On 21 November 2025, with about a week's notice, India retired 29 of its oldest labour laws. Several of them were older than the Republic. If you run a business, last year's salary structure may not be legal now. If you draw a salary, your PF and your take-home have probably already moved.
Four Labour Codes replaced 29 central labour laws with effect from 21 November 2025, and the final Central Rules followed on 8 May 2026 — the change that reaches every payslip is the 50% wage rule, which forces most companies to restructure salaries.
The bottom line
What replaced what: four Codes in place of 29 laws, live since 21 November 2025, with Central Rules notified 8 May 2026.
The change that costs money: basic plus DA must be at least 50% of pay, which raises PF and gratuity and usually trims monthly take-home.
Three things employers now owe: a written appointment letter to every employee, full-and-final settlement within two working days of exit, and social security for gig and platform workers.
The four Codes, and what they swallowed
Parliament passed these between 2019 and 2020, and the government switched them on in late 2025. They fold 29 separate central labour laws, some of them written in the 1920s and 1930s, into four.
| Code | What it governs | Main old laws it replaces |
|---|---|---|
| Code on Wages, 2019 | Wages, minimum wages, bonus, equal pay | Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, Equal Remuneration Act |
| Industrial Relations Code, 2020 | Unions, standing orders, layoffs, disputes | Trade Unions Act, Industrial Disputes Act, Industrial Employment (Standing Orders) Act |
| Code on Social Security, 2020 | PF, ESI, gratuity, maternity benefit, gig workers | EPF Act, ESI Act, Payment of Gratuity Act, Maternity Benefit Act, and more |
| Occupational Safety, Health and Working Conditions Code, 2020 | Safety, working hours, appointment letters, welfare | Factories Act, Contract Labour Act, and 11 others |
Are they actually in force
Yes, and this is where a lot of what you will read online is out of date. The position as of mid-2026:
- The four Codes came into force on 21 November 2025.
- The Ministry of Labour and Employment notified the final Central Rules on 8 May 2026, including the Code on Wages (Central) Rules, 2026.
- Labour is a Concurrent List subject. The Central Rules apply directly only to central-sphere establishments — banking, insurance, telecom, mines, railways, major ports and central PSUs. For most private employers the on-ground detail comes from your state's rules, and several states are still finalising theirs.
Treat the framework as live and check your own state's notification before finalising anything. A salary policy that works in Karnataka may need adjusting in a state that has notified differently.
The myth worth discarding is that nothing applies until every state notifies its rules. The core provisions, the wage definition above all, are already operating. Waiting is the expensive choice.
The 50% wage rule
This is the change that reaches every payslip in the country, so it is worth setting out on its own.
The Codes define "wages" as basic pay plus dearness allowance plus retaining allowance. Everything else — HRA, conveyance, special allowances, bonuses — is excluded. And the excluded components cannot exceed 50% of total remuneration. Where they do, the excess is added back and treated as wages.
For years companies kept basic artificially low, often 30–40% of CTC, to hold down PF and gratuity outgo. That is no longer available. Basic plus DA has to be at least half of pay.
Since PF at 12% and gratuity both sit on the wage base, lifting the base lifts both. That is good for an employee's retirement corpus, less comfortable for their monthly take-home, and a genuine cost increase for the employer.
What changes for employees
- Take-home may dip slightly, because a larger PF deduction comes out of a higher wage base.
- PF and gratuity grow. More of your pay goes into long-term savings whether you wanted it there or not.
- You must get a written appointment letter. For the first time this is mandatory for every employee, in a prescribed format. If you never received one, ask.
- Final settlement is faster. Full-and-final dues have to be cleared within two working days of your last day, rather than the 30-to-45-day wait that used to be normal.
- Fixed-term staff earn gratuity on a pro-rata basis, without needing five years of service.
What changes for employers
Past the salary restructuring, the operational load is substantial:
- Restructure salaries to the 50% wage rule, and recompute PF and gratuity provisioning against the new base.
- Issue appointment letters to every existing and new employee.
- Rebuild payroll so a full-and-final settlement clears in two working days.
- Register gig and platform workers if you operate as an aggregator.
- Provide a crèche with safe arrangements where the headcount thresholds apply, open to employees of any gender.
- Allow women on night shifts, before 6 AM or after 7 PM, where they consent in writing, with safe well-lit premises and transport.
- Arrange free annual health check-ups for workers aged 40 and above in notified categories.
- File through the digital portals. Registration, common returns and dispute filing are moving to Shram Suvidha and Samadhan.
One threshold moved the other way: contract-labour licensing now bites at 50 workers rather than 20, which takes smaller operations out of that regime entirely.
Gig and platform workers
This is new ground. Gig and platform workers — delivery riders, cab drivers, people taking work through aggregator apps — are brought into the social-security net for the first time.
If you run an aggregator you must register your gig and platform workers on the designated portal within 45 days, and contribute towards their social security. It is the clearest statement of intent to formalise the informal economy, and the most likely place for early enforcement attention.
What it costs to get wrong
The Codes keep their teeth. Non-payment or underpayment of wages, failure to maintain the prescribed registers and missing mandatory provisions all carry fines, and repeat offences escalate.
For most companies the near-term risk is not a single fine, though. It is back-pay and contribution liability if a wrong salary structure is found to have been running across a whole workforce for months. An understated basic across 200 employees for a year is not a ₹50,000 problem. It is a recompute-PF-and-gratuity-for-everyone problem, and the arithmetic gets large fast.
A worked example
An employee on ₹1,00,000 per month, whose basic used to be ₹35,000 — 35% of CTC.
| Old structure | New structure (50% rule) | |
|---|---|---|
| Basic + DA (wages) | ₹35,000 | ₹50,000 |
| Allowances | ₹65,000 | ₹50,000 |
| Employee PF (12% of wages) | ₹4,200 | ₹6,000 |
| Employer PF (12% of wages) | ₹4,200 | ₹6,000 |
| Monthly take-home effect | — | ≈ ₹1,800 lower |
| Gratuity accrual base | Lower | Higher |
The employee's pocket is about ₹1,800 lighter each month, and their retirement corpus and gratuity grow by more than that over time. The employer either absorbs the higher PF cost or restructures CTC around it. Nobody gets out of the recalculation.
Common mistakes
- Waiting for all the rules to land. The wage definition already applies, and delay stacks up liability rather than avoiding it.
- Assuming the Central Rules are the whole story. For a private employer the state rules govern the detail.
- Skipping the appointment letter. It is mandatory now, in a set format, and it is the first thing an inspector asks to see.
- Treating gig workers as somebody else's problem. Aggregators have a hard 45-day registration clock.
- Cutting basic to protect take-home. That route is closed. Plan the transition with employees rather than springing it on them.
Where to start this quarter
- Pull every employee's current structure and flag anyone whose basic plus DA is below 50% of CTC.
- Model the new PF and gratuity cost before changing anything. Knowing the number first is what turns this into a decision rather than a surprise.
- Issue or reissue appointment letters in the prescribed format.
- Rebuild the full-and-final settlement process around the two-working-day deadline.
- If you are an aggregator, register gig and platform workers within 45 days.
- Read your state's rule notifications alongside the Central Rules.
Frequently asked questions
Are the new Labour Codes in force in 2026? Yes. All four came into force on 21 November 2025, and the final Central Rules were notified on 8 May 2026. State rules are still being finalised in several states, so check yours.
Will my salary go down under the new Codes? Monthly take-home may dip slightly because more of it goes into PF, while your PF and gratuity savings rise. Total CTC usually stays the same unless your employer raises it.
Is an appointment letter now compulsory? Yes. Every employee must be issued a written appointment letter in the prescribed format.
Do gig workers get PF and ESI now? The Codes extend social security to gig and platform workers, and aggregators must register them within 45 days. The benefit rollout is being operationalised through dedicated portals.
How fast must final settlement happen when I leave a job? Within two working days of your last working day.
Do the Codes apply to a small company? The wage definition applies regardless of size. Several other obligations, such as crèche facilities and contract-labour licensing, only bite above headcount thresholds.