Labour Codes Transition Advisory

What is the Labour Codes transition?

India has replaced 29 central labour laws with four Labour Codes: the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code. The Codes came into force from 21 November 2025, with central and state rules being finalised in stages.

For employers, the changes touch salary structures, PF and gratuity costs, employment contracts, fixed-term employment, working hours, registrations and returns. Transition advisory helps you understand the impact and update your practices.

The key changes

What matters most for employers:

Uniform wage definition

A single definition of wages across the Codes. Excluded allowances above 50% of total remuneration are added back to wages.

Impact on PF and gratuity

A larger wage base can increase PF contributions and gratuity liabilities.

Fixed-term employment

Recognised across sectors, with parity of benefits and gratuity after one year.

Gig and platform workers

Brought into social security, with aggregator contributions to be prescribed.

Appointment letters

Written appointment letters for employees.

Industrial relations thresholds

Higher thresholds for standing orders and for government permission for layoffs and closures.

Consolidated compliance

Single registrations, licences and returns in place of multiple filings, as rules and portals roll out.

Why it matters

The Codes affect costs and compliance:

Employee costs

The wage definition can increase PF, gratuity and other costs.

Take-home pay

Higher contributions can reduce employees' take-home pay.

Accounting impact

Gratuity and leave liabilities may need to be remeasured.

Contracts

Appointment letters and fixed-term contracts need updating.

State rules

States frame their own rules, so obligations vary by location.

New compliance

Registrations and returns are moving to new formats.

Workforce flexibility

Changed thresholds affect standing orders and restructuring.

Who is this for?

Rules are still being notified. We track central and state notifications and update advice as they change.

Before and after the Codes

Selected changes:

What we'll need from you

Salary structures

Current CTC breakdowns by grade.

Headcount

Employees by location, type and wage level.

Contracts

Appointment letters and fixed-term contracts.

Contractors and gig workers

Details of non-employee workforce.

Registrations

Current labour law registrations and licences.

Policies

HR policies, standing orders and working hours.

Engagements are quoted based on headcount, locations and scope.

How we manage the transition

Our approach:

1. 1

   Assess

   We review structures, contracts and practices against the Codes.

2. 2

   Model costs

   The cost impact on PF, gratuity and take-home pay is modelled.

3. 3

   Redesign

   Salary structures are redesigned where useful.

4. 4

   Update documents

   Contracts, policies and standing orders are updated.

5. 5

   Update compliance

   Registrations, returns and payroll are moved to new requirements.

6. 6

   Communicate

   We help explain changes to employees.

After the transition

Keep watching:

Rule notifications

Central and state rules are still being notified.

Portals

New registration and return portals are rolling out.

Wage ceilings

Ceilings and thresholds may be revised.

Gig contributions

Aggregator contribution rules are being finalised.

Accounting

Update actuarial valuations for gratuity and leave.

New hires

Use updated contracts and structures for all joiners.

Benefits and responsibilities