New Labour Codes India 2026 — Complete Guide to the 4 Labour Codes
India’s four new labour codes represent the most significant reform of Indian labour laws in decades, consolidating 29 existing labour laws into four comprehensive codes. Understanding these codes is essential for every Indian employer, as they fundamentally change salary structures, working hours, social security contributions, and compliance requirements.
The Four Labour Codes
1. Code on Wages, 2019
The Code on Wages consolidates the Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act. Key changes include a universal minimum wage applicable to all workers (not just scheduled employments), a new definition of “wages” that impacts how basic salary and allowances are structured, and mandatory floor wage set by the Central government.
2. Code on Social Security, 2020
This code consolidates nine social security laws including the EPF Act, ESI Act, Payment of Gratuity Act, and Maternity Benefit Act. It extends social security coverage to gig workers and platform workers for the first time, creates a national Social Security Fund, and rationalizes the compliance framework for PF and ESI.
3. Industrial Relations Code, 2020
The IR Code consolidates the Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act. It introduces a simplified mechanism for recognizing trade unions, raises the threshold for requiring government permission before layoffs/retrenchment from 100 to 300 workers, and establishes a framework for fixed-term employment.
4. Occupational Safety, Health and Working Conditions Code, 2020
The OSH Code consolidates 13 laws including the Factories Act, Mines Act, and Building Workers Act. It standardizes working conditions across all establishments, mandates annual health checkups for workers in hazardous industries, and introduces a national database of workers including inter-state migrants.
Impact on Salary Structures
The most discussed change is the new definition of “wages” under the Code on Wages. Basic wages plus dearness allowance must constitute at least 50% of total remuneration. This means companies that currently structure salaries with a low basic pay and high allowances will need to restructure. The impact: higher PF and gratuity contributions (calculated on basic + DA), but potentially lower take-home pay for employees.
Impact on Working Hours
The OSH Code allows for a maximum of 8 hours per day or 48 hours per week. However, it also permits 4-day work weeks (with longer daily hours up to 12 hours per day) if both employer and employee agree. Overtime is payable at twice the ordinary rate of wages.
How INDPayroll Prepares You
INDPayroll is fully updated for the new labour codes. The platform offers a salary restructuring tool that shows employers exactly how the new wage definition impacts their CTC structures, PF contributions, and gratuity liability. One-click migration restructures salary components to comply with the new 50% basic pay rule while optimizing tax efficiency. Start your free trial to prepare your payroll for the new labour codes.
