FAQs on India’s New Labour Codes: Legal Position, Applicability & Compliance Guidance

Clipped from: https://taxguru.in/corporate-law/faqs-indias-labour-codes-current-legal-position-applicability-compliance-guidance.html

The Government has consolidated 29 labour laws into four comprehensive Labour Codes. • The four Labour Codes include the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.

• Code on Wages, 2019 (Wage Code) – Partially brought into force, subject to Rules Only sections 1–41, 42(4)-(9), 43–66, 67(1) & 67(2)(a–r,u–zc) & 67(3)-(5), 68, 69 are notified.

The Code on Wages, 2019, aims to simplify and consolidate four laws, including Payment of Wages Act, 1936; the Minimum Wages Act, 1948; Payment of Bonus Act, 1965; and Equal Remuneration Act, 1976.

• Industrial Relations Code, 2020 (IR Code) – brought into force, subject to Rules

The Industrial Relations Code (IR Code) has been prepared by combining relevant provisions of the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947.

• Code on Social Security, 2020 (CSS Code) – Partially brought into force, subject to Rules
  Only sections 1 to 14, 15(1)-(2), 16(1)(c), 17 to 141, 143, 144 to 163, 164(1)(items 1,2,4–9), 164(2)(a),(c), 164(3)* are now applicable.

The Code on Social Security incorporates existing nine Social Security Acts such as viz; The Employees’ State Insurance Act, 1948; The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; The Maternity Benefit Act, 1961; The Payment of Gratuity Act, 1972;

• Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) – brought into force, subject to Rules

The Code has been drafted after amalgamation, simplification and rationalization of the relevant provisions of the 13 Central Labour Acts- such major acts like The Factories Act, 1948; The Mines Act, 1952; The Motor Transport Workers Act, 1961; The Beedi and Cigar Workers (Conditions of Employment) Act, 1966; The Contract Labour (Regulation and Abolition) Act, 1970; The Sales Promotion Employees (Conditions of Service) Act, 1976; The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

1. Effective Date & Mandatory Applicability

• Please confirm whether implementation is mandatory from 21 November 2025?

YES, the notified sections become law on 21.11.2025.

There is no reference to a future enforcement date, therefore they are effective immediately.

• Is it compulsory to apply these changes from the November 2025 payroll month, or is any transition period allowed?

Answer: The notification is silent on payroll cut-over, and companies cannot retro-modify already processed payroll. The Codes do not provide any statutory transition period, as a practical matter, employers typically require time to align payroll systems. Such transition tolerance is administrative in nature and does not constitute a legal exemption.

• Kindly advise if any grace period or phased implementation is acceptable?

Answer: There is NO grace period mentioned in any notification. As per our view even though no grace period is notified, labour authorities generally allow a reasonable transition period for:

• modifying HRMS/payroll
• creating new registers (electronic or physical)
• revising internal policies
• updating contractor agreements

Accordingly, as a practical matter, employers may reasonably target alignment by 31 December 2025, subject to administrative tolerance by authorities. Also the Codes themselves also allow certain compliances within 30–90 days once the rules are framed. So we have to wait for further rules.

2. Working Hours & Overtime Rules (Important Clarification Required)

• What is the maximum legal working hours per day and per week?

Answer: Daily Limit Section 25 of OSH Code says “No worker shall be required or allowed to work… for more than eight hours in a day”

Weekly Limit Section 26 of OSH Code says “No worker shall be allowed to work… for more than six days in any one week.”

• Is the standard limit 8 or 9 hours per dayand 48 hours per week, or has this changed?

Answer: Although a specific 48-hour weekly cap is not explicitly repeated here, the combination of:

• 8 hours per day, and
• 6 days per week,

means the implied maximum is 48 hours per week for all general establishments.

• There is discussion about flexibility allowing up to 12 hours per day, subject to a weekly cap – please confirm its legal position?

Answer: Some articles and draft rules previously discussed a 12-hour shift (including intervals) with 8 hours actual work, but:

√ The OSH Code prescribes 8 hours as the standard daily working limit. Any extension, shift structuring, or longer spread-over can only be permitted through Rules or exemptions issued by the appropriate Government.

√ The daily cap in the actual law remains 8 hours of work, not 12.

A 12-hour “duty” can happen only if intervals + spread-over are included — NOT 12 hours working.

Therefore:

8 hours work allowed

Rest + meal breaks + shift handover included within spread-over

Total spread-over will be notified by State Govt

Please advise:

A) Is strict adherence mandatory for employers?

Answer: YES — The OSH Code has been brought into force; however, most operational obligations become enforceable only upon notification of applicable Central or State Rules.

B) How should overtime be treated legally?

Answer: Section 27 states: There shall be paid wages at the rate of twice the rate of wages in respect of overtime work

C) Is overtime payment compulsory at double the normal rate?

Answer: Mandatory in all cases where:

• working > 8 hours in a day OR
• working > weekly limit as may be prescribed

✔ Overtime must be calculated daily or weekly, whichever is more favourable to the worker.

D) Are we allowed to offer Comp-Off instead of overtime payment?

Answer: Comp-off is NOT a substitute for overtime payment under OSH Code.

The Code provides compensatory holidays only in one specific situation:

If weekly holiday is denied due to exemption permitted by government → worker must get compensatory holidays.

Section 26(1) – Weekly holiday rule

• Weekly holiday is denied ONLY because
• an exemption is granted by the appropriate Government, under Section 26(2).
• In such case, compensatory holiday is MANDATORY, not optional.
• Timing of compensatory holiday is strictly fixed by law:
• Within the same month, OR
• Within the next two months immediately following that month.
• Number of compensatory holidays:
• Equal to the number of weekly holidays denied.

Implications for 24×7 working envirnment:

E) What If company operate a 24×7 environment and often require employees to work beyond normal hours?

Answer: They must follow:

• 8 hours working per day
• Spread-over as per rules (likely 10.5–12 hours, but awaiting notification)
• One weekly off
• Double wages for overtime
• Consent for overtime

3. Gratuity – 1 Year Eligibility

Under the new Labour Codes, Fixed-Term Employees may become eligible for gratuity after 1 year of service instead of 5 years.

A) Is this rule applicable to all employees or only fixed-term employees? 

Answer: NO. It applies ONLY to Fixed-Term Employees.

Statutory Provision Section 53(1) – Code on Social Security, 2020 provides:

“Gratuity shall be payable to an employee on termination of his employment after he has rendered continuous service for not less than five years…”

Proviso to Section 53(1) states:

“Provided that the condition of five years shall not be necessary in case of termination of employment of a fixed-term employee.”

B) From which date does this become operational?

Answer: The Code on Social Security, 2020 was partially brought into force vide notification dated 21-11-2025, which includes Chapter V (Gratuity provisions).

C) Should we amend our gratuity policy immediately?

Answer: Any gratuity policy must reflect:

• 5-year rule for regular employees
• No minimum service period for fixed-term employees

If the existing policy contradicts Section 53, it must be aligned, as statutory provisions override policy.

D) What changes are required in accounting and provisioning for gratuity liability?

Answer: That we have to made provision of fixed-term employee along with the provision of regular employees at every year end. Further gratuity becomes payable only upon termination, not merely completion of one year.

E) If an employee resigns or exits in the subsequent month after completing one year of continuous service from year- 2024, is such employee legally eligible for gratuity?

Answer: If fixed term employee resigns or exits after the Code becomes effective then such employee is legally eligible for grauity.

Fixed-Term Employee – Section 2(26) Special category with: written contract, fixed tenure, proportional statutory benefits.

4. Payroll & Wage Structure Impact

A) Need for restructuring salary as per new definition of “wages”?

Answer : The Code defines wages inclusively and exclusively and introduces the 50% cap. If excluded components exceed 50% of total remuneration, the excess shall be deemed to be wages. Restructuring is not compulsory, but re-characterization happens by force of law if exclusions exceed the statutory limit.

• Impact on:
  • Basic pay
  • Allowances
  • PF & ESIC calculations

Answer : For the first time, the Labour Codes introduce a uniform, statutory definition of Wages, fundamentally altering how “Basic Pay” and “Allowances” must be balanced. The definition of wages operates such that excluded components cannot exceed 50% of total remuneration; otherwise, the excess is deemed wages.

• The Critical 50% Threshold: The aggregate of Basic Pay + Dearness Allowance (DA) + Retaining Allowance must equal a minimum of 50% of the employee’s Total Remuneration.
• Allowance Cap: The remaining amount (up to 50%) may be comprised of various allowances, benefits, or flexible components.
• The Compliance Trigger: If the total value of all excluded allowances exceeds 50% of the Total Remuneration, the excess amount is legally mandated to be added back to the definition of “Wages” for calculating statutory dues (like PF/Gratuity). This automatically increases the employer’s liability.

B) Is any change required in CTC format?

Answer: If the existing CTC format if against the definition of wages then re-characterisation happens by force of law. Any CTC restructuring is consequential, not statutory.

C) Clarification on timely payment obligations?

Answer: The employer shall fix the wage period for employees either as daily or weekly or fortnightly or monthly subject to the condition that no wage period in respect of any employee shall be more than a month. These timelines are statutory and mandatory.

Wage period	Time limit
Daily	End of shift
Weekly	Last working day
Fortnightly	Within 2 days
Monthly	Within 7 days of next month
Termination	Within 2 working days

D) Whether the “floor wage” concept under Code on Wages, 2019 overrides state minimum wage structures?

Answer: Section 9 – Code on Wages, 2019 says “Minimum wages fixed by States shall not be less than the floor wage fixed by Central Government.”

Strict legal position

√ Floor wage = minimum threshold

√ States retain power to fix higher wages

√ Floor wage does NOT replace State minimum wages

->State minimum wages continue, subject only to the floor wage being the base.

E) Kindly confirm whether our current minimum wage range in Rajasthan (₹6,735 – ₹7,410 Basic) remains compliant post implementation?

Answer: Till now Central floor wage notification has not been issued. Till that no impact on wages rate. The Code does not automatically revise State minimum wages. Compliance test is only this: Are State minimum wages ≥ Central floor wage?

F) Could you kindly verify if the minimum wages have indeed been revised by the Government of Rajasthan? If so, please send me the relevant official document or notification regarding this change?

• Unskilled: Rs 285 per day, or Rs 7,410 per month
• Semi-skilled: Rs 297 per day, or Rs 7,722 per month
• Skilled: Rs 309 per day, or Rs 8,034 per month
• Highly skilled: Rs 359 per day, or Rs 9,334 per month

Answer: As per the provisions of the Code on Wages, 2019, the Central Government is required to notify the National Floor Wage, which shall act as the base wage, and the minimum wages fixed by the State Governments cannot be lower than such floor wage.

However, as on date, no notification has been issued by the Central Government prescribing the National Floor Wage under the Code on Wages. Further, no fresh notification revising minimum wage rates has been issued by the Government of Rajasthan pursuant to the Code on Wages.

Accordingly, the existing minimum wage rates continue to remain in force, and there has been no change in the rates. The currently applicable minimum wages in Rajasthan are as per the last State Government Notification No. F.8(5)(6) New.M.Abh./Labour/I.R./2000/Part/00212 dated 13.12.2024.

5. Employment Contracts & Appointment Letters

A) Whether fresh appointment letters must be issued to all existing employees?

Answer: NO Labour Code mandates re-issuance of appointment letters to existing employees. Existing employment contracts remain valid in law. If the existing agreement are inconsistent from the provision of new labour code, then the existing agreement need to be revised.

Note – Under the New Labour Codes, the issuance of a formal Appointment Letter is mandatory for new employees. While not statutorily mandated for existing employees, employers may choose to align appointment letters prospectively for administrative clarity. Crucially, the final, compliant salary architecture must be reflected precisely in these official appointment documents. This ensures the company’s internal record and the employee’s contractual understanding align perfectly with the statutory contribution basis.

B) Required changes in existing contracts, terms and conditions, or fixed-term agreements.

Answer : NO. Existing contracts are not invalidated. However — overriding clause applies. Each Labour Code contains a standard overriding provision, to the effect that:

The provisions of the Code shall have effect notwithstanding anything inconsistent contained in any other law, contract, agreement or standing orders.

6. Social Security Obligations

A) PF, ESIC, Insurance, and other statutory contributions under the expanded scope.

Answer : The Code consolidates the following laws:

• Employees’ Provident Funds Act, 1952
• Employees’ State Insurance Act, 1948
• Payment of Gratuity Act, 1972
• Maternity Benefit Act, 1961
• Employee Compensation Act, 1923
• Unorganised Workers’ Social Security Act, 2008

However (very important):

PF and ESIC contribution machinery under the Code is NOT YET OPERATIONAL, because Schemes under Sections 15 (PF) and Section 28 (ESI) have not yet been notified.

Contribution	Governing law TODAY
Provident Fund	EPF Act, 1952
ESIC	ESI Act, 1948
Gratuity	Code on Social Security, 2020 (operative)
Employee Compensation	CSS Code, 2020
Maternity Benefit	CSS Code, 2020

Until schemes are notified, PF & ESIC and other statutory contributions continue exactly as per old Acts.

B) Compliance for contractual, part-time and fixed-term workers.

Answer: Untill no new scheme introduces the position as on date is same as before applicable of these new labour code.

1. Fixed-Term Employees

Statutory basis:

• Section 2(26), CSS Code (definition of fixed-term employment)
• Section 53 proviso (gratuity)

√ Fixed-term employees are employees under the Code

√  Eligible for:

• PF & ESIC → as per EPF / ESI Acts (if thresholds met)
• Gratuity → after 1 year (statutorily provided)

-> Same social security coverage as regular employees, proportionate where applicable.

2. Contractual / Contract Labour

Statutory position:

• Contract workers are employees under the Code
• Employer–employee relationship exists with the contractor

PF & ESIC (current law)

Under:

• Section 2(f), EPF Act
• Section 2(9), ESI Act

√ Contract workers are covered

√ Primary liability is on contractor

√ Principal employer is liable in default

->  This position continues unchanged, as Code schemes are not yet notified.

3. Part-Time Workers

Statutory position

• Neither the CSS Code nor EPF/ESI Acts exclude part-time workers
• Coverage depends on:
  • wage ceiling
  • establishment coverage
  • nature of employment

√ If they fall within the definition of “employee”, PF & ESIC apply

√ No exemption merely because employment is part-time

CSS Code provisions

The Code empowers Government to frame schemes for:

• life & disability cover
• health & maternity benefits
• old age protection
• gig and platform workers
• unorganised workers

But:

• These schemes require separate notifications
• Most are not yet operational

-> No new contribution liability arises unless a scheme is notified.

• Any new registrations or reporting obligations.

Answer: The Code provides for:

• common registration
• electronic database
• unified returns

However:

• These provisions are enabling, not self-executing
• Rules + portal + scheme notifications are required

-> No fresh registration obligation is triggered merely due to Code enforcement, unless specifically notified.

7. Safety & Working Conditions

A) Any mandatory health check-ups (especially for employees over 40)?

Answer: The OSH Code provides for medical examination of workers, but does NOT prescribe any age-based mandatory health check-up, including for employees over 40.

Relevant statutory provision says

The Code empowers the appropriate Government to prescribe:

• medical examination
• periodic health check-ups
• fitness certification
  for specified classes of workers or hazardous occupations
• Health check-ups are occupation-based, risk-based, or hazard-based
• Age (40 years or otherwise) is NOT mentioned anywhere in the Code

Therefore:

• No universal mandatory health check-up for employees over 40 under the OSH Code
• Mandatory check-ups apply only if prescribed by rules for specific work categories
• Requirements relating to night shifts for female employees?

Answer : The OSH Code expressly permits employment of women in night shifts. But subject to prescribed conditions relating to safety, consent, and facilities

The Code states that:

• Women may be employed in all establishments
• Including night shifts
• Subject to such conditions as may be prescribed by the appropriate Government

Statutory requirements (as per Code structure):

• Consent of the woman employee
• Adequate safety measures
• Protection of dignity
• Facilities such as lighting, security, rest rooms, etc.
  (Exact conditions are to be specified in rules / notifications)

-> Employment of women in night shifts is lawful, but compliance with prescribed safeguards is mandatory. Until Rules are notified, employers should continue to follow existing State-specific conditions issued under Shops & Establishments or Factories laws.

B) Need for forming safety committees or internal compliance bodies?

Answer: The OSH Code empowers the appropriate Government to require constitution of:

• Safety Committees
• Safety Officers
• Internal safety mechanisms

The Code does NOT mandate safety committees for all establishments automatically

C) When is a Safety Committee required?

As per the Code:

• Safety committees are required only when notified
• Typically based on: number of workers, nature of operations, hazardous processes, class of establishment etc.

Unless a notification/rule applies to your category, there is no automatic obligation to form a safety committee.

8. Compliance & Implementation Procedure

• Step-by-step procedure for implementation of the new labour codes in our company.
• Suggested timeline for:
  • Policy revision
  • Payroll restructuring
  • Staff communication
  • Legal compliance updates
• Documents and SOPs that must be updated.

Answer : As on date, the detailed Rules, Regulations and operational Guidelines under the Labour Codes have not yet been issued. In the absence of such Rules and procedural clarity, the formal implementation process has not commenced.

Once the appropriate Government notifies the Rules, Regulations and detailed Guidelines and the compliance framework is clearly laid down, the Company shall initiate the necessary implementation process in a phased and systematic manner.

It is also relevant to note that the Labour Codes do not prescribe any step-by-step implementation procedure or timeline. Employers are only required to comply with the statutory obligations that have been notified and brought into force from their effective date, irrespective of whether internal policies, SOPs or payroll structures are formally revised.

9. Women Employees & Night Shifts

PIB clarifies that women may work in all shifts, including night shifts, subject to consent and safety measures.

A) What formal procedures must we follow for deploying women on night shifts?

Answer: The Code requires that:

Employment of women during night hours shall be subject to such conditions as may be prescribed

The Code does NOT itself prescribe:

• any application process
• any mandatory declaration format
• any approval mechanism
• any consent format

B) Required safety arrangements (transport, security, lodging, surveillance).

Answer: The OSH Code mandates:

• safety
• health
• protection of dignity

The Code does NOT enumerate specific facilities such as: transport arrangements, security guards, CCTV, lodging / rest facilities, escort facilities. All such details are to be prescribed by Rules or Government notifications.

10. Mandatory vs Advisory

A) Which provisions are legally mandatory from 21 November 2025.

Only those provisions which have been expressly brought into force by notification are mandatory. Based on the notifications dated 21-11-2025, the following core obligations are legally enforceable:

1. Code on Wages, 2019 (Partially brought into force, subject to Rules)

Mandatory obligations (where sections are notified):

• Payment of wages not less than minimum wages
• Compliance with definition of “wages” (including 50% rule)
• Timely payment of wages within statutory timelines
• Equal remuneration / non-discrimination
• Payment of overtime at prescribed rate
• Maintenance of wage-related records and registers (subject to rules)

These obligations are direct, unconditional, and enforceable from the effective date.

2. Industrial Relations Code, 2020 (brought into force, subject to Rules)

Mandatory obligations:

• Recognition of employer–worker rights and obligations
• Compliance with provisions on:
  • standing orders (where applicable)
  • lay-off, retrenchment, closure
  • industrial dispute resolution mechanisms
• Prohibition of unfair labour practices

These provisions operate by force of law, irrespective of internal policies.

3. Occupational Safety, Health and Working Conditions Code, 2020 (brought into force, subject to Rules)

Mandatory obligations:

• Maximum working hours and weekly holiday provisions
• Overtime payment obligation
• General duty to ensure safety, health and welfare of workers
• Non-discrimination and dignity at workplace
• Compliance with core safety obligations applicable to the establishment

These are binding duties, even though detailed procedures may await rules.

4. Code on Social Security, 2020 (Partially brought into force, subject to Rules)

Mandatory obligations (notified provisions):

• Gratuity eligibility and payment (including 1-year rule for fixed-term employees)
• Employee compensation provisions
• Maternity benefit provisions
• Continuation of social security entitlements as consolidated under the Code

These rights vest by operation of law once the Code is in force.

A) Which depend on state notifications or further government rules.

Answer: A significant number of provisions under the Labour Codes are enabling in nature and are intended to be operationalised through detailed Rules, Schemes or notifications to be issued by the appropriate Central or State Governments. These include, inter alia, matters relating to spread-over limits, constitution of safety committees, detailed conditions for employment of women during night shifts, medical examinations, unified registration systems, electronic registers and returns, and implementation of social security schemes. In the absence of such subordinate legislation, these provisions do not impose immediate or enforceable compliance obligations on employers, and continue to remain inoperative until the requisite Rules or notifications are formally issued.

B) Potential penalties or risks for non-compliance.

Answer: The penalty framework under the Labour Codes is applicable only in respect of those provisions which have been duly notified and brought into force. Non-compliance risks arise solely where an employer fails to adhere to operational statutory obligations such as payment of wages, observance of working hours, weekly holidays, or statutory social security benefits that are currently enforceable. No penalty, prosecution or adverse action can be initiated for non-compliance with provisions that are dependent upon future Rules, Schemes or notifications, or for non-adoption of internal policies, SOPs or administrative processes where no specific statutory mandate exists. Penalties apply only to notified and operational provisions; however, general duties relating to wages, safety and welfare that are already enforceable may still attract liability.

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Legal Disclaimer: This document is intended for general informational purposes only and is based on the Labour Codes and notifications issued as on date. Several provisions of the Labour Codes are subject to further Rules, Schemes, and State-specific notifications, and their applicability may vary accordingly. This note does not constitute legal advice or a binding interpretation of law. Users are advised to seek professional advice before acting on the contents of this document.