---
title: India's Four Labour Codes Explained for Enterprises
url: https://www.wisemonk.io/blogs/india-labour-codes-for-enterprises
lang: en
---

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Written By [Wisemonk Team](https://www.wisemonk.io/authors/wisemonk-team)

Read time 10 min read

Last updated November 13, 2026

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# India's Four Labour Codes Explained for Enterprises

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TL;DR

- India consolidated 29 central labour laws into four codes, on wages, industrial relations, social security and workplace safety, in force since 21 November 2025.
- The wage code's 50% rule is a wage-definition test: cap excluded allowances at 50% of pay, or the excess is added back, raising provident fund and gratuity cost.
- Layoff and closure approval now applies at 300 workers, fixed-term staff get pro-rata gratuity after one year, and gig and platform workers gain a welfare fund.
- All workers get a written appointment letter, wages are due within 7 days and final settlement within 2, and overtime is paid at twice the rate, as of November 2026.
- State rules are still rolling out, so track your state's notifications and confirm exact thresholds against the official codes or an adviser before restructuring payroll.

**Need help with India labour code compliance?** **[Talk to an expert!](https://www.wisemonk.io/contact)**

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India has rewritten the rules you employ people under. Twenty-nine central labour laws are now folded into four codes, in force since 21 November 2025.

They change how you structure pay, how fast you settle wages, who counts as covered, and what you have to document.

For an enterprise running a team in India, this is a payroll and compliance reset, not a footnote.

This guide is for the HR, legal and finance leaders who have to make an India team compliant with the new codes. From our experience running payroll and compliance for global companies in India, the change that hits budgets hardest is the wage definition. It quietly raises provident fund and gratuity liabilities across the whole team, so it is the first thing to model. [Wisemonk](https://www.wisemonk.io/) keeps client payrolls aligned to these rules, so let's walk through what actually changed.

Treat every figure here as current as of November 2026, and confirm it against the official notifications or your adviser, because state rules are still arriving.

## What are India's four labour codes, and when did they take effect?

The four codes consolidate 29 central labour statutes into one framework, and the central government brought them into force on 21 November 2025, with the Code on Wages central rules notified in May 2026. State-level rules are still being notified, so the exact obligations vary by where your people sit. The four at a glance:

India's four labour codes at a glance

| Code | Laws it replaces | What it mainly changes |
| --- | --- | --- |
| Code on Wages, 2019 | 4 wage laws | 50% wage definition, a national floor wage, strict payment timelines |
| Industrial Relations Code, 2020 | 3 laws | Layoff and closure approval threshold raised to 300, fixed-term employment, strike notice |
| Code on Social Security, 2020 | 9 laws | Wider EPF and ESI, pro-rata gratuity for fixed-term staff, a gig-worker welfare fund, 26-week maternity |
| OSH Code, 2020 | 13 laws | Single electronic registration, mandatory appointment letters, flexible shifts, women's night work |

The one with the widest reach is the wage code, because its definition of wages feeds everything else. Start there.

## What does the Code on Wages change for enterprises?

The headline is the so-called 50% rule, and it is widely misquoted. It is a wage-definition test, not a rule that basic pay must simply be half of CTC. Under the code, the allowances you exclude from wages cannot exceed 50% of total remuneration; if they do, the excess is added back into wages. Because provident fund, gratuity and leave encashment are all calculated on wages, that add-back raises those liabilities. The other wage-code changes:

- **A national floor wage:** universal minimum-wage rules and gender non-discrimination apply across all sectors and types of employment.
- **Strict payment timelines:** monthly wages must be paid within seven days of the wage period, and full-and-final dues within two working days of an exit.
- **Overtime and records:** overtime is paid at twice the normal wage rate, and wage registers must be kept for five years.

Reworking your salary structure to meet the wage definition is the first job for most enterprises; our [salary calculator](https://www.wisemonk.io/tools/salary-calculator) helps you see how a change in basic pay flows through to take-home and deductions. Next, how you manage and exit people changed too.

## What changes under the Industrial Relations Code?

The Industrial Relations Code reshapes how larger establishments restructure, handle grievances and manage fixed-term staff. The changes that matter most to an enterprise:

- **A higher restructuring threshold:** prior government permission for layoffs, retrenchment or closure now applies at 300 workers, up from 100, giving mid-sized employers more flexibility.
- **Grievance and works committees:** a Grievance Redressal Committee is mandatory at 20 or more workers, and a Works Committee at 100 or more.
- **Fixed-term employment, formalised:** fixed-term employees are entitled to the same statutory benefits as permanent staff on a pro-rata basis, including gratuity after one year of service.
- **Stricter strike notice:** unions must give 60 days' notice before a legal strike.

The code with the biggest reach into benefits and contributions is the social security code.

## What does the Code on Social Security change?

The Code on Social Security merges nine laws, including provident fund, state insurance, gratuity and maternity benefit, and widens who is covered. The key points, which sit alongside the broader [employee benefits in India](https://www.wisemonk.io/blogs/employee-benefits-in-india):

- **Provident fund and ESI coverage:** EPF applies to establishments with 20 or more workers and ESI to those with 10 or more, with contribution rates unchanged under the code.
- **Gig and platform workers recognised:** aggregator platforms must contribute toward a dedicated social-security fund, commonly described as 1% to 2% of annual turnover, subject to a cap.
- **Maternity and gratuity:** standardised 26-week maternity benefit, and more flexible gratuity, including the pro-rata entitlement for fixed-term staff after one year.

The fourth code is the one that touches your paperwork, your registrations and your shift patterns.

## What does the OSH Code change?

The Occupational Safety, Health and Working Conditions Code replaces 13 laws and simplifies registration while adding documentation and shift rules that reach every employer:

- **Single electronic registration:** one electronic registration replaces multiple legacy licences for establishments with 10 or more workers.
- **Mandatory appointment letters:** a formal written appointment letter is now required for every worker, which is the single easiest thing to get wrong and the easiest to fix.
- **Flexible shifts and hours:** weekly hours stay capped at 48, but a daily shift can extend to 12 hours with consent and rest intervals, which enables a four-day week.
- **Women's night work:** women may work night shifts across all sectors, provided the employer ensures consent, transport and workplace security.

Put the four codes together and the practical question for a finance leader is simple: what does this do to my cost and my payroll?

## How do the labour codes change your cost and payroll?

The codes raise some costs, tighten some deadlines and add some filings. The ones that hit a budget or a pay run directly, which your [India payroll compliance](https://www.wisemonk.io/blogs/payroll-compliance-in-india) setup has to absorb:

What the labour codes change for your cost and payroll

| Change | What it means for cost or payroll |
| --- | --- |
| 50% wage definition | Higher basic wages raise provident fund and gratuity liabilities |
| Payment timelines | Wages within 7 days, full-and-final within 2 working days of exit |
| Overtime | Paid at twice the normal wage rate |
| Retrenchment | 15 days' wages per retrenched worker into a reskilling fund |
| Fixed-term parity | Gratuity after 1 year and statutory benefits on par with permanent staff |
| Single registration | One electronic registration replaces multiple legacy licences |

The wage-definition change is the one to model first, because it moves the loaded cost of every employee. Our [employee cost calculator](https://www.wisemonk.io/tools/employee-cost-calculator) shows the full cost of a hire once statutory contributions are in. With the impacts clear, here is the order to act in.

### Need your India payroll aligned to the codes?

Talk to our India team about restructuring CTC and staying compliant.

[Talk to an Expert](https://www.wisemonk.io/contact)

## What should enterprises do now to comply?

The work splits into five jobs, and most of it is one-time setup followed by a steadier run state. In order:

1. **Restructure compensation:** audit CTC so basic pay and dearness allowance meet the 50% wage definition, and model the impact on provident fund and gratuity budgets.
2. **Update contracts and policies:** issue appointment letters to all staff, update exit-settlement workflows to the two-day deadline, and set up Grievance Redressal Committees where you have 20 or more workers.
3. **Audit contract and gig labour:** review third-party and gig deployment against the core-activity restrictions and confirm vendor statutory compliance.
4. **Upgrade payroll and registers:** configure payroll and digital registers, retained for five years, to match the new definitions and deadlines.
5. **Track state rules:** monitor the state-specific rule notifications for every location you operate in, because they decide the final detail.

If you do not have an India HR and payroll team to carry this, a partner can run the whole stack for you, which is also how many foreign companies [hire in India in the first place](https://www.wisemonk.io/blogs/us-llc-hire-employees-in-india).

### Let us carry the compliance

We run India payroll, statutory filings and the labour-code obligations for your team.

[Talk to an Expert](https://www.wisemonk.io/contact) [See managed payroll](https://www.wisemonk.io/managed-payroll)

Want to go deeper? See our guides on [payroll in India](https://www.wisemonk.io/payroll-in-india), [salary structure in India](https://www.wisemonk.io/blogs/salary-structure-in-india) and [employee benefits in India](https://www.wisemonk.io/blogs/employee-benefits-in-india), and model severance with the [gratuity calculator](https://www.wisemonk.io/tools/gratuity-calculator).

## How does Wisemonk help enterprises comply with India's labour codes?

Wisemonk is a single, accountable partner for building and running your team in India. We run payroll, statutory contributions and the labour-code obligations for your people, restructure compensation to the new wage definition, and keep your filings and registers current as state rules arrive, whether you employ through us or under your own entity. In the payrolls we run, the codes are handled in the background so your team never feels the change.

That is what Wisemonk is built for: we employ, pay and support your India people compliantly, run entity setup and compliance when you own the team, and you keep control throughout. Here is how we help, whatever your India plan needs:

- [**Employer of Record:**](https://www.wisemonk.io/eor) we legally employ your India team from $99 per employee per month and carry every statutory obligation, including equipment procurement and shipping to Indian addresses.
- [**Managed payroll:**](https://www.wisemonk.io/managed-payroll) the India pay run, TDS and labour-code-aligned statutory filings under your own entity.
- [**PEO and HR services:**](https://www.wisemonk.io/peo-services-in-india) payroll, PF, ESI, benefits and the grievance and appointment-letter obligations under your entity's registrations.
- [**Entity setup:**](https://www.wisemonk.io/company-registration-in-india) we incorporate your Indian company and obtain the single electronic registration and tax registrations.
- [**Contractor of Record:**](https://www.wisemonk.io/contractor-of-record) engage Indian contractors compliantly, with clean classification against the contract-labour rules.
- [**Entity and GCC setup:**](https://www.wisemonk.io/global-capability-centers-in-india) stand up and operate a full India capability center, Build, Operate, Graduate, Own, on a custom quote.
- [**India recruiters:**](https://www.wisemonk.io/hire-in-india) source and screen engineering, finance and operations talent with Mira AI.
- [**Freelancer payments:**](https://www.wisemonk.io/freelancer-payments) pay Indian freelancers and agencies through compliant channels.
- [**Background verification:**](https://www.wisemonk.io/background-verification-companies-in-india) screen every hire before their start date.

Across 300-plus global companies we have onboarded 2,000-plus employees, process $20M-plus in annual payroll, and hold 4.8 out of 5 on G2. See how we helped Onform build and run its India team in the [Onform case study](https://www.wisemonk.io/case-study/onform).

> We've been using WiseMonk to support our India team for the past six months, and the experience has been excellent. They've handled everything from payroll and statutory compliance to equipment procurement and benefits enrollment, all with a level of responsiveness and professionalism that makes managing a remote India team from Canada feel seamless. Nileena and the team are always quick to reply and proactive about flagging anything we need to know. We'd happily recommend WiseMonk to other companies looking to hire and manage talent in India.
> **\- Monika Russell, CFO at Minehub, Canada.** ([Read the full case study](https://www.wisemonk.io/case-study/minehub))

### Stay compliant as the codes roll out

Tell us where your India team sits, and we will keep your payroll and filings aligned.

[Talk to an Expert](https://www.wisemonk.io/contact) [See managed payroll](https://www.wisemonk.io/managed-payroll)

## Frequently asked questions

**When did India's four labour codes take effect?**

The central government brought the four labour codes into force on 21 November 2025, with the Code on Wages central rules notified in May 2026. State-level rules are still being notified, so the exact obligations depend on where your people work, as of November 2026.

**What are the four labour codes?**

They are the Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code. Together they consolidate 29 central labour statutes into one framework covering pay, industrial relations, benefits and workplace safety.

**What is the 50% wage rule under the new labour codes?**

It is a wage-definition test, not a rule that basic pay must be half of CTC. The allowances you exclude from wages cannot exceed 50% of total remuneration; any excess is added back into wages, which raises provident fund, gratuity and leave encashment, because those are calculated on wages.

**Do the labour codes increase employer costs?**

For many employers, yes. The wage-definition rule tends to raise basic wages, which lifts provident fund and gratuity liabilities, and fixed-term staff now accrue gratuity after one year. Model the impact on your own CTC structures before the change lands on your pay run.

**What do the codes change for fixed-term and gig workers?**

Fixed-term employees get statutory benefits on par with permanent staff on a pro-rata basis, including gratuity after one year. Gig and platform workers are formally recognised, and aggregator platforms must contribute toward a social-security fund, commonly described as 1% to 2% of annual turnover, subject to a cap.

**Is an appointment letter now mandatory in India?**

Yes. Under the OSH Code, a formal written appointment letter is mandatory for every worker. It is one of the simplest obligations to meet and one of the most common to overlook, so issuing letters to all existing staff is an early compliance step.

**What should enterprises do first to comply with the labour codes?**

Start by restructuring CTC to meet the 50% wage definition and modelling the cost impact. Then issue appointment letters, update exit-settlement workflows to the two-day deadline, set up grievance committees where required, audit contract and gig labour, and track your state's rule notifications.

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