India's labour law landscape changed fundamentally when Parliament passed 4 new Labour Codes, consolidating 29 existing central labour laws into a cleaner, simpler framework. If you are an HR professional, payroll manager, or compliance officer and you haven't updated your knowledge — your company is operating with outdated compliance practices.
This guide explains all 4 codes in plain English — what they replaced, what changed, and what your HR team needs to do.
⚠️ The 4 Labour Codes have been passed by Parliament. State governments are in the process of notifying implementation rules. HR teams should prepare NOW — not wait for the final notification date.
The 4 New Labour Codes: Quick Overview
1. Code on Wages, 2019
Consolidates: Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, Equal Remuneration Act. Key change: Universal minimum wage applicable to ALL workers regardless of sector. New definition of "wages" now includes basic + dearness allowance + retaining allowance — and this base must be at least 50% of CTC.
2. Industrial Relations Code, 2020
Consolidates: Industrial Disputes Act, Trade Unions Act, Industrial Employment (Standing Orders) Act. Key change: Companies with up to 300 workers (previously 100) can now hire and fire without government permission. Fixed-term employment is now formally recognized as a standard contract type.
3. Social Security Code, 2020
Consolidates: EPF Act, ESI Act, Gratuity Act, Maternity Benefit Act, Employees Compensation Act, and others. Key change: Gig and platform workers are now covered under social security. Gratuity eligibility period may reduce from 5 years to 1 year for fixed-term employees.
4. Occupational Safety, Health and Working Conditions Code, 2020
Consolidates: Factories Act, Mines Act, Contract Labour Act, and 10+ others. Key change: Working hours limited to 12 per day (maximum), with overtime premium doubled. National occupational safety standards to be prescribed. Annual health check-up mandated for workers over 45.
The Biggest Impact: The New Definition of Wages
The most practically impactful change — the one that will force almost every company to restructure salary — is the new definition of wages under the Wage Code.
Under the new code, wages = basic pay + dearness allowance + retaining allowance, and this combined amount must be at least 50% of the total CTC. Currently, most Indian companies structure salary with a very low basic (sometimes 20–30% of CTC) and inflate other allowances to reduce PF liability.
When the code is implemented, companies must restructure CTC so that basic is at minimum 50% of total. This will:
- Significantly increase PF contributions for both employee and employer
- Increase gratuity liability
- Reduce take-home pay for many employees
- Require a complete restructuring of the payroll process
💡 For HR and payroll professionals who understand the new wage code and can implement restructured CTC frameworks — this is a massive career opportunity. Companies will pay well for this expertise.
What HR Teams Must Do Right Now
- Audit your current CTC structures: Check what percentage of CTC is currently basic pay for each employee category. Identify the restructuring gap.
- Model the PF impact: Run a simulation of what increased PF contributions will cost the company and the employee once the 50% basic rule kicks in.
- Review fixed-term contracts: The Industrial Relations Code now formally recognises fixed-term employment. If you use contract workers, update agreements to the new format.
- Gig workers and social security: If your company uses freelancers or platform-based workers, start understanding your future social security obligations under the Social Security Code.
- Update standing orders: Companies with 300+ employees need to re-register their standing orders under the new IR Code framework.
State-Specific Implementation
The 4 codes have been passed by Parliament, but Labour is a concurrent subject in India — states need to notify their own rules before the codes can be implemented locally. As of 2024, multiple states including Maharashtra (Pune-based companies), Karnataka (Bangalore-based companies), Telangana, Gujarat, and others have either notified or are in advanced stages of notifying the rules.
HR teams in Pune and Bangalore should treat implementation as imminent and begin internal preparation now.
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Frequently Asked Questions
What are the 4 new Labour Codes in India?
The 4 codes are: Code on Wages 2019, Industrial Relations Code 2020, Social Security Code 2020, and Occupational Safety Health and Working Conditions Code 2020. Together they consolidate 29 central labour laws into a single, simpler framework.
When will new Labour Codes be implemented in India?
Parliament has passed all 4 codes. Implementation requires state governments to notify their rules. Major states including Maharashtra and Karnataka are in the notification process. HR teams should prepare now rather than wait for a final date.
What is the new definition of wages under the Labour Codes?
Under the new Wage Code, basic wages must constitute at least 50% of the total CTC. This changes PF, gratuity and bonus calculations significantly and will require most Indian companies to restructure their existing salary frameworks.