Clipped from: https://taxguru.in/corporate-law/labour-code.html
Summary: The New Labour Code, effective 21 November 2025, consolidates 29 central labour laws into four major codes governing wages, social security, industrial relations, and occupational safety. The Code on Wages standardises the definition of “wages,” expands employee coverage, introduces national floor wages, mandates faster wage settlements, and updates bonus eligibility. The Social Security Code broadens EPF/ESI coverage, includes gig and platform workers, regulates employer contributions, strengthens maternity benefits, and expands the definition of dependents. The Industrial Relations Code revises definitions, recognises fixed-term employees for gratuity, restructures union negotiation rules, tightens strike procedures, and mandates grievance mechanisms. The Occupational Safety Code streamlines registrations, prescribes health check-ups, limits working hours, regulates contract labour, sets new leave rules, and allows night work for women with conditions. Across the codes, employers face new compliance obligations, stricter timelines, enhanced worker protections, and uniform wage and safety standards.
New Labour Code (w.e.f 21st Nov,2025)
India has consolidated 29 national level labour laws into 4 codes.
1. Code on wages,2019
2. Code on Social security,2020
3. Occupational Safety, Health and Working Conditions Code, 2020
4. Industrial relations code,2020
Code on wages,2019
> Replaces 4 existing labour laws related to wages and bonus and matters connected therewith or incidental thereto.
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- Payment of wages act,1936
- Payment of Bonus act,1965
- Minimum wages act,1948
- Equal remuneration act,1976
> Major changes in wage code,2019
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- Definition of wages
- This code ensures equal remuneration for all who performs similar work irrespective of gender.
- This code empowers the government to set minimum wages and establish advisory board for wage related recommendations.
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Changes in provision
- Nature of change: Wages definition
Provision: Sec 2(y) of CODE OF WAGES defines
Wages means all remuneration whether by way of salary, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—
i. basic pay;
ii. dearness allowance; and
iii. retaining allowance, if any, but does not include–
(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
(d) any conveyance allowance or the value of any travelling concession;
(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
(f) house rent allowance;
(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
(h) any overtime allowance
(i) any commission payable to the employee;
(j) any gratuity payable on the termination of employment;
(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:
Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause
Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.
Explanation ––Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;
Applicability: This wage definition is to be considered for calculation of ESI, EPF, minimum wages, maternity benefit, gratuity, employees compensation, statutory bonus and other payment of wage related provisions.
Previously, Wages definition is different for all 29 acts and it is impossible to remember all the wages definitions in different acts to determine the applicability of such acts.
- Nature of change: Employee definition
Provision: Sec 2(k) of CODE OF WAGES defines Employee means any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;
Previously, payment of wages act applies to employees draws less than Rs.25,000/-, now wage code applies to all employees defined above.
Provision: Sec 9 states that the Central Government shall fix floor wage taking into account minimum living standards of a worker in such manner as may be prescribed:
Provided that different floor wage may be fixed for different geographical areas.
(2) The minimum rates of wages fixed by the appropriate Government under section 6 shall not be less than the floor wage and if the minimum rates of wages fixed by the appropriate Government earlier is more than the floor wage, then, the appropriate Government shall not reduce such minimum rates of wages fixed by it earlier.
Previously, only minimum wages were notified by the relevant State and Central Government. Now, the Central Government will notify national floor wages which States will keep in mind while notifying their respective minimum wages.
The Government of Andhra Pradesh has recently announced the minimum wages for the state dated 31st Oct,2025. Please go through the notification for present minimum wages.
Nature of change: Payment of due wages within two working days of resignation
Provision: Sec 17 of the code states that Where an employee has been— (i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or became unemployed due to closure of the establishment, the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation.
Previously, The prescribed timeline for payment of wages, which was applicable only to cases of termination, has been extended to cases of resignation as well.
- Nature of change: Payment of Bonus
Provision: Sec 26 states that there shall be paid to every employee, drawing wages not exceeding such amount per mensem, as determined by notification, by the appropriate Government, by his employer, who has put in at least thirty days work in an accounting year, an annual minimum bonus calculated at the rate of 8.33% of the wages earned by the employee or one hundred rupees, whichever is higher whether or not the employer has any allocable surplus during the previous accounting year and maximum of 20% of the wages earned.
Previously, payment of bonus act applies to all the employees who earns less than or equal to Rs.21,000/-, The government is yet to announce the salary threshold for statutory bonus eligibility which may increase the net of bonus obligations.
Summary of major changes in Code on wages,2019
a. Universal minimum wages now apply to all employees, unlike earlier coverage limited to scheduled jobs.
b. Contractors and sub – contractors are included in the definition of “employer”
c. Central govt may fix the Floor wage, this ensures that no state can fix wages below this for wage level
d. The code prescribes the timelines for wage payments as flows:
| Payment frequency | Wages to be paid |
| Daily | End of the shift |
| Weekly | Last working day of the week |
| Fortnightly | Before the end of the 2nd day after the fortnight |
| Ends | |
| Monthly | Before the 7th day of succeeding month |
e. Code mandates overtime must be paid at least twice the normal wage rate.
f. Any contract restricting an employee’s benefits under the code is null and void.
g. Full and final settlement shall be payable within 2 working days.
h. The code establishes a formal system for wage claims and recovery.
i. Traditional role of inspector has been replaced with inspector-cum-facilitator
j. Compounding has been introduced, helps reducing the trails in criminal court
Important points
1. Applicability of the code- Code applies to all establishments w.e.f 21-11-2025 irrespective of the establishment size
2. Appointment letter mandatory- yes, employer need to give appointment letter to every employee in specified format.
3. Maximum % of deduction in wages- deduction on wages cannot exceed 50% of the wages.
4. Employees a trade union must file claim with in 3 years from the due.
5. Only employee whose salary or wage does not exceed 21,000 per month entitled to the minimum bonus of 8.33%.
6. For the first five 5 years companies are required to pay bonus only in profit-earning years.
7. Compounding of offenses allows an employer to avoid prosecution by paying the prescribed amount.
THE CODE ON SOCIAL SECURITY, 2020
> Replaces labour laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors and for matters connected therewith or incidental thereto.
Following are the major changes in this code.
a. Wages definition has been elaborated, “if allowances exceed 50% of basic +DA+ retaining allowances, the exceeds will be treated as wages”
b. Any remuneration provided to an employee in kind shall be treated as part of “wages” to the extent it does not exceed 15% of the total wages payable.
c. ESIC coverage is now pan-India, removing the earlier “notified area” requirement. Establishment with fewer than 10 employees can voluntary opt in with mutual consent of employer & employee, and coverage is mandatory for hazardous occupations and extended to plantation workers.
d. New definitions are included “aggregator” “gig worker” and “platform” worker” to enable social security coverage.
e. Aggregators are required to contribute 1-2% of annual turnover, but shall not excess 5% of amount payable to gig workers and platform workers.
f. EPFO coverage now extends to all establishment with 20+ workers, as the schedule-based criteria is removed. Establishments with fewer than 20 workers and self-employed individuals may also opt in voluntarily.g. Dependent term has been in broadened to include material grandparents and parents-in-law in case of female employee
g. A compensation claim will be accepted only if the accident is reported as soon as possible and the claim if filled within two years of the accident ( or within two years from the date of death, in case of fatal accidents)
h. Employees appealing against the EPF order, pre-deposit percentage reduced to 25% of the assessed amout from 40-50%.
Important points
1. Application of the code to any establishment can be notified by the central government, subject to threshold limits.
2. If the remuneration in kind exceeds 15% of the employees wages,15% of the value of such In kind benefit will be included in wages.
3. Code mandates the registration of unorganized workers, gig workers and platform workers.
4. A women employee is entitled to 26 weeks of paid maternity benefit. If 50 or more employees, the employer is legally mandated to provide a creche facility.
5. Components of excluded from wages, such as HRA, conveyance allowance, statutory bonuses, overtime allowance, gratuity, and employer PF contribution.
6. Consequence of nonpayment of maternity benefits imprisonment for a term not less than three months. (which may up to one year 0) fine less 2000. (which may extend to 5000)
THE INDUSTRIAL RELATIONS CODE, 2020
a. The term workman has been replaced with worker
b. Worker definition has been expanded to cover sales promotions staff, journalists and supervisory earning up to 18,000 per month.
c. Wages definition has been elaborated, “if allowances exceed 50% of basic, DA+ retaining allowance, the excess will be treated as wages”
d. Fixed- term employees are those hired for a specified period and they are eligible for gratuity upon completion of 1 year service, earlier it was 5 years
e. For the retrenched employees, employer is required to combine 15 days of last drawn wages to reskilling fund, the is in addition to retrenched compensation paid to employees directly.
f. amount contributed shall be credited to the workers account within 45 days.
g. Strike definition has been revised to include if 50% or more workers takes casual leave on the same day then day is considered as strike.
h. No person is allowed to go for a strike without serving proper notice to the employer.
i. Lay-of and retrenchment provision do not apply to establishment with under 50 workers or to seasonal establishments.
j. Any industrial establishments consist of 20 or more workers must have one or more grievance redressal committees (GRC).
k. A union with 51% membership becomes the sole negotiating union. If no union meets this threshold, a negotiating council if formed with unions having at least 20% membership.
Important points
1. The code applies to establishments as per the formation of committees and unions
-Works committee; mandatory for industrial establishments with 100+ workers employees
-Grievance redressal committee: required for industrial establishment with 20+ workers
-Trade union registration: any union with 7 or more members can register under the code.
– Additional applicability: certain provisions apply to industrial establishment with 300+ workers employed at any time in the preceding 12 months.
2. Gratuity after one year service applies only to fixed term employees. For all other employees. For all other employees standard 5- year rule continues.
3. GRC must complete its proceeding within 30 days.
4. Code states that a dispute relating to the discharge, dismissal, retrenchment, or termination of an individual worker shall be deemed as industrial dispute and the same shall be resolved by conciliation officer.
5. Any worker participating in illegal strike under the code may face a fine between 1000 or imprisonment of up to one month, or both.
THE OCCUPATIONAL SAFETY, HELATH AND WORKING CONDITIONS CODE 2020
> Replaces labour laws relating to the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment and for matters connected therewith or incidental thereto.
Following are the major changes in this code.
a. Factory definition amended to 20 workers for premises where the process uses power and 40 workers where the process uses no power.
b. A uniform threshold of 10 employees has been prescribed for electronic registration. Under the new framework, a single registration will replace the six separate registrations required under the earlier laws.
c. Applicability of contract labour provisions only when 50 or more contract labour are employed.
d. Employers must conduct annual health check-ups for employees
e. Issuance of appointment letters is mandatory for all employees.
f. Number of working hours restricted to a maximum of 8 hours in a day and 6 days week.
g. Overtime requires priors written consent and must be paid at twice the ordinary wage rate.
h. Employee shall be entitled to 1 day leave for every 20 days of work and for a adolescent worker leave shall be entitled to 1 day for every 15 days of work.
i. A worker can carry forward unused leave to the next year, but only up to 30 days. Anything beyond 30days cannot be carried forward.
j. Women employees may work between 7 PM and 6 AM, subject to their consent and required safety safeguards.
k. Establishment with 500 or more workers will form safety committees with employer-worker representation, enhancing workplace safety and shared accountability.
Important points
1. The code applies to establishment with 10 or more workers, and to all mines and docks, regardless of worker count.
2. No code does not prohibit women from working in night, provided the two mandatory conditions. Written concern from the employee, adequate safety, facilities, and transportation
3. The maximum working hours are fixed at 8 hours per day and 48 hours per week. The workers worked in extra time must be paid at least twice the normal rate of wages.
4. In cost of health checkups this cost is not part of the employees CTC; it’s a mandatory and additional cost borne entirely by the employer.
5. Issuance of appointment letters for employees for promoting formalization is mandatory
No code explicitly prohibits gender-based discrimination and code was built on principal of equal work.
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