India's New Labour Codes in 2026: What Changes for Employers

The four codes in one line each

• Code on Wages, 2019 - minimum wages for all, what counts as wages, when salary must be paid
• Code on Social Security, 2020 - PF, ESI, gratuity, maternity, and cover for gig and platform workers
• Occupational Safety, Health and Working Conditions (OSH) Code, 2020 - hours, leave, safety, contract labour
• Industrial Relations Code, 2020 - standing orders, grievance committees, layoffs and retrenchment

What changed at a glance

For every employer, including small businesses

Pay and wages

• Wages - basic pay, dearness allowance and retaining allowance - must be at least 50% of total pay. If allowances go above half, the excess is added back to wages. This raises PF and gratuity for many salary structures. (CTC calculator)
• Pay monthly salary within 7 days of the next month. On resignation, dismissal or retrenchment, wages are due within 2 working days. Gratuity has its own 30-day deadline. (FnF calculator)
• Give a wage slip, physical or electronic, on or before payment.
• Overtime is paid at no less than twice the normal rate.
• Employees now have three years to file a wage claim.

Hours and leave

• No more than 8 hours a day or 48 hours a week. With the worker's consent, longer days are allowed in a shorter week - up to 12 hours a day in a 4-day week.
• Annual paid leave starts after 180 days of work in a calendar year.
• Women may work night shifts with their consent, with safety, facilities and transport arranged by the employer.

Paperwork and social security

• Give every employee an appointment letter in the prescribed format.
• PF applies to establishments with 20 or more employees; the PF wage ceiling is ₹25,000 from 17 September 2026. (PF calculator)
• ESIC now applies across India, not only in notified areas; below 10 employees it is voluntary if employer and employees agree.
• Gratuity: 5 years for regular staff, 1 year for fixed-term staff. (Gratuity calculator)
• Every employee is eligible for a free annual health check-up.
• Registration has one threshold of 10 employees, with single registration and returns.
• Inspectors are now "Inspector-cum-Facilitators", and many first-time, fine-only offences can be settled by paying part of the maximum fine.

For staffing agencies and contractors

• Contract labour rules apply when 50 or more contract workers are deployed (earlier 20). Contractors with fewer than 50 do not need a licence.
• One all-India licence, valid for 5 years, replaces multiple state licences.
• Contract labour cannot be used in an establishment's core activities, except where that work is normally done through contractors, is not full-time for most of the day, or is a sudden spike that must be finished in a set time.
• If a contractor fails to pay, the principal employer must pay the unpaid wages.
• Fixed-term employees get the same statutory benefits as permanent staff - PF, ESI, bonus and gratuity.

For companies with 300 or more workers

• Standing orders are needed only at 300 or more workers (earlier 100).
• Prior government permission for lay-off, retrenchment or closure is needed at 300 or more workers in non-seasonal establishments.
• Establishments with 20 or more workers need a grievance redressal committee.
• On retrenchment, the employer pays 15 days' last drawn wages per retrenched worker into a re-skilling fund, credited within 45 days.
• Retrenching a worker with one year of service needs one month's written notice or wages in lieu, plus compensation of 15 days' average pay per completed year.
• Factories with 500 or more workers need a safety committee; establishments with more than 50 workers need a creche.

A 10-point checklist for small employers

1. Issue appointment letters to everyone, including existing staff.
2. Check that basic + DA is at least 50% of pay in every salary structure.
3. Pay salaries by the 7th of the next month.
4. Plan final dues so wages reach exiting employees within 2 working days.
5. Pay gratuity within 30 days of an exit when it is due.
6. Update PF on wages up to ₹25,000 from 17 September 2026.
7. Give fixed-term staff gratuity after one year.
8. Start annual leave eligibility at 180 days.
9. Issue wage slips every pay period.
10. If you use contractors, check whether they cross 50 workers and hold the new licence.

State rules can add to these. Check your state's notified rules or ask a labour law adviser.

Frequently asked questions

Related: PF calculator, FnF calculator, Gratuity calculator, CTC calculator. Glossary: basic salary, full and final settlement, notice period.