29 Laws Just Became 4. Here’s What Actually Changes for Your Business.

By Ayush Saxena, Article Assistant

For eight decades, running payroll in India meant answering to whichever combination of 29 different central labour laws applied to your size, sector and state. As of 21 November 2025, that patchwork is gone. The Code on Wages, the Industrial Relations Code, the Code on Social Security and the OSH Code are now the law of the land — and with Central Rules finalised in May 2026, the fine print is no longer theoretical.

If your last conversation about the “new labour codes” was a LinkedIn post two years ago, it’s time for an update. This is what’s actually in force, and where your business is exposed.

The Number That Matters Most: 50%

Buried in the Code on Wages is a single rule that touches every salary slip in the country: basic pay plus dearness allowance must now equal at least 50% of an employee’s total remuneration.

Most Indian CTC structures weren’t built that way — many keep basic pay at 25–35% and load the rest into allowances that attract lighter statutory deductions. That gap is now closed. Anything you’ve excluded from “wages” beyond the 50% cap gets automatically reclassified — whatever you call it on the payslip.

The knock-on effects are concrete, not theoretical:

• Provident Fund is calculated on wages, so a higher wage base means a higher employer PF contribution — in allowance-heavy structures, employer PF cost has been estimated to rise 25–100% per employee.
• Gratuity, tied to last-drawn basic pay, rises in step.
• Take-home pay may dip slightly for some employees, even as their retirement corpus grows.
• Full and final settlements must now clear within two working days of an employee’s last day — down from the informal 30–45 day norm most companies ran on.

This is a finance conversation before it’s an HR one. If nobody has modelled what the 50% rule does to your next twelve months of payroll cost, that’s the first gap to close.

What Else Changed, in Brief

Hiring and contracts (Industrial Relations Code). The threshold for standing orders and for government permission on layoffs, retrenchment and closure has been raised from 100 to 300 workers — real breathing room for mid-sized employers. Fixed-term employment is now formally recognised, but fixed-term staff must get the same benefits as permanent employees, including pro-rata gratuity after just one year rather than five.

Gig work and CSR (Code on Social Security). “Gig worker” and “platform worker” are now legally defined terms. Aggregators — food delivery, ride-hailing, logistics and marketplace platforms — must contribute 1–2% of annual turnover to a Social Security Fund for their workforce. Less obvious: that fund can also be financed through CSR contributions, which gives companies already running CSR programmes a compliant new channel worth reviewing alongside their Form CSR-2 filings.

The workplace itself (OSH Code). Appointment letters are now mandatory for every worker, including contract staff. Working hours are capped at 8 hours a day and 48 a week, with overtime at double pay and worker consent required. Women may now work night shifts across all establishments with consent and employer-arranged safety and transport. And establishments with 20 or more workers must now stand up a formal Grievance Redressal Committee under the Central Rules notified in May 2026.

What to Do Before Your Next Payroll Cycle

1. Run your current CTC structures against the 50% rule and model the cost impact.
2. Reissue appointment letters — every employee, every contract worker.
3. Check your headcount against the 300-worker threshold for standing orders and retrenchment permissions.
4. If you use fixed-term hiring, rewrite those contracts with explicit benefit parity.
5. Track your state’s rule notifications — obligations still vary by where your people actually work.

None of this is a one-afternoon fix, and state rules are still rolling out unevenly, which is exactly why “wait for full clarity” isn’t a safe compliance posture right now. The substantive law is already in force.

We’ve put together a complete compliance guide — the full breakdown of all four codes, a sector-by-sector view of what changes for manufacturing, NGOs, startups, real estate, exporters and retail, and a 10-point action checklist you can hand straight to your HR and finance teams. 

Download the free guide :  SCORE — India’s New Labour Codes (FY 2025-26 Guide).pdf

Not sure where your business stands? Talk to a SCORE partner — the first conversation is complimentary.

This article is for general information as of September 2026 and is not legal or tax advice. Central and state rules continue to evolve; please confirm current provisions with SCORE or your legal counsel before acting.