India’s new labour codes reward employers who move first, not last
India’s new labour codes stopped being a future event on 21 November 2025. That’s when four codes took effect together: the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code. Together, they folded 29 older laws into four.
The central government notified the final rules on 8 May 2026. By late September 2026, ten states had published their own rules, while most of the rest were still working through drafts.
If you employ anyone in India, whether directly or through an Employer of Record, some of this is already binding on you today. Some of it genuinely isn’t yet.
Knowing which is which keeps you from ignoring a real obligation, or freezing a hiring plan over a rule that hasn’t landed.
This isn’t a light update. It touches your salary structures and your settlement timelines. It changes who counts as a worker for social security, and how much room you have before a layoff needs government sign-off.
India’s New Labour Codes Are Live Nationally, but State Readiness Varies Sharply
The four codes replaced 29 central laws the day they took effect. That repeal applies across the country, regardless of where you operate. But labour sits on India’s concurrent list.
Most of the codes only bite fully once a state notifies its own implementing rules. That gap, between national law and state rulemaking, is exactly what’s tripping employers up right now.
What’s Already Binding, No Matter Which State You’re In
A handful of obligations don’t wait for state notification. The revised wage definition applies now: wages for provident fund, gratuity, and overtime must equal at least 50 percent of total pay. Allowances like housing, conveyance, and sales commissions sit outside that base.
Fixed-term employees earn gratuity eligibility after one year of service, not five. Full and final settlement is due within two working days of termination, resignation, or retrenchment.
And contractors must register on the government’s portal within 45 days. Aggregators bringing on gig or platform workers face that same window.
A few smaller, easy-to-miss items are binding too. Appointment letters are now mandatory for every worker, and wage slips must go out electronically. Workers aged 40 and older in specified sectors get an annual health check-up.
Cross 50 employees at a single establishment, and you owe a crèche facility, or a monthly allowance of at least ₹500 per child. Assigning a woman to a night shift now needs her prior written consent, plus safety and transport arrangements, before that shift starts.
None of these are footnotes. Labour inspectors can check every one of them from a payroll file.
What’s Still Catching Up, State by State
Ten states had finalised and published their own rules as of late September 2026. Madhya Pradesh, Uttar Pradesh, Gujarat, Karnataka, and Haryana lead that list. Maharashtra, Tamil Nadu, Telangana, and Kerala were still working through draft rules and public comment.
Labour Secretary Chandra Bhushan Kumar said in September that the government hopes every state and union territory will have rules in place by 31 October 2026. That target has slipped before, though, and it could slip again.
| What’s Changed Under India’s New Labour Codes | Status as of Late September 2026 |
| 50% wage floor for PF, gratuity, and overtime | In force nationwide |
| Gratuity after one year for fixed-term employees | In force nationwide |
| Two-working-day full and final settlement | In force nationwide |
| Contractor and gig-worker registration (45-day window) | In force nationwide |
| Retrenchment permission threshold raised to 300 employees | In force under the central Industrial Relations Code |
| Crèche allowance and women’s night-shift consent rules | In force under central rules; state enforcement still varies |
| National floor wage rate | Framework exists; a specific rupee figure hasn’t been notified |
| Full state-level rulebook (shops and establishments, local variations) | Depends entirely on your state’s notification status |
Five Moves That Keep India’s New Labour Codes From Costing You Later
None of this calls for panic. It calls for five specific checks. Most take a payroll review and a contract audit, not a legal overhaul.
1. Rebuild Wage Structures Around the 50 Percent Floor
Look at every salary structure where basic pay sits below half of total compensation. If allowances make up the rest, the excess above the permitted threshold gets added back in for provident fund, gratuity, and overtime calculations, whether your payroll software reflects it yet or not.
Restructure new offers first. Then work through the existing base on a rolling schedule, so nobody’s take-home pay changes without warning.
2. Recheck Every Fixed-Term Contract for the One-Year Gratuity Trigger
Fixed-term staff who cross twelve months on the same contract now qualify for gratuity. That right used to sit almost entirely with permanent employees.
Pull a list of every fixed-term hire approaching their first anniversary, and confirm the liability is already booked, not something you learn about later.
3. Get Full and Final Settlement Down to Two Working Days
Two working days is tight. And it applies whether someone resigned, got terminated, or was retrenched. Your offboarding process needs to move faster, not just your payroll cycle.
Final approvals, asset returns, and dues calculation all have to run in parallel now, instead of in sequence. Our guide to termination, severance pay, and notice periods walks through that offboarding sequence end to end.
4. Register Contractors and Gig Workers Where the Codes Now Require It
If you route India-based work through staffing contractors, confirm they’ve registered within the 45-day window. If your business engages gig or platform workers directly, aggregators owe welfare contributions too: 1 to 2 percent of annual turnover, capped at 5 percent.
Those workers also become eligible for a portable, Aadhaar-linked benefits account. That kicks in after 90 days with one aggregator, or 120 days spread across several.
5. Track Your State’s Rule Status Before You Plan Headcount Moves
Hiring across Bengaluru, Pune, and Chennai means juggling three different notification timelines at once. Karnataka has already published final rules. Tamil Nadu, home to Chennai, was still at the draft stage as of late September.
Build a simple tracker by state. Don’t assume national news means every state is ready on the same day.
Why Companies Lean on an Employer of Record Through This Transition
An Employer of Record absorbs exactly this kind of moving-target compliance work. It owns the payroll structure, the settlement timelines, the contractor registrations, and the state-by-state rule tracking. That frees your own team to focus on the work itself, not the paperwork behind it.
There’s an honest case for choosing an EOR during a transition like this one. The cost of a wrong wage structure, or a missed settlement deadline, compounds quietly. It surfaces only when an audit or a departing employee’s complaint brings it forward.
In practice, that means an EOR issues compliant appointment letters, keeps wage slips electronic and audit-ready, and manages the crèche allowance and night-shift consent paperwork. It registers every contractor and gig worker your India operation touches, so none of it lands on your desk as a surprise.
Our Employer of Record in India guide covers how that administration works day to day. Our 50 questions on EOR services in India answers the practical questions founders and HR leads ask most before switching to this model.
Start With What’s Already Binding, Not What’s Still Pending
Don’t wait for your state’s rules to land before you act. Pull your last three payroll cycles. Check whether basic pay clears 50 percent of total compensation for every employee.
If it doesn’t, fix it before your next audit does it for you instead. That’s the one move a compliance review would flag first, and it’s within your control today, whatever your state has or hasn’t notified yet.