security framework for the first time. The Central Government may frame schemes for their life and disability cover, health benefits, maternity benefits, and provident fund.

Maternity Benefit — Continuity

The Code broadly preserves existing maternity benefit provisions: 26 weeks paid leave for the first two children; 12 weeks thereafter; crèche facility for establishments with 50 or more employees. The Code extends applicability to a wider range of establishments. POSH and maternity benefit are two compliance areas that remain fully operative and unchanged under current law — see Section 8 below.

POSH Compliance — Unchanged, But Still Widely Violated

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 is not part of the Labour Codes consolidation — it remains a standalone statute and continues to apply in full. It is, however, the single most commonly violated mandatory compliance among Indian employers. The Labour Codes do not reduce this obligation in any way.

POSH non-compliance carries penalties up to ₹50,000 for a first offence, escalating to cancellation of business licences for repeat violations. An invalid or lapsed ICC exposes the employer to substantial civil damages if a complaint is made and there is no functioning committee to hear it.

• A written POSH policy exists and has been formally communicated to all employees — including remote and contractual workers
• The Internal Complaints Committee (ICC) has been constituted by a written order signed by the employer — not merely referenced in a policy document
• The ICC has a Presiding Officer who is a senior woman employee at the establishment
• At least half the members of the ICC are women
• One member is from an NGO or association committed to women's causes, or a person familiar with issues relating to sexual harassment
• All ICC members' terms are within the 3-year limit — terms have not expired unnoticed
• A separate ICC has been constituted for each distinct location of the establishment
• ICC members (including the Presiding Officer) have been trained on the complaint, enquiry, and redressal process
• The POSH policy explicitly covers third-party harassment, extended workplace, and remote / work-from-home situations
• Penal consequences of sexual harassment are displayed prominently at every workplace location
• The ICC has submitted its annual report to the employer; the employer has submitted the combined annual report to the District Officer
• Awareness programmes on POSH have been conducted for employees within the past 12 months

Standing Orders — Revised Thresholds, New Obligations Action Required Now

Standing orders govern the terms of employment of workmen — attendance, leave, shifts, conduct, disciplinary procedure, grievance redressal, and termination. They are one of the most important compliance documents an employer can have, and one of the most widely misunderstood.

Current Law (Industrial Employment (Standing Orders) Act 1946)

Establishments employing 100 or more workmen (50 in some states) must have standing orders certified by the certifying officer. Without certification, model standing orders apply by default — but the employer cannot customise them.

Industrial Relations Code 2020 — Key Change

The threshold is raised to 300 workers. Establishments below 300 workers will operate under Model Standing Orders notified by the Central Government — these will be deemed to apply automatically, without requiring certification. This reduces the administrative burden for smaller establishments but does not eliminate the need for internally adopted, well-drafted service rules.

• Does the establishment meet the current threshold for mandatory standing orders (100 workmen under current law)?
• If yes, have standing orders been drafted, submitted to, and certified by the certifying officer?
• Are certified standing orders displayed in English and the local vernacular language at the establishment entrance?
• Have standing orders been communicated to and acknowledged by workmen employees?
• Does the standing orders / service rules document contain a complete domestic enquiry procedure — sufficient for a manager to follow correctly without further instruction?
• If below the current threshold, are well-drafted service rules in place that mirror the substance of standing orders for disciplinary and grievance matters?

• Assess your headcount against the revised 300-worker threshold under the IR Code
• If you will fall below 300 workers under the Code, review the Central Government's draft Model Standing Orders and identify any gaps relative to your operations
• Draft customised service rules or standing orders amendments before the commencement date so you are ready from day one

Working Hours, Overtime & Leave

The OSH Code standardises working hour and leave obligations across all industries — replacing the patchwork of sector-specific rules that currently apply under the Factories Act, the various state S&E Acts, and other statutes. These changes require parallel updates to your leave policy and employment contracts.

Employee Exits — Retrenchment, F&F & Workmen

Employee exits are the most litigated area of Indian employment law, and one where the Labour Codes make their most commercially significant structural change. Every exit — resignation, termination, redundancy, or retirement — triggers statutory obligations that must be met precisely and within prescribed timelines.

Retrenchment Threshold — The Big Change

Retrenchment Compensation — No Change

Below the permission threshold, retrenchment compensation remains mandatory for all workmen: 15 days' average wages for every completed year of continuous service, plus one month's notice or pay in lieu. This obligation is unchanged under the IR Code.

Full & Final Settlement

State-level S&E Acts prescribe the timeline within which F&F must be paid. In Maharashtra, dues must be paid within 2 working days of exit. Delayed F&F creates an actionable claim regardless of whether any other dispute exists.

• F&F settlement process is documented with a defined timeline from last working day to payment
• F&F includes all statutory components: unpaid wages, earned leave encashment, gratuity (where applicable), bonus dues, and reimbursements
• F&F is documented in a signed settlement recording what was paid and the basis of calculation
• Experience letter and relieving letter issued within 7–10 days of last working day
• Under the IR Code: pro-rata gratuity is included in F&F for all fixed-term employees from day one of commencement — irrespective of tenure length

Headcount Thresholds That Change Everything

Labour law in India is structured around headcount milestones. As you grow, new obligations activate automatically — without notice, without grace periods. The Labour Codes revise several critical thresholds. Every employer needs to know where these lines fall, under both current law and the incoming Codes.

Your Labour Codes Readiness Action Plan

The commencement notification for the Labour Codes could arrive within weeks or months. Businesses that prepare in advance will absorb the transition smoothly. Those that wait will face simultaneous disruption across every HR function. Here is a structured action plan, organised by urgency.

How LexWin Helps

LexWin works with Indian businesses — from growth-stage startups to established enterprises and Indian subsidiaries of foreign companies — on the full spectrum of employment law and HR compliance. Our practice combines employment law expertise with practical HR implementation knowledge, so everything we produce is both legally sound and operationally workable.

Master Checklist — 20 Questions Every Employer Must Be Able to Answer

Run this diagnostic against your business today. If you cannot answer yes to more than 15 of these, a compliance audit is overdue.

• All applicable registrations — S&E, EPF, ESIC, PT — are current, accurate, and reflect your current headcount and locations
• EPF and ESIC contributions are enrolled from date of joining for every eligible employee — not from confirmation or probation completion
• Minimum wages are being paid correctly in every state — at the component level, not just total salary — and are reviewed against state notifications every 6 months
• Every active employee's CTC has been modelled against the Code on Wages 50% wages rule, and a restructuring plan is in place
• Every employee has a signed appointment letter or employment contract on file — including contractual, part-time, and informal workers
• A fixed-term employment contract template and policy exists — or is being developed — for workers engaged on project or time-bound terms
• Gratuity provisioning has been recalculated to include pro-rata accrual for all fixed-term employees from Day 1, effective on Code commencement
• The POSH policy is current; the ICC is validly constituted; all members' terms are within the 3-year limit; the annual report has been submitted
• ICC members have received training on the complaint and enquiry process within the past 12 months
• The disciplinary and exit process clearly distinguishes between workmen and non-workmen, and specifies a domestic enquiry procedure
• Your headcount has been assessed against both the current (100-workman) and incoming (300-worker) thresholds for standing orders and retrenchment permissions
• Standing orders are certified (if currently required) and displayed in English and the local vernacular at the establishment
• Leave policy is aligned with the OSH Code standard (1 day per 20 days worked) and reflects state S&E Act entitlements
• Working hours, overtime, and spread-over limits are documented in employment contracts and comply with both current law and the OSH Code incoming standard
• F&F settlement process meets the state S&E Act timeline — and includes all statutory components including earned leave encashment and gratuity
• All mandatory registers are maintained and up to date; all mandatory notices and abstracts are displayed at every establishment location
• Annual returns — S&E, ESIC, Bonus, Contract Labour — have been filed for the most recent applicable period
• Contract worker arrangements have been reviewed — each contractor holds a valid licence, and principal employer obligations are being monitored
• Gig or platform worker engagements (if any) have been identified and documented in anticipation of Social Security Code scheme notifications
• HR policies have been reviewed or are scheduled for review against all four Labour Codes — with a target to be Code-ready before the commencement date