Published on Mar 9, 2026Updated on Sept 30, 2026
Understand how the New Labour Codes affect wages, PF, gratuity, working hours, employee benefits and workplace compliance, and what employees and employers should review in 2026.
India's new four Labour Codes, in force since November 2025, have changed several aspects of wages, social security, working conditions, and employment practices. For salaried employees, the changes can influence how wages are calculated, along with PF contributions, gratuity, overtime and take-home pay in some cases. Employers also face updated requirements around payroll, employee records, workplace safety, and compliance. This article explains the major changes under the New Labour Codes and what they mean for employees and businesses.
The New Labour Codes consolidate 29 Central labour laws into four codes:
The accompanying framework also reduces multiple returns, forms and registers, with a move towards simpler electronic compliance.
For salaried employees, one of the most relevant changes is the revised definition of wages. Depending on the existing salary structure and applicable provisions, it can affect statutory calculations such as PF and gratuity and may consequently influence take-home pay. Understanding these changes can help employees assess how their salary structure and employment benefits may be affected.
One of the key changes under the New Labour Code framework is the standardised definition of wages.
It specifies that the deductions authorised under the code, such as deductions for absence from duty, house accommodation, or recovery of advances or loans, cannot exceed 50% of wages during the wage period.
The law does not simply require every employee's basic salary to be 50% of CTC. Instead, where specified excluded components exceed 50% of total remuneration, the excess amount is treated as wages for the purposes covered by the code.
This can affect the way some employers structure salary components.
For employees, the impact may include:
The Code on Social Security brings provisions relating to EPFO, ESIC, gratuity, maternity benefits and other forms of social security under a consolidated framework. It also creates a framework for social security coverage of unorganised, gig, and platform workers.
However, the New Labour Codes do not automatically mean that every employee's PF deduction will increase. The actual impact depends on factors such as:
PF impact depends on factors such as:
Suppose an employee earns Rs. 60,000 per month:
In this example, the employee contributes Rs. 1,200 more towards PF each month, which may reduce take-home pay by a corresponding amount while increasing retirement savings.
You can review your PF deduction against your payslip and use your Universal Account Number to check relevant contribution details.
This is only an illustrative example. Actual PF contributions depend on EPF coverage, the applicable wage ceiling, contribution rules and the employer's contribution practices.
The Code on Social Security includes gratuity provisions within the consolidated social-security framework. It also provides for gratuity for eligible fixed-term employees subject to the applicable conditions.
For an eligible fixed-term employee, gratuity can become payable when the fixed-term contract ends after the employee completes the required one year of service.
The revised wage definition can also affect the amount used to calculate gratuity.
This gives eligible fixed-term employees greater clarity about their long-term employment benefits.
The Labour Codes provide a framework for regulating daily and weekly working hours, with the applicable rules setting out the detailed requirements. Under the Central Rules, the normal working standard is 8 hours per day and 48 hours per week.
Where the applicable overtime provisions apply, employees who work beyond the prescribed normal working hours must be paid overtime at not less than twice the normal rate of wages.
The Occupational Safety, Health and Working Conditions Code strengthens workplace safety and welfare requirements.
Employers are required to maintain safe and suitable working conditions, including measures related to hygiene, ventilation, drinking water, sanitation, and other welfare facilities. Appointment letters are also part of the formal employment framework.
Women can work in all establishments and types of work. However, when women work before 6:00 a.m. or after 7:00 p.m., employers must obtain their consent and comply with prescribed safety measures, working hours, holidays and other conditions set by the appropriate governing body.
This means night-shift employment for women is permitted, but it is subject to the required safeguards.
The New Labour Codes strengthen employment formalisation through measures such as appointment letters and clearer employment records.
The OSH Code requires employers to issue appointment letters to employees.
For employees, formal documentation can make it easier to verify:
The framework also recognises fixed-term employment and provides eligible fixed-term employees with statutory benefits subject to the relevant conditions.
The Code also sets timelines for settling wages when employment ends. Wages payable following resignation, removal, dismissal or retrenchment must generally be paid within two working days. Where gratuity becomes payable, the employer must arrange payment within 30 days from the applicable date.
The New Labour Codes may require some employers to review existing salary structures.
Employers need to assess whether specified exclusions from wages exceed the statutory threshold. If they do, the excess is treated as wages under the applicable definition.
If your employer changes your salary structure, check:
Depending on your existing salary structure and how it is revised, your take-home pay may increase, decrease, or remain broadly unchanged.
The four Labour Codes came into force across India on 21 November 2025. The four Codes replaced and consolidated 29 Central labour laws. Employers must also consider the rules and requirements of the appropriate government, including applicable state rules and jurisdiction-specific notifications.
As an employee, you can take a few simple steps to understand how the New Labour Codes India framework affects you:
For businesses and MSMEs, the Labour Codes 2026 framework aims to simplify compliance while strengthening employee protections.
Businesses may need to review:
The Central Government has notified the rules under the four Labour Codes. The Ministry's official Labour Codes portal lists rules covering wages, industrial relations, social security, and occupational safety and working conditions.
Key points:
The Code on Wages sets timelines for payment of wages. For monthly wage periods, wages must be paid before the expiry of the seventh day of the succeeding month. When an employee leaves due to resignation, dismissal or termination, due wages must be paid within two working days. Any applicable gratuity becomes payable within 30 days.
The Code on Social Security formally recognises gig and platform workers and includes provisions for their social security. It also provides for contributions from aggregators. An aggregator's contribution is linked to its annual turnover and the amount paid or payable to gig and platform workers.
Key points:
The New Labour Codes India framework marks a significant change in the country's employment and labour-law structure, with all four Codes now in force.
For employees, important areas to review include wage calculations, PF and social security contributions, gratuity, overtime, wage-payment timelines, appointment letters, and workplace safety. The impact on salary and benefits can vary depending on your employment terms, existing salary structure, and applicable provisions. Reviewing your payslip and employment records can help you identify any changes that affect you.
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The impact on payroll can include changes to wage calculations, salary structures, PF or other statutory contributions, gratuity calculations, and wage-payment processes. The actual effect depends on the employee's salary structure and applicable statutory coverage.
Employers can maintain accurate payroll and electronic records, ensure timely wage payments, and keep employee documentation up to date. The Labour Codes also aim to simplify compliance through common or reduced forms, registers and returns, and greater use of electronic processes.
The four Labour Codes came into force on 21 November 2025. The final rules were subsequently notified in May 2026. Employers must also comply with applicable State Rules and jurisdiction-specific notifications.
There is no single deadline covering every requirement. Different provisions have their own timelines. For example, monthly wages must generally be paid before the expiry of the seventh day of the succeeding month, while due wages on resignation, dismissal, or termination must be paid within two working days.
MSMEs may need to review payroll, employment records, appointment letters, wage payments, social security coverage, and workplace safety requirements.
The Labour Codes should not be treated as a general permission to reduce employee benefits. Employers must comply with the statutory rights and conditions applicable to their employees and establishments. Any change to employment terms should also follow applicable legal requirements.
Under the statutory wage definition, where specified exclusions exceed 50% of total remuneration, the excess is treated as wages.
Depending on eligibility and the applicable provisions, employees may receive benefits such as minimum wages, timely payment of wages, PF, ESI, gratuity, maternity benefits, overtime pay, and workplace safety protections. The exact benefits depend on the applicable Code, Rules, employment status, and statutory coverage.
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