India's four consolidated Labour Codes — replacing roughly 29 separate central labour statutes — are moving toward the government's target of full operational rollout across all sectors from April 1, 2026, following their official notification on November 21, 2025.
The four codes are the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020. Together they replace a patchwork of close to 30 central laws and hundreds of state-level regulations with what the government has described as a single, digital-first compliance framework, administered through an 'Inspector-cum-Facilitator' model in place of the earlier inspection regime.
The most significant change for payroll and HR teams is what has come to be called the 50% wage rule: basic pay must now make up at least half of an employee's total cost-to-company. Because provident fund and gratuity contributions are calculated on basic pay, the change is expected to raise employers' PF and gratuity liabilities by an estimated 5–15% per employee, ending the common practice of structuring salaries with a low basic component and a high share of allowances.
Fixed-term employees also gain ground: they now qualify for pro-rata gratuity after just one year of service, down from the five-year threshold that applied previously, and the codes require 'parity of benefits' — meaning fixed-term staff must receive wages and social security comparable to permanent employees doing similar work.
For the first time, gig and platform workers receive formal statutory recognition. Digital aggregators will be required to contribute 1–2% of annual turnover to a government-managed Social Security Fund, extending life, disability and health insurance coverage to a workforce that has so far sat outside India's labour-law framework entirely.
Employers should also note a new procedural deadline: full-and-final settlements with departing employees — including leave encashment and other statutory dues — must now be completed within 48 hours of separation, a sharp compression from the informal timelines many organisations have followed until now.