Key takeaways
- Four codes replace many older laws
- The wage definition affects payroll costs
- Gig workers enter the social security net
- State rules matter — track them
From many laws to four codes
India's labour reform consolidates a large number of central labour laws into four codes: the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code.
The intent is simplification — fewer definitions, unified registrations and returns, and more use of digital compliance. But simplification also brings change, and employers need to review policies, contracts and payroll structures.
Code on Wages
The code brings a uniform definition of 'wages' across laws and establishes a floor wage concept. A significant point for payroll is the treatment of allowances: where excluded components exceed a prescribed share of total remuneration, the excess may be counted as wages, which can affect contributions to social security and gratuity.
Code on Social Security
This code consolidates provident fund, employee state insurance, gratuity, maternity benefit and related laws, and for the first time creates a framework for gig and platform workers. Employers should map which schemes apply based on headcount and review gratuity provisions, including for fixed-term employees.
Industrial Relations and OSH Codes
The Industrial Relations Code addresses standing orders, trade unions, dispute resolution and conditions for lay-offs and closures. The OSH Code unifies registrations, sets health and safety duties and covers working hours, leave and welfare facilities.
A practical compliance checklist
Employers can prepare in stages rather than all at once:
- Audit salary structures against the new definition of wages
- Update appointment letters and HR policies
- Review contract and fixed-term workforce arrangements
- Check state-level rules, which vary in detail
- Move registrations and returns to digital platforms
How ITFOI helps
Labour code interpretation is a core part of our free advisory service. Members receive circulars as central and state rules are notified, and can raise specific queries through the advisory helpline.
This article is for general information and is not legal, tax or financial advice. Rules change frequently — members can contact the ITFOI advisory desk for guidance on their specific situation.