Labour code rules by state are the compliance detail smart India hiring plans track closely
Labour code rules by state are the reason your India compliance picture can look different depending on where your team sits. The four labour codes became law across the country on 21 November 2025.
But that date alone doesn’t tell you what applies to your payroll right now. What matters more is whether your employee’s state has finished writing and notifying its own rules, because several of the biggest changes only bite once that happens.
If you’re hiring in India directly, through your own entity, or through an EOR, this gap trips people up. Get it wrong and you either over-correct in a state that hasn’t moved yet, or you miss a change your state adopted months ago.
Why labour code rules by state matter more than the 2025 start date
Here’s the part that catches people out. A national start date doesn’t mean uniform enforcement. Labour sits on the concurrent list in India’s constitution, so both the central government and individual state governments get to write rules under these codes.
The Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code together replaced 29 older labour laws when the central government notified them. That’s according to a Press Information Bureau release from November 2025. It made them law on paper everywhere in the country on the same day.
Until a state finishes writing its own rules, though, the older laws it’s replacing keep applying there. PwC’s own roadmap on the codes puts it plainly. The codes “await Central and State rule notifications, so existing regulations continue during the transition.”
Even the central rules took time. KPMG’s flash alert on the topic notes the Government of India didn’t finalize its own central rules under all four codes until 8 May 2026. That’s roughly six months after the codes came into force.
The delay pushed most states’ drafting timelines back with it, and it’s a big part of why the rollout still looks patchy today.
What’s already settled everywhere, no matter which state you’re in
Some changes don’t wait on any state. They’re built into the central codes and rules, so they apply the same way whether your employee sits in Karnataka or Kerala.
The clearest one is the 50% basic wage rule. Under the Code on Wages, allowances such as house rent, overtime and bonuses can’t exceed half of an employee’s total pay package. Anything beyond that gets reclassified as “wages” for calculating provident fund and gratuity.
We’ve written a full breakdown of how the 50% basic wage rule changes take-home pay and gratuity. It’s worth reading alongside this piece, since it affects every state at once.
Three other changes work the same way. Overtime now has to be paid at twice the ordinary rate, subject to the worker’s consent. Employers must issue a written appointment letter to every worker, not just senior hires.
Fixed-term employees are now entitled to statutory benefits on a pro-rated basis alongside permanent staff. That covers gratuity, bonus, provident fund and ESI. Herbert Smith Freehills Kramer flagged it as one of the more consequential shifts in the Industrial Relations Code.
Where labour code rules by state genuinely diverge right now
Plenty of the codes’ detail is left entirely to states to prescribe, and that’s where the real divergence sits. Everything covered above holds nationally already. What follows depends on where your team is based.
Daily and weekly working hour limits sit with states. So do spread-over rules, shop and establishment registration thresholds, and the safety and welfare conditions attached to women working night shifts. States write their own rules on top of the central framework in each of these areas.
Contract labour licensing got a genuine simplification on paper. A single license can now cover work across multiple states, instead of one per state. But whether that actually functions smoothly still depends on each state adopting the new system in its own rules.
And the pace varies a lot. Speaking to Business Standard on 24 September 2026, Labour Secretary Chandra Bhushan Kumar said roughly ten states had already published their final rules. The rest were still working through draft versions and public consultation.
He added that the ministry was “hoping we will have the rules at the state level by October 31,” calling it “a major, major exercise.”
Treat that October date as a target, not a guarantee. And treat any specific state-by-state list you find online as a snapshot rather than a fixed fact, since several states have already moved their own timelines more than once.
Centrally locked in versus still state-dependent
Here’s the split in one view, so you can tell at a glance what to act on now and what to keep watching.
| Compliance area | Where it stands as states catch up |
|---|---|
| Definition of “wages” and the 50% cap | Centrally fixed. Applies now, regardless of state. |
| Overtime rate | Centrally fixed at twice the ordinary rate, with consent. |
| Appointment letters | Centrally mandatory for every worker, in every state. |
| Fixed-term employee benefits | Centrally mandated, pro-rated, on par with permanent staff. |
| Daily and weekly working hour limits | Set by state rules. Confirm your specific state’s status before changing policy. |
| Shop and establishment registration | Set by state rules. Thresholds and paperwork still vary by state. |
| Contract labour licensing | Simplified on paper (one license, multiple states), but real-world use depends on each state’s own rules. |
| Women’s night-shift conditions | Centrally permitted, plus extra state-specific safety conditions layered on top. |
What this patchwork means if you already employ people in India
A single company can legally run two different rulebooks at once, one per state. That’s not a loophole. It’s just how a concurrent-list system behaves mid-transition.
Consider a company running a 40-person team split between Karnataka and West Bengal, a purely illustrative case but a common shape. Say Karnataka has notified its state rules and West Bengal hasn’t. The company can’t apply one working-hours policy or one filing calendar to both offices and call it done.
The Bengaluru team’s day-to-day obligations may already reflect the new code. Meanwhile, the Kolkata team is still operating, quite legally, under the older state rules it’s replacing.
That does mean your HR and payroll setup needs to know which state each employee sits in. Treat it as a live variable, not a one-time note in an onboarding document.
It also means your notice period and severance obligations can carry state-specific wrinkles even where the underlying central rule looks uniform. That’s particularly true around retrenchment procedures tied to older state-level rules that haven’t been fully superseded yet.
How to track labour code rules by state without running your own compliance team
You have two realistic options here, and neither involves checking a government gazette every week yourself.
The first is to build a lightweight internal habit. Someone on your HR or finance team owns a short list of every state you employ people in. They check each state labour department’s notifications monthly and log the date of the last check.
It works, but it’s manual. And it’s easy to let slide once quarter-end gets busy.
The second is to put that tracking on a partner whose entire job already depends on getting it right. An Employer of Record in India is the legal employer of your staff on paper. State-by-state labour code compliance isn’t a side project for them; it’s the core of what they’re liable for.
If you’re still weighing whether that structure fits your team, our guide to the 50 questions employers ask about EOR services in India covers where the responsibility actually sits between you and a provider.
Either way, don’t assume “the labour codes are in effect” settles the question. It settles the direction. The state you’re hiring in settles the timing.
Your next step
One question separates employers who are actually covered from employers who only think they are. Before your next India hire or contract renewal, ask your payroll provider or EOR, in writing, which of your state’s labour code rules are finalized today versus still in draft. Ask when they last checked, too.
If they can give you a dated answer within a day, you’re in good hands. If they can’t, that hesitation is itself the answer you needed.