The 4 New Labour Codes, Explained Simply

Why the Codes exist

India had dozens of labour laws written across seven decades, each with its own definitions, registers and returns. The same word — “wages”, say — meant different things in different Acts. The four Codes merge 29 central laws into four, use common definitions, and move most filings online.

1. Code on Wages, 2019

Replaces the Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act and Equal Remuneration Act.

• One definition of wages, with the 50% rule on excluded allowances.
• Minimum wages for all employees, not only scheduled employments, with a national floor wage set by the Centre.
• Timely payment for every employee, and full and final settlement within two working days of exit.
• Bonus uses the same wage definition.

2. Industrial Relations Code, 2020

Replaces the Industrial Disputes Act, Trade Unions Act and Industrial Employment (Standing Orders) Act.

• Fixed-term employment is allowed in all sectors, with the same pay and benefits as permanent staff.
• Standing orders are required for establishments with 300 or more workers (up from 100).
• Lay-off, retrenchment and closure need government permission only at 300 or more workers.
• Strikes need 14 days' notice in all establishments.
• A reskilling fund: employers contribute 15 days' wages for each retrenched worker.

3. Code on Social Security, 2020

Replaces the EPF Act, ESI Act, Payment of Gratuity Act, Maternity Benefit Act and five others.

• Gratuity for fixed-term employees after one year instead of five. See the gratuity calculator.
• PF and gratuity use the new wage definition, so both can rise.
• ESI can extend across the country and to establishments with hazardous work regardless of size.
• Gig and platform workers are covered for the first time.

4. Occupational Safety, Health and Working Conditions Code, 2020

Replaces 13 laws, including the Factories Act, Contract Labour Act and Inter-State Migrant Workmen Act.

• Working hours capped at 48 a week; states can allow a four-day week with longer days.
• Overtime at twice the ordinary rate of wages, with the employee's consent.
• Women can work night shifts with consent and safety arrangements.
• Appointment letters are mandatory for every employee.
• Free annual health check-ups for workers above a notified age.
• Leave: eligibility for annual leave after 180 days of work, down from 240.

What changes for employers — a first-steps checklist

1. Map every salary structure against the 50% wage rule.
2. Recalculate PF, ESI, gratuity and bonus on the new wage base.
3. Issue appointment letters to any employee without one.
4. Review fixed-term contracts: equal benefits, and gratuity after one year.
5. Check full-and-final settlement timelines (two working days).
6. Update registers and returns to the new electronic formats as your state notifies them.
7. Review working hours, overtime and leave policies.

What changes for employees

Most employees will see higher PF and gratuity, and possibly lower monthly take-home pay if their employer keeps gross pay the same. Fixed-term staff gain gratuity rights much earlier. Everyone is entitled to an appointment letter and timely payment.