Indian Labour Codes: What HR Teams Should Understand in 2026

For years, India's new Labour Codes were discussed as something employers needed to "prepare for." That is no longer the situation. The four Labour Codes came into force on 21 November 2025, replacing and consolidating 29 central labour laws. The Central Rules were subsequently notified on 8 May 2026, and throughout 2026 the Ministry of Labour & Employment has been running awareness and capacity-building programmes for employers, HR professionals and industry bodies.

For HR teams, the Labour Codes should no longer sit in a folder marked "future compliance." They affect some of the most routine parts of HR: how wages are structured, how quickly employees are paid when they leave, what records employers maintain, when social-security provisions apply, how appointment letters are handled, and what additional obligations appear as a company grows. This guide explains the four Codes from an HR operations perspective and highlights the areas growing Indian businesses should review in 2026.

What Are the Four Labour Codes?

The new framework consolidates 29 central labour laws into four Codes:

1. The Code on Wages, 2019
2. The Industrial Relations Code, 2020
3. The Code on Social Security, 2020
4. The Occupational Safety, Health and Working Conditions Code, 2020

The government has tried to reduce the number of separate registrations, returns, forms and registers employers need to manage. According to the Ministry of Labour & Employment's employer compliance handbook, the earlier framework involved 31 different returns, 181 forms and 84 registers across the laws being consolidated. Under the new framework these are intended to move towards a single electronic return, 73 forms and eight registers. For HR teams, however, the more important question is: what changes in everyday work?

1. Salary Structure Matters More Under the New Definition of Wages

One of the most important concepts for HR and payroll teams is the new common definition of "wages." Under the Code on Wages, wages broadly include basic pay, dearness allowance and retaining allowance where applicable. Certain items such as HRA, conveyance allowance, overtime, commission and employer contributions to provident or pension funds are excluded. However, there is an important rule: if specified excluded components exceed 50% of total remuneration, the excess is added back and treated as wages.

Why does this matter?

Imagine an employer has historically structured compensation with a relatively low basic salary and a large number of allowances. Under the new definition, simply labelling most of the salary as allowances may not keep those amounts outside the wage calculation. That can affect the base on which certain statutory benefits and liabilities are calculated. Salary structures should not simply be carried forward from older templates without review.

A useful exercise in 2026 is to take a few representative salary structures across the organisation and ask:

• What percentage is basic pay and DA?
• Which components are being excluded from wages?
• Do the exclusions cross the 50% threshold?
• Would the wage base change as a result?
• Does that affect gratuity or other statutory calculations?

This is one area where HR and payroll teams may need to work closely with finance and their labour-law or payroll adviser. Our salary structure guide is a good starting point for the components involved.

2. Minimum Wages Now Have Wider Coverage

The Code on Wages provides a statutory right to minimum wages across employment rather than restricting minimum-wage protection to selected scheduled employments. Employers must pay at least the minimum rate notified by the appropriate government. For HR, this means minimum-wage compliance cannot be treated as an issue relevant only to certain categories of workers.

Companies with employees across different states or locations should also remember that the applicable minimum wage can depend on the jurisdiction, nature of employment and classification of work. A multi-location company therefore needs a reliable way of answering a fairly basic question: are we paying every employee at least the applicable minimum wage for their location and category? That becomes harder to answer when employee data and salary structures are maintained in separate spreadsheets across branches.

3. Wage Payment Timelines Need Attention

For employees on a monthly wage period, wages must generally be paid before the expiry of the seventh day of the following month. There is an even more important requirement during employee exits: when an employee leaves because of resignation, dismissal or termination, the employer is required to pay wages due within two working days.

This is particularly relevant because exits involve several moving parts: attendance until the last working day, unpaid leave or LOP, salary payable, deductions, reimbursements, recoveries, leave balances, gratuity where applicable, and other full-and-final settlement components. If these calculations still depend on several teams exchanging spreadsheets at the end of the process, meeting tighter payment timelines becomes more difficult. The practical lesson is that the resignation and final-settlement workflow needs to begin before the employee's last day, not after it.

4. Attendance, Wage and Overtime Records Still Matter

Digitalisation does not eliminate record keeping. The employer compliance handbook lists records such as attendance or muster rolls, wage registers, overtime registers, registers relating to deductions, and employee records. The Code on Wages allows prescribed records to be maintained electronically, and its employer handbook states that relevant wage records must be preserved for five years.

This is an important distinction for growing companies. Moving HR from paper to Excel is not necessarily the same as creating a reliable compliance record. If attendance is in one spreadsheet, leave approvals are in WhatsApp, payroll is in another workbook and salary corrections happen over email, it can still be difficult to reconstruct exactly how an employee's salary was calculated six months later. Good record keeping means the underlying information is consistent, traceable and retrievable. Our guide to how payroll works walks through the records a payroll cycle should leave behind.

5. Appointment Letters Become a Basic Compliance Requirement

Under the Occupational Safety, Health and Working Conditions Code, employers are required to issue appointment letters to employees. For a well-established HR department this may sound obvious. For small companies, it is worth paying attention to. Many businesses begin informally: the founder hires the first few employees directly, offers are confirmed by email, salary details sit in a spreadsheet, and formal HR documentation is added much later. As the business grows, that becomes risky.

A basic onboarding process should ensure every employee has a formal appointment letter, confirmed designation and department, date of joining, compensation details, employment terms, relevant policies, and employee records and statutory information. The Labour Codes make formalisation more important, not less.

6. Social Security Thresholds Still Need to Be Monitored

The Code on Social Security brings several social-security laws into one framework, including provisions relating to EPF, ESI, gratuity, maternity benefit and employee compensation. For HR teams, headcount continues to matter.

Employees' Provident Fund

The Ministry's employer handbook states that EPF provisions apply to establishments employing 20 or more employees.

Employees' State Insurance

The handbook states that ESI provisions apply to establishments employing 10 or more persons, subject to the Code's applicability provisions. It also provides for coverage of establishments engaged in hazardous or life-threatening activities even where only one employee is employed.

The important operational point is that a company should not discover that it has crossed a statutory threshold several months later during an audit. HR needs visibility into current employee strength and applicable coverage as the organisation grows.

7. Gratuity Has an Important Change for Fixed-Term Employees

For most employees, gratuity remains linked to completion of at least five years of continuous service, subject to the circumstances set out in the Code. However, the Social Security Code introduces an important provision for fixed-term employees. According to the Ministry's employer handbook, gratuity is payable to a fixed-term employee when their contract ends after completing one year of service. The handbook also states that gratuity must generally be paid within 30 days from the date it becomes payable.

Companies using fixed-term employment should therefore review their contracts, employee classification and gratuity calculations rather than assuming the same five-year rule applies to everyone. Our gratuity calculator can help estimate the amounts involved.

8. Maternity and Crèche Requirements Remain Important

The Social Security Code retains significant maternity protections. According to the Ministry's compliance handbook:

• An eligible woman employee must have worked at least 80 days in the preceding 12 months.
• Eligible employees can receive up to 26 weeks of maternity benefit.
• Establishments employing 50 or more employees must provide access to a crèche facility, including permitted common crèche arrangements.

For a growing company, the important point is that HR compliance changes as headcount changes. A process that was sufficient when the company had 15 employees may no longer be sufficient at 50. This is why headcount should not only be treated as a hiring metric. It is also a compliance trigger.

9. Grievance Redressal Becomes More Structured

The Industrial Relations Code introduces specific requirements for industrial establishments based on worker strength. Every industrial establishment employing 20 or more workers must constitute one or more Grievance Redressal Committees. The committee must have equal representation from the employer and workers, and women must be adequately represented in proportion to their share of the workforce.

For HR teams in industrial organisations, this means employee grievances should not depend entirely on informal escalation to a manager or HR executive. The organisation needs a defined mechanism for receiving, tracking and resolving grievances.

10. Larger Industrial Establishments Have Additional Obligations

The Industrial Relations Code introduces additional requirements as workforce size increases. For example:

• Industrial establishments with 300 or more workers come within the standing-orders provisions.
• Factories, mines and plantations with 300 or more workers face prior-permission requirements in specified cases of lay-off, retrenchment or closure.
• Certain establishments with 50 to 299 workers have separate notice requirements for such actions.

These provisions may not affect every small business, but they show why HR compliance cannot be managed using one checklist for companies of every size. Industry and employee classification matter just as much as total headcount.

11. Workplace Safety Is Also an HR Issue

The Occupational Safety, Health and Working Conditions Code is particularly important for manufacturing, construction, mining and other operational environments. Employer responsibilities include maintaining safe and healthy working conditions, providing prescribed welfare facilities, reporting specified workplace accidents and dangerous occurrences, and meeting industry-specific safety requirements. The Code also allows women to work in all establishments and types of work, including before 6:00 a.m. or after 7:00 p.m., subject to their consent and prescribed safety conditions.

Workplace safety therefore cannot sit entirely with an EHS or operations team. HR may need to manage employee records, shift assignments, consent documentation, health examinations, incident documentation, appointment information, and welfare and working-condition requirements. The exact obligations depend heavily on the type of establishment and applicable rules.

Headcount Thresholds at a Glance

Several obligations above switch on at specific employee or worker counts. As reported in the Ministry's employer handbook:

What Should HR Teams Do in 2026?

The Labour Codes cover a wide range of employment issues, but an HR team does not need to begin by reading hundreds of pages of legislation. Start with the processes that already exist inside the company.

1. Review your salary structures. Check whether your existing salary-component structure works under the new definition of wages and the 50% rule.
2. Review your payroll process. Make sure wages are paid within the applicable timelines and that the exit process can support faster settlement of wages.
3. Check your headcount against statutory thresholds. Look at EPF, ESI, crèche, grievance committee and other requirements relevant to your establishment.
4. Check appointment letters. Every employee should have proper employment documentation rather than relying on offer emails or verbal agreements.
5. Review your employee records. Make sure attendance, wages, deductions, overtime and employee information are maintained in a consistent and retrievable manner.
6. Review fixed-term employees separately. Do not assume gratuity and other provisions apply to fixed-term employees in exactly the same way as to permanent employees.
7. Map your locations. If the organisation operates in more than one state, identify which state-level rules, minimum wages and other requirements apply at each location.
8. Update HR policies and workflows. Payroll, resignation, final settlement, working hours, overtime, grievances and safety processes should reflect the requirements applicable to the organisation.
9. Speak to the right adviser where necessary. The Codes interact with Central Rules, State Rules, notifications and establishment-specific requirements. Questions about legal applicability should be validated with a qualified labour-law or compliance professional.

The Bigger HR Challenge Is Not Knowing the Law. It Is Running the Process.

Many compliance failures do not happen because HR has never heard of PF, gratuity, minimum wages or appointment letters. They happen because the underlying information is fragmented. An employee joins, but their documentation is incomplete. Attendance changes, but payroll is working from an older file. Someone resigns, but finance receives the final attendance details three days after the employee leaves. The company crosses an employee threshold, but nobody notices immediately because the headcount tracker is maintained separately.

That is where HR systems become useful. An HRMS cannot decide which law applies to your organisation or replace professional compliance advice. What it can do is make the operational side of compliance much easier to manage. Employee records, salary structures, attendance, leave, payroll, documents and exits can sit in the same system rather than being reconstructed from spreadsheets and email every month.

Where MedleyHR Fits

MedleyHR is built for small and growing Indian businesses that want to move these everyday HR processes into one system. It brings together employee records, payroll, PF, ESI and TDS workflows, leave and attendance, payslips and employee self-service, salary information, reimbursements, employee documents, and multi-branch HR and payroll data. The goal is not to make HR teams labour-law experts. It is to make sure that when a compliance requirement depends on payroll, employee data, attendance or documentation, the underlying information is organised and accessible.

The Bottom Line

The biggest change for HR teams in 2026 is simple: India's Labour Codes are no longer something to prepare for at an unspecified future date. They are now part of the employment framework. The practical task for HR is to translate that framework into everyday processes: salary structures that are reviewed correctly, employees who have proper documentation, payroll that runs on time, social-security thresholds that are monitored, records that can be retrieved, and exit settlements that do not depend on last-minute spreadsheet reconciliation. For growing businesses, that is the right place to start.