India’s labour law framework has entered a major implementation phase. The Code on Wages, 2019, Industrial Relations Code, 2020, Code on Social Security, 2020, and Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 came into effect on 21 November 2025, consolidating 29 central labour laws.

A major development followed on 8 May 2026, when the Central Government notified the final Central Rules under all four Labour Codes. These include the Code on Wages (Central) Rules, Industrial Relations (Central) Rules, Social Security (Central) Rules and OSHWC (Central) Rules. The Rules provide greater operational clarity on areas such as wage calculations, working hours, records, social security, workplace safety and industrial relations.

However, HR managers should distinguish between Central Rules and State Rules. The Central Rules do not automatically govern every private establishment in India. Their applicability depends on which government is the “appropriate government” for the establishment. State Governments continue to have rule-making responsibilities for establishments falling within their jurisdiction. Businesses operating across multiple states must therefore track both the Central framework and the applicable State Rules.

The focus in 2026 is consequently on operationalising the Labour Codes. HR, payroll, finance, legal and compliance teams need to review salary structures, employment documentation, statutory benefits, working hours, employee records and workplace policies against the applicable rules.

What Changed in India’s Labour Laws in 2026?

The most significant development in 2026 is the move from a broad legislative framework to detailed implementation rules.

The four Labour Codes provide the overarching legal framework, while the final Central Rules notified on 8 May 2026 provide procedures and operational requirements. These include provisions concerning wage slips, working hours, weekly rest, social security processes, appointment letters, workplace safety and industrial relations.

For HR teams, the practical impact includes:

• Reviewing salary structures under the new definition of wages
• Issuing compliant appointment letters and wage slips
• Reassessing gratuity eligibility and calculations
• Reviewing working hours and overtime systems
• Establishing required grievance mechanisms
• Reviewing standing-order applicability
• Updating social security processes
• Implementing applicable health and safety measures
• Maintaining statutory registers and records
• Tracking Central and State Rules separately

Four Labour Codes and Their Impact on HR Compliance

The four Labour Codes form the foundation of India’s current labour law framework.

• Code on Wages, 2019: Covers minimum wages, payment of wages, bonus and the definition of wages.
• Industrial Relations Code, 2020: Covers trade unions, standing orders, grievance redressal and industrial disputes.
• Code on Social Security, 2020: Consolidates provisions relating to EPF, ESI, gratuity, maternity benefits and social security for unorganised, gig and platform workers.
• OSHWC Code, 2020: Covers occupational safety, health, working conditions, welfare and related employer responsibilities.

Together, these Codes consolidate 29 central labour laws and create a more unified statutory framework.

Key Labour Law Updates HR Managers Need to Track in 2026

Changes to Wage Definitions and the 50% Rule

The new definition of wages is one of the most important changes for payroll teams.

Under the Labour Codes, certain components are included in wages, while specified allowances and benefits are excluded. However, the exclusions are subject to a 50% ceiling.

If the allowances and benefits covered by the exclusion provisions exceed 50% of total remuneration, the amount exceeding that 50% limit is added back to wages for statutory calculations. Gratuity and retrenchment compensation are excluded from the allowance calculation for this purpose. The Ministry has clarified that this definition of wages applies across all four Labour Codes.

For example, if total remuneration is ₹76,000 and eligible allowances and benefits result in ₹40,000 of excluded allowances, while the 50% limit is ₹38,000, the excess ₹2,000 is added back to wages. Statutory calculations would then use the revised wage figure.

HR and payroll teams should therefore review:

• Basic pay and dearness allowance
• Allowance structures
• Reimbursements and benefits
• PF and other statutory calculations
• Gratuity calculations
• Payroll software configuration

A salary structure that was compliant under the previous framework may require restructuring under the new wage definition.

Updates Affecting Gratuity and Employee Benefits

The Code on Social Security changes the gratuity framework in several important ways.

For employees covered by the general gratuity provision, the five-year continuous service requirement continues, subject to statutory exceptions. However, fixed-term employees (FTEs) become eligible for gratuity after completing one year of service under their contract. The Ministry has clarified that fixed-term employment for this purpose refers to employees directly engaged by the employer, rather than contract labour engaged through contractors.

Gratuity under the Code is calculated at 15 days’ wages for each completed year of service, subject to the maximum amount notified by the Central Government. The employer must pay the gratuity within 30 days from the date it becomes payable.

HR teams should review fixed-term contracts, gratuity provisions, payroll calculations and employee exit processes to ensure the revised eligibility requirements are reflected accurately.

Social Security Coverage for Different Worker Categories

The Code on Social Security recognises unorganised workers, gig workers and platform workers within the statutory social security framework. However, recognition as a gig or platform worker does not mean that these workers should automatically be treated as conventional employees for PF or ESI purposes.

The Code provides for separate social security schemes covering areas such as life and disability cover, accident insurance, health and maternity benefits and old-age protection. It also provides for a Social Security Fund and aggregator contributions for schemes relating to gig and platform workers.

The aggregator contribution framework provides for a contribution between 1% and 2% of annual turnover, subject to the statutory limit of 5% of the amount paid or payable to gig and platform workers, as specified under the Code. The actual applicability and operation of schemes depend on the relevant statutory provisions and notifications.

Businesses should therefore assess worker classification carefully instead of automatically extending employee benefits designed for conventional employment relationships.

Working Hours, Overtime and Leave Requirements

The final Central Rules provide greater clarity around normal working hours.

Under the Central Rules, the normal working day for employees whose wage period is fixed on a daily basis is eight hours, while the total working hours for other employees must not exceed 48 hours per week. Employees are also entitled to a weekly rest day subject to the conditions in the Rules.

Overtime becomes relevant when work exceeds the applicable eight-hour daily or 48-hour weekly threshold, with overtime generally payable at twice the normal rate of wages under the Code.

HR teams should review:

• Attendance and time-tracking systems
• Shift schedules
• Overtime approval processes
• Weekly rest-day arrangements
• Leave and holiday policies
• Wage-slip calculations

However, these Central Rules must not be applied mechanically to every establishment. HR teams must check whether the Central Government or the relevant State Government is the appropriate government and review the applicable State Rules where required.

Industrial Relations and Employment Rules

The Industrial Relations Code introduces important thresholds that HR teams should track.

An establishment employing 20 or more workers must constitute a Grievance Redressal Committee (GRC) for resolving individual grievances relating to employment and conditions of service.

The Code also establishes a 300-worker threshold for the applicability of statutory standing-order requirements. Establishments meeting the relevant threshold must review whether certified or model standing orders apply to them and ensure their employment rules are aligned accordingly.

The 300-worker threshold is also important in relation to retrenchment and closure provisions under the Industrial Relations Code, subject to the specific statutory conditions.

HR teams should therefore review:

• Whether a GRC is required
• Standing-order applicability
• Disciplinary procedures
• Grievance mechanisms
• Retrenchment processes
• Workforce restructuring procedures
• Trade union-related processes

Workplace Safety and Working Conditions

The OSHWC Code broadens the focus on workplace health, safety and welfare. Employers need to review workplace facilities, safety procedures, appointment letters, employee welfare measures, contractor compliance and health-related requirements.

A significant 2026 development is the rollout of the annual health check-up initiative for workers aged 40 years and above. The nationwide programme was launched on 7 May 2026 through ESIC for eligible insured persons above 40.

The exact applicability of health-check requirements depends on the establishment and the applicable rules. For establishments governed by Central Rules, the Central framework applies; where the State Government is the appropriate government, HR teams must check the applicable State Rules, including any differences in age thresholds or implementation requirements.

How the 2026 Labour Law Changes Affect Employers

The new framework can affect almost every part of the employee lifecycle.

Payroll teams need to review wage definitions, allowance structures, wage slips and statutory calculations.

HR teams need to update appointment letters, employment contracts, working-hour policies, grievance mechanisms and employee records.

Finance teams should assess potential changes to gratuity and other statutory costs.

Legal and compliance teams should determine which government is the appropriate government for each establishment and track applicable Central and State Rules.

For multi-state organisations, a single national compliance checklist may not be sufficient. The organisation should maintain a location-wise compliance matrix.

Central Rules vs State Rules: What HR Teams Should Know

The notification of the Central Rules does not mean that every private establishment in India is automatically governed by those rules.

The Labour Codes distinguish between the Central Government and State Government as the appropriate government depending on the establishment, industry and statutory provisions. The Central Rules apply to establishments falling within the Central Government’s jurisdiction, while State Governments have their own rule-making role for establishments under their jurisdiction.

Therefore, HR teams should:

• Identify the appropriate government for each establishment.
• Determine whether Central or State Rules apply.
• Track State notifications and final rules.
• Maintain a state-wise compliance matrix.
• Review differences in working hours, health checks, forms, registers and other requirements.
• Update policies and payroll systems when applicable State Rules change.

This distinction is particularly important for organisations operating in multiple states.

2026 Labour Law Compliance Checklist for HR Managers

HR and compliance teams can use the following checklist:

• Review salary structures against the new definition of wages.
• Identify excluded allowances exceeding the 50% threshold and add the excess back for statutory calculations.
• Reconfigure payroll where required.
• Issue compliant appointment letters.
• Issue wage slips on or before payment of wages.
• Review PF, ESI, gratuity and other applicable statutory calculations.
• Review gratuity eligibility for fixed-term employees completing one year.
• Identify whether a GRC is required for establishments with 20 or more workers.
• Check standing-order requirements at the 300-worker threshold.
• Review retrenchment and workforce restructuring processes.
• Audit working hours against the eight-hour/48-hour framework under applicable rules.
• Review overtime calculation and approval processes.
• Assess annual health-check requirements, including the 40+ ESIC initiative where applicable.
• Update workplace safety and welfare procedures.
• Review gig/platform worker and aggregator arrangements separately from conventional employment.
• Maintain statutory registers, wage records and employee documentation.
• Identify the appropriate government for each establishment.
• Track Central and State Rules separately.
• Train HR, payroll and compliance teams on the new framework.

Common HR Mistakes When Adapting to Labour Law Changes

One of the biggest mistakes is assuming that the notification of Central Rules means that the same rules automatically apply to every establishment in India. State-level implementation must continue to be monitored.

Another common mistake is changing the wording of HR policies without updating payroll and HR systems. For example, simply mentioning the new wage definition in a policy does not address the need to recalculate statutory wages where the 50% allowance rule applies.

Other gaps may include:

• Failing to review fixed-term employee gratuity
• Not checking the 20-worker GRC threshold
• Overlooking the 300-worker standing-order threshold
• Continuing outdated wage-slip formats
• Not reviewing overtime calculations
• Missing health-check requirements
• Treating gig workers as conventional employees without assessing the applicable social security framework
• Maintaining a single compliance process for multiple states

How HR Teams Should Operationalise the Labour Codes in 2026

With the final Central Rules now notified, HR teams should move from monitoring the reform to implementation and operational readiness.

A practical approach is to conduct a Labour Code gap assessment covering:

1. Payroll: Review wage components, the 50% rule, statutory deductions and wage slips.
2. Employment documentation: Update appointment letters, contracts and employee records.
3. Benefits: Reassess gratuity, PF, ESI and other applicable social security obligations.
4. Industrial relations: Check GRC and standing-order thresholds and update grievance processes.
5. Working conditions: Review working hours, overtime, leave, welfare and safety requirements.
6. Health and safety: Assess annual health-check obligations and other OSH requirements.
7. Worker classification: Review permanent, fixed-term, contract, gig and platform worker arrangements.
8. State compliance: Create a state-wise regulatory tracker and identify applicable government authorities.
9. Training: Train HR, payroll, legal and compliance teams on the operational requirements.
10. Audit: Conduct periodic compliance reviews and maintain evidence of implementation.

This approach helps organisations move beyond simply understanding the legislation and towards demonstrable compliance.

Frequently Asked Questions About Labour Law Updates in 2026

What are the latest labour law changes in India in 2026?

The four Labour Codes came into effect on 21 November 2025, and the final Central Rules under all four Codes were notified on 8 May 2026. The 2026 focus is therefore on implementing the Codes and applicable Central and State Rules.

What is the 50% wage rule under the Labour Codes?

If specified allowances and benefits excluded from wages exceed 50% of total remuneration, the excess amount is added back to wages for statutory calculations. For example, if the 50% limit is ₹38,000 but eligible excluded allowances total ₹40,000, ₹2,000 is added back to wages.

Are fixed-term employees eligible for gratuity after one year?

Yes. A fixed-term employee directly engaged by the employer is eligible for gratuity after completing one year of service under the contract. This differs from the general five-year continuous-service requirement, subject to the statutory provisions and exceptions.

Do the Central Labour Rules apply to every private company?

No. The Central Rules do not automatically govern every private establishment. Applicability depends on the identity of the appropriate government under the relevant Labour Code. Establishments under State jurisdiction must also comply with applicable State Rules.

What are the normal working hours under the 2026 Central Rules?

Under the Central Rules, the normal working day for daily-wage employees is eight hours, while employees with other wage periods must generally not exceed 48 working hours per week. Overtime requirements apply when the statutory thresholds are exceeded. HR teams must also check the applicable State Rules.

When is a Grievance Redressal Committee required?

A Grievance Redressal Committee is required in an establishment employing 20 or more workers under the Industrial Relations Code.

When do standing-order requirements become relevant?

The Industrial Relations Code uses a 300-worker threshold for statutory standing-order requirements, subject to the specific provisions of the Code. HR teams should assess applicability based on the establishment and applicable rules.

Who is covered by the gig and platform worker provisions?

The Social Security Code formally recognises gig and platform workers and provides for social security schemes for them. However, this does not mean that they automatically become conventional employees for PF or ESI. The applicable schemes, registration requirements and aggregator obligations must be assessed under the Social Security Code and relevant rules.

Are annual health check-ups mandatory for workers aged 40 and above?

The government launched a nationwide free annual health-check programme for eligible workers aged 40 and above through ESIC on 7 May 2026. The precise statutory applicability depends on the establishment and the applicable Central or State rules, so employers should verify the requirements relevant to their jurisdiction and workforce.

Strengthen Your Labour Law Compliance with comply360°

The Labour Codes require more than updating an HR policy. Organisations need to translate the new framework into payroll structures, appointment letters, wage slips, gratuity processes, working-hour systems, grievance mechanisms, workplace safety measures and state-wise compliance controls.

comply360° can help HR and compliance teams assess their current framework, identify gaps and operationalise applicable Labour Code requirements through compliance advisory, training and implementation support.

Get in touch with comply360° to strengthen your organisation’s labour law compliance framework and prepare for ongoing regulatory requirements in 2026.