Workplace Rights

What Are the Four Labour Codes and What Do They Actually Change for You?

12 min read

Updated July 2026

Workplace Rights

Twenty-nine central labour laws — some dating back to the 1940s — were replaced by four codes when the government notified them on November 21, 2025. For most salaried employees, the most immediate impact is on how wages are structured. For gig workers, it’s the first time any statutory protection applies at all. Here is the plain-English breakdown of all four codes and what each one actually changes.

India’s labour law landscape was, for decades, a patchwork of 29 central statutes — the Factories Act, the Payment of Wages Act, the Industrial Disputes Act, the Employees’ Provident Funds Act, and more than two dozen others — many of them written in the 1940s and 1950s. The four Labour Codes consolidate all of these into a single, unified statutory framework.

The codes were passed by Parliament in 2019 and 2020, then spent years in implementation limbo while states drafted their own rules. That limbo ended on November 21, 2025, when the central government notified all four codes simultaneously, repealing the 29 legacy laws. Central rules were finalised around April 2026 and state-level implementation continues to roll out unevenly — but the framework is now law. Here is what each code covers and what it actually means for you as an employee.

Implementation is real but uneven — check your state Labour is a Concurrent List subject, meaning both the central government and each state must notify their own rules before full enforcement kicks in locally. As of July 2026, 11 states have notified final rules under all four codes (MP, UP, Gujarat, Karnataka, Haryana, Uttarakhand, Jharkhand, Odisha, Bihar, Chhattisgarh, Assam). Major industrial states including Maharashtra, Tamil Nadu, Kerala, Telangana, and West Bengal are still in draft. The central framework is in force; local enforcement depends on your state’s progress.

Code 1: The Code on Wages, 2019

Code 1 of 4 — In Force

Code on Wages

Standardises pay definitions and sets a national wage floor

Replaces: Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965, Equal Remuneration Act 1976

Introduces a single unified definition of “wages” across all industries
Sets a national floor wage below which no state minimum wage can fall
Mandates that basic pay must be at least 50% of total compensation — the rule with the biggest payroll impact
Requires payment of wages within 2 working days of termination or retrenchment
Applies to all employees regardless of sector — factory workers, office staff, gig workers, domestic workers

The 50% Wages Rule — What It Actually Means for Your Salary

This is the single change with the most direct financial impact on salaried employees in India. Under the Code on Wages, your basic pay plus dearness allowance must constitute at least 50% of your total gross compensation.

Basic Pay + DA ≥ 50% of Total Gross Compensation

Many Indian salary structures currently keep basic pay at 30–40% to reduce EPF and gratuity contributions
This rule forces a restructuring — with significant downstream effects

Impact on You — Positive

Higher EPF contribution base and larger gratuity

Since EPF, gratuity, and leave encashment are all calculated on basic pay, a higher basic pay means larger statutory benefits. Your EPF corpus grows faster, and your gratuity entitlement at exit increases.

Impact on You — Tradeoff

Lower take-home pay in some cases

If your basic pay is raised to meet the 50% threshold, your EPF deduction also increases proportionally — reducing your monthly take-home even if your CTC stays the same. The statutory benefit accrual improves; the monthly net may not.

Code 2: The Industrial Relations Code, 2020

Code 2 of 4 — In Force

Industrial Relations Code

Governs unions, termination, layoffs, strikes, and dispute resolution

Replaces: Industrial Disputes Act 1947, Trade Unions Act 1926, Industrial Employment (Standing Orders) Act 1946

Raises the threshold for prior government permission before retrenchment from 100 to 300 workers
Formalises fixed-term employment — fixed-term workers get full statutory benefits proportionate to tenure
Introduces a 14-day notice requirement before a legal strike (increased from the previous requirement)
Creates Reskilling Funds for retrenched workers
Mandates standing orders (conduct rules) for establishments with 300+ workers (up from 100)

What This Means for You

Fixed-term employees now get proper statutory benefits

If you are on a fixed-term contract, you are now entitled to all benefits — EPF, ESI, gratuity proportionate to service — that a permanent employee of the same category would receive. Fixed-term work can no longer be used to deny statutory entitlements.

What This Means for You

Retrenchment rules relaxed for large employers

Establishments with 100–299 workers no longer need prior government permission before retrenching staff. This makes large-scale layoffs administratively easier for mid-size employers — though retrenchment compensation (15 days’ pay per year of service) still applies.

Code 3: The Code on Social Security, 2020

Code 3 of 4 — In Force

Code on Social Security

Consolidates and extends provident fund, ESI, gratuity, and maternity benefits

Replaces: EPF & MP Act 1952, ESIC Act 1948, Payment of Gratuity Act 1972, Maternity Benefit Act 1961, and 5 others

Extends EPF and ESI coverage to gig workers and platform workers for the first time
Reduces the gratuity qualifying period from 5 years to 1 year for fixed-term contract employees
Extends maternity benefits framework to gig and unorganised sector workers
Enables optional EPF membership for employees earning above the wage ceiling
Creates a new Social Security Fund for unorganised, gig, and platform workers

Gig workers: the biggest change is here For the first time in India, gig and platform workers — delivery riders, cab drivers, freelancers on platforms — are brought inside a statutory social security framework. Platforms (aggregators) will contribute a percentage of their turnover or the worker’s earnings into a Social Security Fund on behalf of gig workers. Contribution rates (expected at 1–2% of aggregator turnover) are still being finalised, but the legal entitlement is now established.

For Fixed-Term Employees

Gratuity after 1 year — not 5

One of the most employee-friendly changes in the Code. Previously, gratuity required 5 continuous years of service. For fixed-term contract employees, this is now 1 year — acknowledging that fixed-term work is often short-cycle by design.

For All Salaried Employees

No change to core EPF and gratuity mechanics for permanent employees

If you are a permanent salaried employee, your EPF contributions, gratuity calculation (15 days per year), and ESI entitlements remain structurally the same — the change is in who the framework now extends to, not the core mechanics for existing covered employees.

Code 4: The Occupational Safety, Health and Working Conditions Code, 2020

Code 4 of 4 — In Force

OSH & Working Conditions Code

Governs workplace safety, working hours, and conditions of employment

Replaces: Factories Act 1948, Contract Labour Act 1970, Mines Act 1952, Plantation Labour Act 1951, and 9 others

Standardises working hours at 8 hours per day, 48 hours per week across most sectors
Allows flexibility in how the 48 hours are spread — enabling 4-day work weeks or compressed schedules where employer and employee agree
Extends formal leave provisions (earned leave, sick leave, casual leave) to a wider range of establishments
Introduces a single licence system for inter-state migrant workers and contract labour
Mandates appointment letters for all employees — formalising an obligation that was previously inconsistently applied
Applies to all establishments with 10 or more workers, expanding coverage significantly

The 4-day work week — possible, not mandatory The OSH Code allows an employer to structure the 48-hour week across 4 days rather than 5 or 6, provided the employee’s consent is obtained and the daily hours do not exceed 12. This is an enabling provision — no employer is required to offer it, and no employee can demand it as of right. It simply removes the legal barrier to offering it.

The Consolidation at a Glance

Code	Laws Replaced	Biggest Change for Employees
Code on Wages	4 laws including Payment of Wages Act, Minimum Wages Act	Basic pay must be ≥50% of gross; universal wage definition
Industrial Relations Code	3 laws including Industrial Disputes Act, Trade Unions Act	Fixed-term workers get full benefits; retrenchment threshold raised to 300
Code on Social Security	9 laws including EPF Act, Gratuity Act, Maternity Benefit Act	Gig workers inside social security; 1-year gratuity for fixed-term contracts
OSH & Working Conditions Code	13 laws including Factories Act, Contract Labour Act	48-hour week universalised; 4-day week enabled; appointment letters mandatory

“The codes simplify the structure of compliance, but they expand the scope of who you are responsible for and reprice some of what you owe them. For employees, the 50% wages rule is the most immediate impact. For gig workers, it is the first time any of this applies at all.”

WorkRightsIndia — paraphrasing Palo Santo Consulting, June 2026

What Is Still Being Rolled Out

Provision	Status as of July 2026
50% wages rule	IN FORCE — employers in states with notified rules are restructuring payroll
Fixed-term employee benefits	IN FORCE — full statutory benefits for fixed-term workers where state rules notified
Gig worker social security contributions	PENDING — contribution rates (1–2% of aggregator turnover) still being finalised centrally
New pension scheme for gig/unorganised workers	PENDING — transition period continues until November 2026
State-level enforcement across all states	PARTIAL — 11 states fully notified; major industrial states still in draft as of July 2026
Mandatory appointment letters	IN FORCE — where state rules notified; obligation applies to all establishments with 10+ workers

Frequently Asked Questions

Will the 50% wages rule reduce my take-home pay?

It may, depending on your current salary structure. If your basic pay is currently below 50% of your gross, your employer must restructure your CTC to bring the basic component up. A higher basic pay means higher EPF deductions — which reduces take-home, even if your CTC stays the same. The trade-off is a larger EPF corpus and higher gratuity entitlement at exit.

Do the Labour Codes apply to me if I work in a state that hasn’t notified rules?

The central framework is in force nationwide, but provisions that require state-level rules to operate are pending until your state notifies them. In states without final rules, the old legislation continues to apply in practice. If you are in Maharashtra, Tamil Nadu, Kerala, or West Bengal, verify the current position through the state’s Labour Department website — it is changing.

I’m a gig worker — do the codes actually change anything for me yet?

The legal entitlement is now established — you are inside the social security framework for the first time. However, the specific contribution rates and operational mechanism for the Social Security Fund are still being finalised at the central level. Watch for notifications from the Ministry of Labour on this — it is expected to be operational before the end of 2026.

Does the 4-day work week become an option I can request?

Not as of right — the OSH Code enables employers to offer it, but does not give employees the right to demand it. Whether a 4-day week is available to you depends entirely on whether your employer chooses to offer it as a working arrangement, subject to the 48-hour weekly cap and the 12-hour daily cap being respected.

What happened to the Industrial Disputes Act?

It was repealed on November 21, 2025 and subsumed into the Industrial Relations Code. The core protections it offered — retrenchment compensation, the domestic enquiry requirement for misconduct dismissals, workman classification — carry forward into the new Code, though with some modifications (most notably the threshold change from 100 to 300 workers for prior permission before retrenchment).

The One Line to Remember

29 old laws became 4 codes on November 21, 2025. The most direct impact on your payslip is the 50% wages rule — it will push basic pay up, EPF contributions up, take-home potentially down, and gratuity at exit up. Whether this has fully hit your salary yet depends on your state’s implementation progress. If it hasn’t yet — it will.

Reviewed by the WorkRightsIndia Editorial Team

This article is verified against the Code on Wages 2019, Industrial Relations Code 2020, Code on Social Security 2020, and OSH & Working Conditions Code 2020 as notified November 21, 2025. Implementation status verified against state gazette notifications, Ministry of Labour & Employment communications, and multiple independent legal and HR advisory sources. Last reviewed: July 2026.