Introduction
After six years of waiting — the four Labour Codes are finally in force. The Government of India notified the implementation date of all four Labour Codes as 21st November 2025, consolidating 29 existing central labour laws into a unified framework covering 64.33 crore workers across India.
This is the largest labour law reform since Independence. For HR professionals, payroll teams, and business owners, understanding what changes immediately versus what follows a phased transition is critical to staying compliant and avoiding penalties.
The Four Labour Codes — At a Glance
| Code | Enacted | Effective | Laws Consolidated |
|---|---|---|---|
| Code on Wages, 2019 | August 2019 | 21 Nov 2025 | 4 Acts |
| Code on Social Security, 2020 | September 2020 | 21 Nov 2025 | 9 Acts |
| Industrial Relations Code, 2020 | September 2020 | 21 Nov 2025 | 3 Acts |
| OSH & Working Conditions Code, 2020 | September 2020 | 21 Nov 2025 | 13 Acts |
Together: 29 repealed Acts → 4 unified Codes.
What Has Changed Immediately — Effective 21st November 2025
From the Code on Wages, 2019
1. New Wages Definition (Section 2(y)) The most impactful immediate change. “Wages” now means Basic + DA + Retaining Allowance. Excluded components cannot exceed 50% of total remuneration — if they do, the excess is deemed wages. See our detailed article: New Wages Definition — The 50% Rule Explained.
2. Universal Applicability The Code applies to all employees regardless of salary quantum. The old ₹24,000/month ceiling no longer applies. All registers must include all employees.
3. Minimum Wages Structure HRA cannot form part of minimum wages. Must be satisfied through Basic + DA or consolidated pay only.
4. Wage Slip (Form V) Every employer must issue a wage slip to every employee for every pay cycle — no salary ceiling restriction.
5. Full and Final Settlement — 2 Working Days Wages on termination, dismissal, retrenchment, or resignation must be paid within two working days. Strict 48-hour deadline.
From the Code on Social Security, 2020
6. Fixed Term Employee Gratuity (after 1 year) FTEs completing one year of continuous service are entitled to gratuity on contract expiry. Provision from day one of FTE engagement.
7. Common Crèche Obligation Employers engaging 50 or more women employees must provide a common crèche facility — whether or not ESI applies.
8. Vacancy Reporting Establishments must report vacancies to Career Centres before initiating recruitment.
9. Multi-State Establishments — Central Government Private establishments with branches in more than one state: Central Government is the appropriate Government for maternity benefit and social security purposes.
From the Industrial Relations Code, 2020
10. Strike Notice — 60 Days + 14-Day Window Trade Union must give 60 days’ advance written notice before commencing a strike. Strike can only commence within the 14-day window specified in that notice. Applies to all establishments.
11. Layoff/Retrenchment Threshold — 300 Workers Prior government approval now required only where 300 or more workers are employed (raised from 100).
12. Standing Orders — 300 Workers Mandatory for establishments with 300 or more workers (raised from 100). Central Draft Standing Orders apply by default.
13. Trade Union Recognition — 51% Membership A trade union with 51% of workers as members is the Negotiating Union.
14. Mass Casual Leave = Strike If 50% or more workers take casual leave simultaneously, it is treated as a strike.
From OSH & Working Conditions Code, 2020
15. Appointment Letter — Every Employee Every employer must issue an appointment letter to every employee at the time of appointment. No exceptions — includes FTEs, contract labour, part-time workers.
16. Leave Eligibility — Reduced to 180 Days Threshold for earning annual leave reduced from 240 to 180 days worked in a calendar year.
17. Leave Carry-Forward — Capped at 30 Days Maximum carry-forward is 30 days. Balance above 30 days at year-end must be encashed.
18. Contract Labour Threshold — 50 Workers Raised from 20 to 50 workers. Establishments engaging fewer than 50 contract workers are outside the Contract Labour chapter’s requirements.
19. Factory Threshold — 20/40 Workers Factory Chapter applies to 20+ workers (with power) or 40+ workers (without power). Smaller units no longer classified as factories.
20. Women — Night Shifts Permitted Women permitted to work all shifts including nights, with consent and mandatory safety measures.
21. Independent Director Cannot Be Factory Occupier Must be rectified immediately if currently the case.
What Continues Under Old Framework
EPF: EPF and MP Act, 1952 and its schemes continue. New wages definition affects contribution calculations but EPF procedures remain unchanged.
ESI: Current ESI schemes continue for one year until 20th November 2026.
Bonus ceiling: Not yet notified under the Code. Existing ₹21,000/month ceiling applies.
Procedural compliance: Forms, returns, registers under old Acts continue where state rules under the Codes have not been notified.
Before vs After — Key Changes Summary
| Area | Before | After |
|---|---|---|
| Wages definition | Varied across Acts | Unified; 50% cap on exclusions |
| Minimum wages | Scheduled employments only | All workers across all sectors |
| Gratuity for FTEs | 5 years | 1 year |
| Strike notice | 14 days (public utilities) | 60 days + 14-day window (all) |
| Retrenchment approval | 100 workers | 300 workers |
| Standing Orders | 100 workers | 300 workers |
| Contract labour | 20 workers | 50 workers |
| Factory threshold | 10/20 workers | 20/40 workers |
| Earned leave eligibility | 240 days | 180 days |
| Leave carry-forward | Varied | Max 30 days |
| Women night shifts | Restricted | Permitted with consent |
| Appointment letter | Not mandatory everywhere | Mandatory for all |
| Full & Final settlement | Varied timelines | 2 working days |
| ESI geographic coverage | Notified areas only | Pan-India |
HR Implementation Roadmap
Immediate — Week 1
- ✅ Audit salary structures — identify employees with Basic+DA below 50% of gross
- ✅ Recalculate statutory contributions on new wages base
- ✅ Issue appointment letters to all employees who don’t have one
- ✅ Calculate prorate EPF/ESI for November 2025
- ✅ Verify Full & Final settlement process can complete within 2 working days
- ✅ Check if independent director is serving as factory Occupier — rectify
- ✅ Set up common crèche if 50+ women are employed
Short-term — Month 1-3
- Update payroll software for new wages definition
- Issue revised wage slips (Form V) from December 2025 onwards
- Re-check ESI eligibility for all employees
- Register newly eligible employees with ESIC
- Update offer letter and FTE contract templates
- Begin gratuity provisioning for FTEs approaching one year
- Train HR and payroll teams on all changes
Penalties for Non-Compliance
| Offence | First Instance | Repeat (within 5 years) |
|---|---|---|
| Underpayment of wages | Fine up to ₹50,000 | Up to 3 months imprisonment + ₹1,00,000 |
| General contravention | Fine up to ₹20,000 | Up to 1 month imprisonment + ₹40,000 |
| Improper records | Fine up to ₹10,000 | — |
Note: Inspector-cum-Facilitator must provide written direction to comply before prosecution for first-time offences.
Frequently Asked Questions
When did the four Labour Codes come into effect? All four Labour Codes came into effect on 21st November 2025.
How many laws did the Labour Codes replace? The four Labour Codes consolidated 29 existing central labour laws.
Does the new salary structure apply immediately? Yes. The wages definition under the Code on Wages applies from 21st November 2025. Statutory contributions must be calculated on the new wages base immediately.
Do I need to issue appointment letters to existing employees? Yes. The OSH Code mandates appointment letters for all workers — existing employees without one should receive it now.
What happens if state rules are not yet notified? Procedural compliance continues under existing Acts. The substantive provisions — wages definition, FTE rights, leave thresholds — apply regardless of state rules.
Has the EPF Act been repealed? Not yet. The EPF and MP Act, 1952 and its schemes continue to apply.
What is the new threshold for retrenchment approval? Prior government approval is now required only where 300 or more workers are employed.
What is the penalty for not issuing an appointment letter? First-instance contravention under the OSH Code — written direction to comply, then fines up to ₹20,000.
Conclusion
The implementation of India’s four Labour Codes on 21st November 2025 is not an incremental update — it is a structural overhaul of the country’s labour framework. Organisations that invest in proactive compliance now will avoid the penalties, disputes, and reputational risks that reactive compliance always invites.
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