India's New Labour Codes —
A Comprehensive Summary

Overview

India has undertaken the most significant reform of its labour law framework in decades. The four new Labour Codes consolidate 29 central labour laws into a streamlined regulatory structure designed to improve ease of doing business, extend social security coverage, and modernise employment relationships across India's formal and informal sectors.

The four codes are:

Code on Wages, 2019 — Key Provisions

Universal Coverage

For the first time, minimum wage protections apply to all workers regardless of sector, industry, or scheduled/non-scheduled status. Previously, the Minimum Wages Act applied only to scheduled employment categories, leaving many workers unprotected.

Floor Wage

The Central Government will fix a National Floor Wage below which no state can set its minimum wage. This creates a genuine wage floor across India, preventing a race to the bottom between competing states.

Definition of Wages

The Code introduces a uniform definition of "wages" for the purpose of all calculations — bonus, PF contributions, gratuity, and leave encashment. It includes basic pay and dearness allowance but excludes HRA, overtime, conveyance allowance, and other statutory contributions. Critically, it provides that allowances excluded from the wage definition cannot together exceed 50% of total remuneration — meaning at least 50% of CTC must be structured as wages.

Payment Timelines

• Daily workers — wages due by end of working day
• Weekly workers — wages due by last working day of the week
• Monthly employees — wages due within 7 days of wage period end

Bonus Provisions

The eligibility threshold for bonus has been enhanced. Every employee earning up to ₹21,000 per month is eligible for statutory bonus. The minimum bonus payable is 8.33% of wages (subject to a minimum of ₹100), and the maximum is 20% of wages.

Industrial Relations Code, 2020 — Key Provisions

Fixed-Term Employment

The Code introduces fixed-term employment as a distinct category. Fixed-term employees are entitled to all statutory benefits (ESI, PF, gratuity) on a pro-rata basis, and gratuity accrues from year one — unlike permanent employees who require five years of service. This is a significant shift that enables employers to engage workers for project-based work without contractual uncertainty.

Revised Retrenchment & Closure Thresholds

The threshold for requiring prior government permission for retrenchment, lay-off, and closure has been raised from 100 workers to 300 workers. State governments may raise this threshold further. This gives medium-sized enterprises significantly more operational flexibility.

Trade Union Recognition

The Code introduces a negotiating union or negotiating council concept. Where a single union has more than 51% membership, it is the sole negotiating union. Where no union has 51% membership, a negotiating council is formed. This provides clarity on collective bargaining processes.

Standing Orders

The threshold for mandatory Standing Orders (service rules) has been raised from 100 to 300 workers. Model Standing Orders provided by the Central Government serve as deemed Standing Orders for establishments below this threshold, reducing compliance burden for smaller employers.

Strike Notice

Notice of strike must be given at least 14 days in advance (previously 6 weeks for public utilities). The notice period applies to all industries, not just public utilities — a significant expansion of the strike notice requirement.

Code on Social Security, 2020 — Key Provisions

EPF Coverage

The Employees' Provident Fund provisions continue broadly as under the existing EPF Act. The threshold remains at establishments with 20 or more employees. The definition of "employee" has been expanded and clarified.

ESI Coverage

The wage ceiling for ESI eligibility has been left to be notified (currently ₹21,000 per month, ₹25,000 for persons with disabilities). Coverage has been expanded to additional sectors.

Gratuity

The five-year continuous service requirement for gratuity eligibility is retained for permanent employees. However, for fixed-term employees, gratuity is payable on a pro-rata basis regardless of tenure — a major change from existing law.

Gig Workers & Platform Workers

For the first time, gig workers (e.g. app-based delivery personnel) and platform workers are recognised as a distinct category and brought within the social security framework. The Central Government may frame schemes for their life and disability cover, health and maternity benefits, and provident fund.

Maternity Benefit

Maternity benefit provisions broadly continue as under the existing Maternity Benefit Act (26 weeks paid leave for first two children, 12 weeks thereafter). The Code extends applicability to a wider range of establishments.

ESIC Medical Benefit

Medical benefit under ESI may be extended to retired and permanently disabled insured persons and their spouses, subject to payment of a contribution.

OSH Code, 2020 — Key Provisions

Working Hours

• Maximum daily working hours: 8 hours (with flexibility to be notified)
• Maximum weekly hours: 48 hours
• Overtime: permitted, with double wages payable
• Spread-over: not to exceed 12 hours in a day

Annual Leave

Workers are entitled to 1 day of earned leave for every 20 days worked (previously 1 in 20 for adults under the Factories Act). Leave may be carried forward, with the maximum accumulation limit to be notified by state governments.

Contract Labour

The Code continues to regulate contract labour. Contractors must be registered. Principal employers are liable for contractor non-compliance on wages and social security obligations. The threshold for registration of contract labour contractors has been raised.

Appointment Letter

Every employer must issue an appointment letter to every employee at the time of appointment. This is a new universal requirement not previously applicable to all sectors — a significant change for informal and semi-formal employment practices.

Factories Threshold

The threshold for coverage under factory-style regulation has been revised. Power-using factories with 20 or more workers, and non-power factories with 40 or more workers, will be covered.

29 Laws Repealed — Complete List

The four Labour Codes repeal and consolidate the following 29 central labour laws:

Key Employer Action Points

• Wage restructuring: Review CTC structures to ensure at least 50% of total remuneration qualifies as "wages" under the new definition. This will affect PF contributions, gratuity calculations, and bonus eligibility.
• Appointment letters: Issue formal appointment letters to all employees, including those in informal or part-time roles.
• Standing orders: If below the revised 300-worker threshold, rely on model standing orders but ensure HR policies are aligned.
• Fixed-term contracts: Establish clear policies for fixed-term employment — including pro-rata gratuity calculations from day one.
• Contract labour: Audit all contractor arrangements to ensure principal employer obligations are met.
• Leave policies: Align earned leave accrual rates and carry-forward policies with the new framework.