The note highlights wage changes, wider worker coverage, gratuity updates, and compliance checks to manage audit risks in this transition
The four Labour Codes: 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. Together, they replace 29 earlier central labour laws, marking a major shift in India’s labour regulation framework.
Key reforms introduced by the four Labour Codes, based on ICAI’s guidance:
Wages Redefined
● Allowances, bonuses, and HRA are capped at 50% of total pay.
● Any excess counts as “wages” for PF, gratuity, ESI, and other statutory dues.
● In‑kind remuneration up to 15% also included.
Wider Coverage
● Statutory protections extended to managerial, supervisory, fixed‑term, gig, and platform workers.
● Significantly expands the employee base under labour law compliance.
Gratuity Reform
● Fixed‑term employees are now eligible for gratuity after 1 year of service (earlier 5 years for permanent staff).
● Gratuity calculations aligned with the new wage definition.
Gig & Platform Workers
● Formal recognition of gig and platform workers.
● Creation of a Social Security Fund, with aggregators contributing 1–2% of turnover (subject to caps).
Compliance & Penalties
● Penalties substantially increased.
● Imprisonment is reserved for serious violations.
● Certain offences can be compounded, shifting focus to corrective enforcement.
Audit Implications
● Labour laws are now treated as statutes directly affecting financial statements (SA 250).
● Auditors must check payroll restructuring, statutory dues, benefit obligations, disclosures, and management judgments.
● Non‑compliance could lead to qualified or adverse audit opinions.
In the foreword to the publication, ICAI President CA Charanjot Singh Nanda described the guidance as a timely resource for auditors to address the “substantial changes” introduced by the new Labour Codes. The Institute expressed confidence that this document will support members in managing compliance risks and ensuring smooth adaptation during this critical transition phase.
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