Appropriate Government Under New Labour Codes — Which Government Applies to Your Establishment?

Introduction

One of the most common and consequential questions HR professionals face under India’s new Labour Codes is deceptively simple: which government — Central or State — is the “appropriate Government” for our establishment?

The answer determines which government’s rules, notifications, and minimum wages apply to your organization. It determines whether your compliance obligations are set in New Delhi or your state capital. And it differs — sometimes significantly — across the four Labour Codes for the same establishment.

Why “Appropriate Government” Matters

Under India’s federal structure, labour is a concurrent subject. The four Labour Codes are Central legislation, but their implementation is divided between Central and State Governments.

The appropriate Government’s jurisdiction determines:

• Which minimum wages apply (Central or State notification)
• Which Inspector-cum-Facilitator has jurisdiction
• Which authority hears claims and appeals
• Which government’s rules on procedural matters apply
• Which government’s notifications on thresholds govern

Getting this wrong creates misaligned compliance — following State minimum wages when Central minimum wages apply can result in underpayment liability.

Code on Wages, 2019 — Appropriate Government

Section 2(a) of the Code on Wages, 2019 defines “appropriate Government” as:

Central Government for:

• Railways
• Mines
• Oil fields
• Major ports
• Air transport services
• Telecommunications
• Banking and insurance companies
• Corporations or companies established by or under a Central Act
• Central Public Sector Undertakings (PSUs), their subsidiaries, and autonomous bodies under Central Government
• Contractors of any of the above
• Any other establishment notified by the Central Government

State Government for:

• All other establishments

Key point: determination is industry/sector-based, not size-based. A small bank with 15 employees falls under Central Government. A large manufacturing company with 5,000 employees in a state industry falls under State Government.

Code on Social Security, 2020 — The Critical Multi-State Rule

Section 2(1)(a) of the Code on Social Security, 2020 mirrors the Wages Code — but adds one critical provision:

Central Government additionally covers:

• Establishments having branches or offices in more than one State

This is the key differentiator. A private manufacturing company operating only in Maharashtra → Maharashtra Government. The same company opens a branch in Gujarat → Central Government for the entire company under SS Code.

The multi-state rule is automatic — no application or notification required. The moment a second-state branch opens, Central Government jurisdiction applies for all social security matters.

Industrial Relations Code, 2020

IR Code follows the industry/sector-based determination — same as Wages Code. Additionally:

• Metro Railways explicitly listed as Central Government
• Telecommunications, Banking, Insurance explicitly listed

Important: the multi-state rule does NOT apply to the IR Code. A private multi-state company remains under State Government for IR Code unless in a Central sector industry.

OSH & Working Conditions Code, 2020

Same as the Wages Code — pure industry/sector-based determination. No multi-state rule.

Practical Decision Framework

Step 1: Industry check Is your establishment in Railways / Mines / Oil fields / Major ports / Air transport / Telecom / Banking / Insurance / Central Acts corporation / Central PSU or contractor of any above?

→ YES: Central Government applies under all four Codes

→ NO: Go to Step 2

Step 2: Multi-state check (SS Code only) Does your establishment have offices or branches in more than one state?

→ YES: Central Government applies under Code on Social Security only → NO: State Government applies under Code on Social Security

Step 3: Default For Wages Code, IR Code, OSH Code (if not in Central sector): → State Government of the state where establishment is located

Common Scenarios

*State = state where principal place of business is located

Impact on Minimum Wages

The appropriate Government determines which minimum wage notification applies:

• Central Government establishments: Central Government’s minimum wage notifications
• State Government establishments: State government’s minimum wage notifications

The Central Government sets a National Floor Wage — both Central and State minimum wages must be at or above this floor.

Note: a company’s appropriate Government can differ across codes. Multi-state private company under Central for SS Code still follows State minimum wages under Wages Code for each state where workers are employed.

Contractor Liability

Contractors of Central Government establishments are treated as Central Government establishments under all four Codes.

A private manpower contractor supplying workers to a Central PSU must apply Central minimum wages — even if the contractor’s own direct workforce follows State minimum wages.

Appropriate Government and ESI/EPF

ESI: ESIC is a Central body — ESI compliance is with ESIC regardless of appropriate Government. However, appropriate Government determines which ESIC regional office has jurisdiction.

EPF: EPFO is a Central body. EPF compliance does not change based on appropriate Government. Appropriate Government determines jurisdiction for disputes under the Code on Social Security once it fully replaces the EPF Act.

Frequently Asked Questions

What is “appropriate Government” under the Labour Codes? The government (Central or State) that has jurisdiction over a particular establishment under each Labour Code. Determines minimum wages, dispute authority, and procedural rules.

Which establishments always fall under Central Government? Railways, mines, oil fields, major ports, air transport, telecom, banking, insurance, Central Act corporations, Central PSUs, their subsidiaries, and contractors of these establishments.

If my company has offices in multiple states, which government applies? For the Code on Social Security only — Central Government for all locations. For Wages Code, IR Code, and OSH Code — State Government unless in a Central sector industry.

Can the appropriate Government differ across the four Codes? Yes. A multi-state private company may be under Central Government for SS Code but State Government for Wages, IR, and OSH Codes.

Does a private bank always fall under Central Government? Yes. Banking companies — both public and private sector — fall under Central Government under all four Labour Codes.

What minimum wages apply to Central Government establishments? Central Government’s minimum wage notifications issued by the Ministry of Labour and Employment, which must be at or above the National Floor Wage.

Does a contractor inherit the appropriate Government of the principal employer? Yes — contractors of Central Government establishments are treated as Central Government establishments.

How does opening a second-state branch affect compliance? For SS Code — Central Government becomes the appropriate Government for the entire company automatically. Social security compliance shifts to Central jurisdiction. No application required.

Is the multi-state rule the same under all four Codes? No. The multi-state rule applies only under the Code on Social Security. The other three Codes use industry/sector-based determination only.

Conclusion

The “appropriate Government” determination is the foundation of your entire Labour Code compliance structure. The multi-state rule under the Code on Social Security is the most consequential change for growing private sector companies — expanding to a second state automatically shifts social security jurisdiction to the Central Government.

HR and legal teams must factor this into every expansion decision.

Related resources:

• Appropriate Government Finder Tool (coming soon)
• State Rules Tracker
• Code on Wages — Full Pillar Guide
• Code on Social Security — Full Pillar Guide
• Compliance Calendar