New Labor Codes 2025 Readiness Checklist

The Code on Wages, 2019 introduces a unified definition of 'wages' where allowances (HRA, conveyance, etc.) exceeding 50% of total remuneration are deemed wages. Analyse your current salary structure and ensure that the basic wages plus DA component is at least 50% of the gross remuneration to avoid reclassification.

If allowances (HRA, special allowance, conveyance, etc.) exceed 50% of the CTC, the excess will be treated as 'wages' for PF, ESI, gratuity, and bonus calculations. Model the impact on employer cost and employee take-home pay and restructure salary components accordingly.

Under Section 9 of the Code on Wages, the Central Government will fix a national floor wage. No state can fix a minimum wage below the floor. Track the notification of the floor wage rate and assess impact on wage budgets, especially for low-wage categories and states with currently lower minimum wages.

Section 14 of the Code on Wages mandates overtime wages at twice the normal rate of wages. Verify that payroll systems calculate overtime correctly under the new definition of wages and adjust any overtime policies or cap mechanisms.

Under Section 17, wages must be paid by the 7th of the succeeding month (for establishments with fewer than 1,000 workers) or the 10th (for larger establishments). Ensure your payroll processing cycle can meet these timelines under the new Code.

The Code on Social Security, 2020 extends social security benefits to gig workers, platform workers, and unorganised sector workers. If your organization engages gig or platform workers (e.g., delivery partners, freelancers), plan for potential contributions to the Social Security Fund as notified by the Central Government.

The Code empowers the Central Government to revise wage ceilings for PF (currently INR 15,000) and ESI (currently INR 21,000) through notification without legislative amendment. Monitor notifications for any increase in these ceilings, which will expand the coverage pool and increase employer costs.

The Code envisages a unified web portal for registration, filing returns, and making contributions for EPF, ESI, gratuity, and maternity benefits. Ensure Aadhaar linkage for all employees and prepare IT systems for API integration with the proposed unified portal.

Under the Code on Social Security, 2020, fixed-term employees are entitled to gratuity on a pro-rata basis even if they have not completed 5 years of continuous service. Assess the impact on gratuity provisioning for organizations that hire fixed-term contract workers.

The Code consolidates maternity benefit provisions (previously under the Maternity Benefit Act, 1961). Benefits include 26 weeks of paid leave for the first two children and 12 weeks for subsequent children. Ensure payroll systems are configured to handle maternity leave calculations under the new Code provisions.

The OSH Code, 2020 applies to establishments employing 10 or more workers (with power) or 20 or more workers (without power), mines, docks, and building and construction work. It subsumes 13 old Acts including the Factories Act, 1948 and the Contract Labor Act, 1970. Verify which provisions apply to your organization.

The OSH Code introduces a unified registration for all covered establishments through an online portal. Organizations currently holding registrations under the Factories Act, Contract Labor Act, ISMW Act, etc. will need to migrate to the new unified registration system.

The OSH Code retains the requirement for registration of principal employers and licensing of contractors but introduces a threshold of 50 workers (instead of 20 under the Contract Labor Act). Review existing contractor arrangements and determine if any fall below the new threshold.

The OSH Code mandates facilities like canteens (for 100+ workers), crches (for 50+ workers), first aid, adequate lighting, ventilation, and sanitation. Conduct a gap assessment of current welfare provisions against the Code's requirements and plan necessary upgrades.

Under the OSH Code, employers engaged in hazardous processes must arrange free annual health examinations for workers. Identify if any of your operations involve hazardous processes as defined in the Code and set up health examination protocols.

The OSH Code formally recognises fixed-term employment and mandates that fixed-term workers receive the same wages, hours, allowances, and benefits (including gratuity on a pro-rata basis) as permanent workers performing similar work. Update appointment letter templates to reflect these entitlements.

The IR Code, 2020 raises the threshold for mandatory standing orders from 100 to 300 workers. If your establishment has between 100 and 300 workers, you may no longer be required to have certified standing orders, though it is advisable to maintain them voluntarily as good practice.

Under the IR Code, establishments with 300 or more workers must obtain prior government permission before lay-off, retrenchment, or closure (raised from 100 under the old Industrial Disputes Act). Establishments with fewer than 300 workers gain more flexibility in workforce adjustments.

The IR Code introduces a statutory framework for trade union recognition. A trade union with 51% or more membership will be recognised as the sole negotiating union; if none qualifies, a negotiating council of unions with more than 20% membership will be formed. Assess your trade union landscape against these new criteria.

Under Section 4 of the IR Code, every establishment with 20 or more workers must have a Grievance Redressal Committee comprising equal representation of employer and workers (with at least one woman if the establishment employs women). Constitute or reconstitute the committee as required.

Under the IR Code, workers in all industrial establishments (not just public utility services) must give a 14-day advance notice before going on strike. Similarly, employers must give 14 days' notice before a lockout. Review and update your employee relations policies to reflect this change.

Under Section 83 of the IR Code, when a worker is retrenched, the employer must contribute an amount equal to 15 days of the worker's last drawn wages to the Worker Re-Skilling Fund. Update your separation cost models and HR budgets to include this new obligation.

Map every provision of the four Codes (Wages, Social Security, OSH, IR) against your existing HR policies, employment contracts, payroll configurations, and compliance processes. Identify gaps, cost implications, and areas requiring policy changes. Engage external labor law consultants for a comprehensive assessment.

Work with your HRIS/payroll vendor to reconfigure wage components, contribution calculations (PF, ESI, gratuity, bonus), and reporting formats. Test the new configurations thoroughly with pilot payroll runs before the Codes come into effect.

Update standard employment contracts, offer letters, and appointment orders to incorporate fixed-term employment clauses, revised notice periods, the new wage structure, and other provisions mandated by the four Codes. Have the updated templates reviewed by legal counsel.

Organise comprehensive training sessions for HR business partners, payroll administrators, and compliance officers on the key changes introduced by the four Codes. Cover topics such as the new wage definition, social security for gig workers, revised thresholds, and the unified compliance portal.

Prepare employee communication materials explaining how the new labor codes affect salary structure, take-home pay, social security benefits, and working conditions. For unionised workplaces, engage with trade union leaders early to address concerns and negotiate transitional arrangements.