By S&S Co. Advocates & Solicitors · Published 15 October 2026 · Informational content, not legal advice: see our disclaimer
Clients tend to ask the same question once they hear the Labour Codes are finally in force: do we need to redo our contracts tomorrow. The honest answer is more complicated than yes or no, because the four Codes came into effect substantively on 21 November 2025 while the detailed rules under them, particularly at the state level, were still being notified well into 2026. Acting too fast on an incomplete rulebook and not acting at all are both ways to get this wrong.
This guide sets out what actually changed when the Code on Wages, the Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code, and the Code on Social Security replaced twenty nine existing central labour statutes, what is genuinely still unsettled, and where an employer's exposure is highest in the gap between the Codes being in force and the rules catching up.
What actually happened on 21 November 2025
The Government of India notified the enforcement of the Code on Wages, 2019, the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020, and the Code on Social Security, 2020, with effect from 21 November 2025, consolidating twenty nine separate central labour laws that had accumulated over the better part of a century. The notification brought the Codes into force in their entirety, with a specific carve out for provisions dealing with the repeal of the erstwhile Employees' Provident Funds and Miscellaneous Provisions Act, 1952, along with certain other procedural, rule-dependent provisions that could not meaningfully operate without the supporting rules being in place first.
Because labour falls within the Concurrent List of the Constitution, the central notification alone does not complete the picture. Each state and union territory still has to notify its own rules under the four Codes for a large range of operational matters, from the specifics of registration and licensing to working hour variations permitted at the state level, and reporting through early 2026 showed many states still working through this process, with central rules themselves still in draft as late as December 2025. An employer operating across several states should accordingly expect a genuinely uneven compliance picture for some time, where the substantive Code applies everywhere but the procedural detail of compliance differs by state depending on how far that state's rule making has progressed.
The wage definition change that affects nearly every CTC structure
The single change with the broadest practical reach is the Code on Wages' uniform definition of wages, which caps allowances and other components excluded from the wage base at fifty per cent of total remuneration. Where an employer's existing compensation structure routes a large share of CTC through special allowances, conveyance, or similar heads specifically to keep the basic wage component low, the Code requires anything above that fifty per cent exclusion cap to be treated as wages for statutory purposes regardless of what the pay slip calls it.
This single definitional change ripples outward into gratuity, provident fund contributions, and other statutory dues calculated as a percentage of wages, since a higher deemed wage base generally means higher statutory contribution and benefit obligations for the same gross pay. Employers who built compensation structures around the older, narrower wage definitions used under the Payment of Wages Act and the Payment of Bonus Act should treat a payroll structure review as the first practical task arising from the Codes, not a later compliance item, since getting the wage definition wrong compounds across every statutory calculation that depends on it.
Fixed term employment and the end of easy standing orders exemptions
The Industrial Relations Code formally recognises fixed term employment as a distinct category, giving employers a cleaner statutory basis to hire for a defined period or project without the fixed term worker being automatically treated as a permanent employee purely because the engagement continued for some time, provided the terms are genuinely fixed term rather than a disguised permanent role rolled over repeatedly. At the same time, the Code also widens which establishments the model standing orders provisions apply to by lowering the employee threshold compared to the old Industrial Employment (Standing Orders) Act, which brings a meaningfully larger number of mid-sized establishments within the standing orders framework for the first time.
A further change under the same Code raises the threshold for prior government permission before retrenchment, layoff or closure, a provision that was set at one hundred or more workers under the old Industrial Disputes Act and is raised to three hundred or more workers under the new Code, giving a wider band of employers more flexibility on workforce reduction without needing government permission first, though this does not remove the underlying retrenchment compensation and notice obligations that still apply regardless of the headcount threshold.
Social security coverage widens to gig and platform workers
The Code on Social Security is the first central labour statute in India to expressly bring gig workers and platform workers within a social security framework, through provisions contemplating contributions from aggregators towards a social security fund for such workers, alongside the more conventional extension of social security schemes to unorganised sector workers generally. For platform-based businesses, this is a genuinely new compliance category rather than an extension of an existing obligation, and the operative detail of contribution rates and fund administration depends heavily on rules that were still being finalised well after the Code itself came into force.
Businesses that rely on gig or platform workforce models, including logistics, ride hailing, and delivery platforms, should treat this as an active watch item rather than a settled compliance requirement, since the financial exposure will depend substantially on contribution rates fixed by rules rather than by the Code's own text.
Practical sequencing for employers right now
Given that the substantive Codes are in force but a meaningful share of the operational detail still depends on rules being notified, the more defensible approach for most employers is a staged one. Start with the wage definition change, since it affects payroll mechanics that need to be right regardless of which state's procedural rules eventually apply, and review fixed term and standing orders exposure for any workforce structured around short term or contract engagements that could now be read differently under the Industrial Relations Code.
Hold off on wholesale contract redrafting exercises until the relevant state's rules are notified, since redrafting against an incomplete rule set risks having to redo the exercise once the actual procedural requirements, such as registration formats or specific notice periods, are settled. Keep a standing watch on the Ministry of Labour and Employment's notifications and the specific state government's gazette for each state where the business operates, since the pace of state-level rule notification has not been uniform and an employer with establishments in multiple states cannot assume the compliance timeline is the same everywhere.
Frequently Asked Questions
Do we need to rewrite all our employment contracts immediately now that the Codes are in force?
Not immediately in most cases. The Codes are substantively in force, but many operational rules, especially at the state level, were still being notified well after 21 November 2025. A staged approach, starting with payroll and wage definition fixes, is more defensible than a rushed, wholesale redraft against an incomplete rule set.
Will our current CTC structure, with a large share paid as allowances, still work under the new Code on Wages?
Possibly not without adjustment. The Code caps allowances and similar exclusions at fifty per cent of total remuneration, so any structure where a larger share is routed outside the basic wage component will need the excess treated as wages for statutory purposes, affecting gratuity and provident fund calculations.
We have around one hundred and fifty workers at one plant. Do we now need government permission before any layoff?
Generally no. The Industrial Relations Code raised the threshold requiring prior government permission for retrenchment, layoff or closure from one hundred to three hundred or more workers, so an establishment of your size would likely fall outside that specific permission requirement, though ordinary retrenchment compensation and notice obligations still apply.
We run a delivery platform with gig workers. What is our obligation under the new Code on Social Security?
The Code is the first central labour law to bring gig and platform workers within a social security framework, including contemplated aggregator contributions to a dedicated fund. The exact contribution rates and mechanics depend on rules that were still being finalised after the Code came into force, so treat this as an active compliance area to monitor rather than a fixed, settled obligation yet.
References & Further Reading
The provisions and rulings below were relied on for this guide. The position can change with amendments and later decisions, so check the current text and the latest case law before acting on any of it.
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Occupational Safety, Health and Working Conditions Code, 2020
- Code on Social Security, 2020
- Government of India notification bringing the four Labour Codes into force with effect from 21 November 2025