India's new Labour Codes — be ready before your state notifies
Four codes. Twenty-nine acts replaced. States are notifying on a rolling basis — some with as little as 30–90 days' lead time. OpticompBharat lets you model both regimes simultaneously so you're never caught off guard.
Current status — April 2026
All four Labour Codes have received Presidential assent but are not yet in force in most states. Existing 29 central acts continue in full force. States must publish their own rules before central codes apply in that state — most states are still drafting. However, several states are close, and notification can come with minimal advance notice. Companies need to model both scenarios now.
The four Labour Codes
Four codes consolidate 29 central labour laws. Here's what each replaces and the single most important change for payroll teams.
Code on Wages, 2019
Replaces: Minimum Wages Act · Payment of Wages Act · Payment of Bonus Act · Equal Remuneration Act
Key change: "Wages" must be ≥ 50% of CTC (Basic + DA + retaining allowance). This restructures salary design for most Indian companies — current CTC structures that park salary in allowances will violate the new definition.
Industrial Relations Code, 2020
Replaces: Industrial Disputes Act · Trade Unions Act · Industrial Employment (Standing Orders) Act
Key change: Hire-and-fire (retrenchment/closure) threshold raised to 300 workers, up from 100. Fixed-term employment is now formally recognised in central law — fixed-term employees get proportionate gratuity.
Social Security Code, 2020
Replaces: EPF Act · ESIC Act · Gratuity Act · Maternity Benefit Act · CLRA Act (social security provisions) · and others
Key change: Gig workers and platform workers get statutory social security coverage for the first time. Gratuity eligibility may reduce to 1 year for fixed-term contract employees (vs. 5 years currently).
OSH Code, 2020
Replaces: Factories Act · Contract Labour (Regulation & Abolition) Act · and 11 other acts
Key change: Unified registration replaces 13 separate registrations. Single annual return replaces multiple act-specific returns. Threshold changes for applicability affect many mid-size manufacturers.
What changes for your payroll
Three concrete payroll and compliance impacts every Indian employer needs to plan for.
Salary restructuring — the 50% wages rule
The Code on Wages defines "wages" to include only Basic + DA + retaining allowance — and this must be at least 50% of total CTC. Most Indian companies currently have Basic at 30–40% of CTC. Under the new code, every employee's CTC structure needs redesigning, or PF contributions and Bonus calculations shift significantly.
PF and gratuity recalculation
PF is contributed on "basic wages" — once the new wages definition kicks in, PF-applicable salary rises for most employees. Similarly, gratuity is calculated on last-drawn "wages" under the new code, not just basic + DA. Employers need to model both current and future liability simultaneously.
Unified returns and registration
The OSH Code merges 13 separate registrations and multiple annual returns into one. The Social Security Code consolidates EPF and ESIC contributions under a single framework. Your compliance calendar and return-filing workflows need updating when your state notifies.
How OpticompBharat prepares you
- Regime toggle per company — switch between Legacy Acts and Labour Codes mode in one click
- 50% wages rule validator — flags every employee whose current salary structure will violate the upcoming definition
- PF recalculation engine under new wages definition — compare current vs future PF liability in seconds
- Gratuity recalculation for fixed-term employees — 1-year eligibility modelled alongside the existing 5-year rule
- Readiness report — shows exactly which employees and payroll lines change when your state notifies
- State notification tracker — we monitor state gazette notifications so you know when to switch
- Dual-mode payslips — run payroll under current law while previewing what it looks like under new codes
Free Salary Restructuring Calculator
See how the 50% wage rule impacts your payroll. Enter any CTC and instantly see restructured basic, revised PF contributions, gratuity changes, and take-home impact — before your state notifies.
29
Central acts consolidated into 4 Labour Codes
30–90 days
Typical lead time between state notification and enforcement
Dual-mode
Run legacy and new-code payroll in parallel until you're ready to switch
Don't wait for your state to notify.
Start modelling your Labour Codes readiness today — free for up to 50 employees, no credit card required.