Once states notify the rules under the four new Labour Codes, employees are likely to see major changes starting from their appointment letters to monthly salary slips. From higher basic pay and clearer working hours to transparent PF, gratuity and leave rules, employment terms will become more structured and legally defined.
The four new Labour Codes, consolidating 29 old laws, came into effect from November 21, 2025. The four Codes – Code on Wages, 2019; Industrial Relations Code, 2020; Code on Social Security, 2020; and Occupational Safety, Health and Working Conditions (OSH) Code, 2020 – are expected to introduce significant reforms in India’s labour sector.
While these laws have become effective at the central level, the real impact will be seen when states notify their respective rules. Since labour laws are a concurrent subject, companies will have to fully implement them only after the states issue their notifications.
When this happens, it will directly affect the most basic documents related to employees’ jobs – from the appointment letter received at the time of joining, to monthly salary slips, working hours, holidays, and retirement benefits.
Appointment letter to become a legal document, not just an HR document
Until now, the appointment letter was often considered an HR-driven document, with many things written in general terms. But after the implementation of new labour laws, its role is going to change.
According to Rishi Agarwal, CEO and Co-Founder of TeamLease Regtech,
“Once states notify the Labour Code rules, appointment letters will move from being largely HR-driven documents to becoming legally significant compliance instruments. The most immediate and visible change employees will see is in the wage structure.”
This means that the appointment letter will no longer be just an offer letter, but will become a legal document clearly outlining the salary structure, working hours, holidays, and social security rights.
Major changes in salary structure and basic pay
Under the Code on Wages, the definition of ‘wages’ has been standardised. According to this, at least 50% of an employee’s total salary must be considered wages. This directly means that companies will have to increase the basic salary and reduce or restructure those allowances that were previously used to understate statutory payments.
Rishi Agarwal says, “This will lead to a restructuring of salary components, with a higher basic pay and a rationalisation of allowances that were earlier used to suppress statutory payouts.”
Although this may slightly reduce the monthly take-home salary for some employees, the long-term benefits will be greater. An increase in basic salary will directly benefit things like PF contributions, gratuity, overtime pay, bonuses, and leave encashment.
Increased transparency in salary slips
Not only the appointment letter, but the format of the salary slip will also change. The number of allowances will be reduced, and statutory deductions and contributions will be more clearly displayed. This will make it easier for employees to understand where each part of their salary is going.
Working hours and overtime will now be clearly defined
The new labour laws formally recognise an 8-hour workday and a 48-hour workweek. Any work beyond this will be considered overtime, for which double the normal wage must be paid, provided state rules permit it.
This means that vague phrases like “additional work as per business needs” will no longer be sufficient in appointment letters. Normal working hours and overtime rules will have to be clearly stated so that employees can legally enforce them.
Leave rules will be more transparent
Changes will also be seen in leave policies. Currently, many companies only include leave rules in their HR policies. However, under the new codes, the rules for leave accrual, carry-forward, and encashment are expected to be more clearly stated in the appointment letter.
This will particularly benefit employees who work in multi-state organisations or those who face uncertainty regarding leave settlements when transitioning to a new job.
Complete details of social security
The new labor codes place special emphasis on social security. PF, ESIC (where applicable), gratuity, and other statutory benefits will be clearly mentioned in the appointment letter. Fixed-term and contract employees have also been formally included under these laws, ensuring their rights are documented in writing.
Will new appointment letters be mandatory?
The Labour Codes do not mandate issuing new appointment letters for existing employees. However, once the state rules are implemented, any terms that do not conform to the new laws will become legally unenforceable. In this situation, issuing revised appointment letters or addendums will become a practical necessity for companies to avoid future inspections or potential liabilities.
What employees should look out for
If an employee receives a revised appointment letter or addendum, it is crucial to read it carefully. First, check the salary structure – are wages at least 50% of the total salary, and is PF being calculated on the correct basis?
Provisions related to gratuity should be clear, especially for fixed-term employees. Working hours and overtime clauses should also be in line with state regulations and clearly defined. It is also essential to ensure that there are no reductions in social security coverage.
New legal recourse for employees
With the new Labour Codes, the appointment letter will no longer be just a formality of joining, but will become the legal basis for salary, working conditions, and social security. As state rules are notified, these changes will gradually become apparent, but their impact will be profound and lasting.
This is the time for employees to understand and pay attention to their appointment letters – because the coming period will bring significant changes.
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