Anshul Prakash: Hi, all. I am Anshul Prakash, Partner in the employment practice at Khaitan & Co. Today, we are diving into one of the most significant changes in India’s labour law landscape—the enforcement of the four labour codes on wages, social security, industrial relations, and occupational safety and health. These codes came into effect on 21 November 2025 barring some provisions, replacing 29 central labour laws and introducing a unified compliance framework.
Joining me is my colleague, Vinay Joy, also a Partner in the employment practice.
Vinay Joy: Thank you, Anshul. It is an exciting time to be an employment lawyer in India. While this is a landmark moment, the transition is still unfolding. We will break down what is effective now, what is pending, and try to broadly answer the questions employers are asking.
Anshul Prakash: Absolutely. So, what assumes the force of law as of now? The substantive provisions of all four codes are in effect—definitions, basis for computation of social security contributions and gratuity, timeline for payment of wages, and prohibition on engagement of contract labour in core business activities.
Vinay Joy: That is right. But here is the catch—the procedural framework is still evolving. State rules, schemes, and notifications are pending. Until those are finalized, existing laws and rules continue to apply for procedural compliance.
Anshul Prakash: Exactly. For instance, the code on occupational safety talks about working hours to be prescribed by the relevant government, so one would have visibility on the working hour requirements only once the rules are implemented. Same goes for registration requirements, prescription of a floor wage by the Central Government for minimum wage purposes, or maintenance of records on various compliances.
Vinay Joy: So, let us talk about what employers should focus on immediately. Under the Wages Code, the definition of ‘wages’ is uniform now. Employers need to check if their remuneration structure aligns with the 50% threshold rule for wage components. Is there anything you want to add on that, Anshul?
Anshul Prakash: Thank you for pointing that out, Vinay. There is a lot of misconception around the definition of wages under the codes. For example, it is being assumed that basic salary component must be at 50% level, but the point is that there is no such emphasis on basic salary under the codes! The codes only mention that if all components included in the concept of wages, taken together, fall below 50% of the total remuneration, then the law would notionally assume wages to be at 50% for the purpose of computing wage-linked payments such as social security, severance compensation, and so on. The law, unlike what some people are thinking, does not really expect employers to restructure the salaries of employees.
Vinay Joy: That is a good point! And, until we know what the salary threshold would be for application of various chapters like statutory bonus and social security contributions, restructuring salaries at this point may be a bit impulsive.
Anshul Prakash: Absolutely. And continuing with other Wages Code provisions, there is a buzz that full and final dues will have to be disbursed in two working days. The point is that this requirement is limited to wages only, and of course, idea would be to achieve the requirement on a reasonable effort basis, not in every scenario including where the employee is required to but has not discharged their own obligations like return of employer’s property.
Vinay Joy: Makes sense, Anshul. And now, coming to Social Security Code, contract labour is now included in the definition of ‘employee’ for gratuity purposes, and fixed-term employees are entitled to pro-rated benefits. Do you see a material impact of these changes?
Anshul Prakash: Look, even under the laws that existed so far, principal employers were made responsible for social security contributions for contract workers, but contractually, principal employers would still mandate contractors to comply with these requirements as the immediate employer. Similarly, under the codes, idea is not that principal employers should directly assume gratuity liability vis-à-vis contract workers – there should of course be necessary checks and balances to monitor compliance by contractors with these liabilities. As for fixed-term employees, even the standing orders in few states such as Karnataka under the previous regime envisaged pro-rated benefits for fixed-term employees. The labour codes are effectively extending the principle pan-India.
Vinay Joy: That is correct, Anshul.
Anshul Prakash: Vinay, what are some key provisions that would become the focus areas under Industrial Relations Code?
Vinay Joy: I think one major development is introduction of the concept of recognition of trade union, which gives the right of collective bargaining to a trade union that was not the case earlier when the Trade Unions Act only talked about registration of a trade union and gave only limited rights such as right to sue or be sued. I would also say that from a cost perspective, employers would now have to factor in contributions to a worker re-skilling fund during severance of a non-managerial employee.
Anshul Prakash: Agreed, Vinay, and one more point I can think of is the concept of grievance redressal committee which would now have to involve worker representation, while earlier there was flexibility for employers to come up with their own grievance redressal mechanism.
Okay, now let us talk about OSH Code, Vinay. What would be the one provision that employers should take cognizance of?
Vinay Joy: The OSH Code prohibits contract labour in core activities, Anshul. So far, this prohibition did not exist for the most part, although of course such engagement could become a risk factor in permanency claims from contract workers. The law of course has exceptions to the prohibition, including sudden increase in the volume of work which requires readily available workforce or there being a general practice to engage contract workers in a particular activity. It will be interesting to see how these exceptions are interpreted.
Anshul Prakash: Now, let us tackle some common questions we are hearing. One question I keep hearing is whether state-specific shops and establishments laws would continue to apply. What would you have to say on that, Vinay?
Vinay Joy: Of course, the state-specific laws are intended to operate independently of the labour codes. Once the rules under the labour codes are in place, employers may have to navigate overlaps between these state laws and the labour codes, especially on working hours and leave entitlements.
Anshul Prakash: It is clear that employers need not panic and must take time to process the changes while the government works towards setting the implementation regime in motion. And remember, this is a facilitative regime. The government aims for ease of compliance, with digital interfaces and compounding of offences. Idea is certainly not to immediately commence prosecution against employers. Stay proactive, not reactive.
That brings us to the end of this episode of our podcast. Thank you very much for your valuable insights, Vinay!
Vinay Joy: I am glad to be a part of this engaging discussion, Anshul! And to those listening, thanks for tuning in.
