Introduction

The Ministry of Labour and Employment notified the long-awaited labour codes i.e., the Code on Wages, 2019 (“Wages Code”), the Code on Social Security, 2020 (“SS Code”), the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”) and the Industrial Relations Code, 2020 (“IR Code”) (together, “Labour Codes”) on 21 November 2025. The Labour Codes update and consolidate 29 central labour legislations and aim to modernise and streamline the erstwhile regime .
While the Labour Codes are now in force, the transition to the new framework under the Labour Codes remains ongoing and will only be complete once the Central Government and respective State Governments frame the necessary rules, regulations and schemes required to make the framework operational. Relevant provisions of the existing labour laws will continue to be in force during this transitional period . The Labour Codes do not override or replace State specific employment laws and local legislations, such as shops and establishments acts, will continue to apply and regulate aspects such as working hours, leaves and other working conditions for commercial establishments going forward. This overlap will have to be considered and addressed while revisiting existing HR policies and compliance requirements.
The Labour Codes are primarily a consolidation exercise but they do make certain significant additions and amendments to the previous regime.

Some of the key changes introduced by the Labour Codes have been analysed below.
Wages Code
The Wages Code consolidates and replaces the erstwhile Equal Remuneration Act, 1976, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Payment of Wages Act, 1936 (together, the “Old Wages Laws”).

(A) Scope of employees

• Requirements in relation to timeline and manner of payment of wages were typically only applicable to employees earning a monthly wage of INR 24,000 or less under the Old Wages Laws. The Wages Code has extended these benefits and introduced additional benefits (see below) for all employees, whether skilled, unskilled, managerial / supervisory or non-managerial, regardless of their monthly wages.
• As a result, all requirements in relation to wages (such as restriction on having a wage period longer than 1 (one) month, payment of monthly wages prior to the seventh day of the succeeding month, making deductions from wages and imposing fines on employees), which were previously predominantly applicable to blue collar workers engaged in establishments such as factories, will now apply to white collar employees as well. Majority of the companies that were previously not impacted by the Old Wage Laws (given the low applicability threshold), will now need to revisit their practices and ensure compliance with these requirements.

(B) Uniform definition of wages

• The Wages Code introduces a uniform definition of the term ‘wages’ applicable across the Labour Codes. This definition forms the basis for calculating social security and statutory benefits (such as gratuity, provident fund contributions and maternity benefits) payable to employees.
• The term was previously defined differently under various labour legislations and primarily included: (i) all remuneration capable of being expressed in terms of money and payable to an employee on completion of work as per the terms of their employment (“Basic Remuneration”); and (ii) certain types of allowances (the scope of which differed across statutes).
• The revised definition broadly remains the same (i.e., it includes all Basic Remuneration such as salary and basic pay) as well as allowances (including dearness allowance and retaining allowance) (the “Wages Basket”), but specifically excludes certain sums such as bonus payments, employer contributions to provident fund or pension (including accrued interest), house rent allowance, conveyance and travelling allowances, overtime allowance, gratuity, retrenchment compensation and other retirement benefits (the “Excluded Components”).
• To avoid employers structuring allowances in a manner that reduces the Wages Basket, the Wages Code also provides that if the Excluded Components exceed 50% (or such other threshold as may be notified by the Central Government) of the total remuneration being paid to the employee (i.e., the Wages Basket plus the Excluded Payments), then the amount exceeding 50% of the total remuneration will be deemed to form part of the Wages Basket. Separately, up to 15% of any remuneration paid to the employee in kind will also be considered as part of the Wages Basket.
• The primary impact of this change is that the Wages Basket must now form at least 50% of the total remuneration payable thereby increasing social security related contributions and reducing the take home component for the employees. Accordingly, employers will need to revisit their practices relating to calculation of wages and statutory benefit contributions.
• Separately, the Wages Code now specifically recognises and permits payment of wages via electronic mode.

(C) Introduction of National Floor Wage

• Previously, minimum wages were notified by both the Central Government and individual State Governments. As per the Wages Code, the Central Government will now prescribe a ‘National Floor Wage’ i.e., the minimum wages payable to all employees across organised and unorganised sectors in all States. This will now serve as a baseline below which no State Government can fix its own minimum wage rates but a State which already provides for a higher rate than this floor need not reduce its minimum wages.
• The National Floor Wage amount is yet to be notified but the Wage Code mandates the usage of fair criteria such as skill level (unskilled, semi-skilled, skilled, or highly skilled), type of work and geographical area to determine the minimum wages.

(D) Timely payment of wages on resignation
• The two-day timeline prescribed under the Old Wages Laws for payment of wages to an employee on termination of their employment (including where such termination is due to closure of the establishment) has now been extended to employee resignations as well. Also, worth reiterating that this payment obligation will get triggered on termination of or resignation by any employee (given the wider definition under the Wages Code) going forward unlike the Old Wages Laws.
• It is also crucial to consider this from an M&A perspective as employees are often transferred via a resignation plus immediate fresh appointment mechanism during such transactions.

(E) Uniform claim period
• The limitation period for filing a claim for breaches under the Old Wages Regime varied across statutes (with certain statutes not providing for a limitation period altogether). For instance, claims in relation to unlawful deductions could only be filed within 12 (twelve) months from the date of the deduction. Breaches for which no specific limitation period was prescribed were governed by the Limitations Act, 1963, which provides for a 3 (three) years’ limitation period for contractual breaches and other employment-related suits.
• The Wages Code has introduced a unified time limitation of 3 (three) years for filing of any claims arising under the code.
(F) Payment of statutory bonus
• The Old Wages Laws provided for payment of an annual statutory bonus (ranging between 8.33% to 20% of the employee’s salary) to employees who: (i) earned a salary of up to INR 21,000 per month; (ii) were employed in an establishment having 20 (twenty) or more employees; and (iii) had worked in the establishment for a prescribed time period.
• The Wages Code retains this construct but also provides for a revised salary threshold for eligibility for bonus payments. The revised threshold is yet to be notified but if it is higher than the erstwhile INR 21,000 threshold, additional employees could become eligible for bonus payments going forward and the pay-out obligations for employers could increase significantly.
(G) Remedial & penalties framework
• The Wages Code introduces a remedial mechanism (rather than a direct enforcement construct) for employers. It requires the labour authority to give an opportunity to the employer to comply with the provisions of the Wages Code in a time-bound manner before initiating proceedings against them. However, this mechanism does not apply in case of a repeated offence by the employer within 5 (five) years from the first offence of the same nature.
• Non-compliance with the Wages Code can attract a monetary fine ranging from INR 10,000 to INR 50,000 for the first offence, which can increase to a fine ranging from INR 40,000 to INR 100,000 and/or imprisonment ranging from 1 (one) month to 3 (three) months for any repeated offences occurring within 5 (five) years of the first offence.

SS Code

The SS Code replaces the existing social security laws including the Employees’ State Insurance Act, 1948 (“ESI Act”) and the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”).
The existing social security framework under these erstwhile statutes has largely been retained in the SS Code, with some notable changes such as the introduction of new categories of workers, extension of social security benefits to such workers and coverage of emerging employment models via aggregators and online platforms. The schemes and rules corresponding to the SS Code are yet to be issued so the existing social security schemes (such as employees’ provident fund, employees’ state insurance, etc.) will continue to operate until the new schemes are notified. However, the impact of the new uniform definition of ‘wages’ under the Wages Code will have to be considered for calculating the social security benefits with immediate effect.

(A) New categories of workers

• Gig workers – persons who perform work or participate in a work arrangement and earn from such activities outside of the traditional employer-employee relationship.
• Platform workers – persons engaged in platform work i.e., a work arrangement outside of a traditional employer-employee relationship where the person accesses other persons through an online platform to provide specific services or other such activities in exchange for payment.
• Self-employed workers – persons not employed by an employer but who engage themselves in any occupation in the unorganized sector subject to a monthly earning threshold to be notified by the Government.
• While the above classifications are mentioned to be outside a “traditional employer-employee relationship”, there is no guidance on the interpretation of this term. The legislative intent is to cover persons working as delivery partners, cab drivers, and other such persons providing services through an online aggregator or platforms such as Uber, Zomato, etc. as well as home-based workers and other workers in the unorganised sector (for instance, domestic workers) who had been excluded from the ambit of the existing social security framework. However, given the broad manner in which the above definitions have been drafted, it is unclear whether independent contractors, consultants and freelancers may also be covered under these classifications.
• Fixed-term employees (“FTEs”) – persons engaged on the basis of a written contract of employment for a fixed period. Relevant benefits for FTEs have been set out in paragraph (C) below.

(B) Recognition of aggregators

Digital intermediaries and marketplaces for buyers/consumers to connect with sellers/service providers have been expressly recognized under the SS Code as “aggregators”, who are, inter alia, required to make contributions towards social security schemes, in the context of gig workers and platform workers (see paragraph (C) below). While conventional aggregators such as ride, food delivery, and e-commerce platforms are covered, it is unclear whether contribution obligations applicable to aggregators would also extend to any enterprise which engages freelancers or consultants (who may be termed gig workers or self-employed workers) to provide services to its own end-users/consumers through an online presence, given the inclusion of ‘any other goods and services provider platform’ within the list of specified aggregators in the SS Code.

(C) Benefits

• • Replacement of existing schemes – As mentioned above, the Government is yet to notify schemes under the SS Code to replace the existing schemes under the erstwhile social security framework so the current schemes will continue to apply in the interim.
  • Introduction of new schemes – The Government will notify special social security schemes for gig workers, platform workers and their family members. Such schemes may require aggregators (see paragraph (B) above) to make certain contributions and also clarify compliance requirements based on eligibility criteria such as income thresholds etc. Aggregators are expected to make contributions at a rate (yet to be prescribed) falling between 1% to 2% of their annual turnover, with the total contribution capped at 5% of the aggregate amount paid or payable by an aggregator to its gig workers or platform workers.
  • Coverage of ESI scheme – The SS Code introduces a central level Employees’ State Insurance (ESI) scheme that is no longer limited to notified areas and classes of establishments. Smaller establishments having less than 10 (ten) employees can also voluntarily opt for this scheme but such coverage is mandatory for establishments undertaking any hazardous occupation, even if they have a single employee.
  • Benefits for FTEs – The wages, conditions and benefits offered to such employees must not be less than that of a permanent employee doing the same or similar work, and they will also be eligible for benefits which may require a qualifying period of employment on a proportional basis.
    Notably, the SS Code provides that FTEs are now eligible to receive gratuity benefits from their employers. While permanent employees are required to complete 5 (five) years of continuous service in order to be eligible for gratuity, FTEs are eligible for gratuity on a pro rata basis upon expiration of the fixed term of their employment. In this regard, the Ministry of Labour and Employment has, through a press release, mentioned that FTEs will be eligible for payment of gratuity after a period of 1 (one) year although the SS Code does not itself expressly refer to any such period. Further rules in this regard are awaited to clarify the criteria for gratuity entitlement of FTEs.

(D) Transfer of employees

In case an employer transfers their establishment, such employer and the transferee will be jointly and severally liable to pay any dues towards the employer’s liabilities under the SS Code till the date of transfer. The transferee’s liability will only be to the extent of the value of the assets obtained by them. Although this provision was already in force under the EPF Act and ESI Act, the SS Code extends it to all social security benefits payable to employees and aligns the regulatory framework with prevailing market practice on employee/establishment transfers.

(E) Limitation period for claims

The SS Code introduces a limitation period of 5 (five) years from the date of the dispute/payment dues arising to file claims in relation to employees’ provident fund and employees’ state insurance benefits.

(F) Unified registration

The SS Code requires every establishment to register itself electronically or in such other manner as may be prescribed by the Central Government. However, if an establishment is already registered under any other central labour law, such establishment will be deemed to be registered under the SS Code as well and not require any separate registration. While the corresponding rules in this regard are awaited, the SS Code seems to introduce a unified registration framework, as opposed to the earlier requirement to obtain registration separately under various statutes.

(G) Penalties

Non-compliance with the SS Code can attract a monetary fine up to INR 100,000 and/or imprisonment ranging from 2 (two) months to 3 (three) years depending on the nature of the offence. Repeated offences can attract a fine ranging from INR 200,000 to INR 300,000, and imprisonment for a term of up to 3 (three) years.

OSH Code

The OSH Code creates a uniform national regime for workplace safety, health and basic working conditions by replacing thirteen central statutes, including the Contract Labour (Regulation and Abolition) Act, 1970 (“CLRA”), Factories Act, 1948 (“Factories Act”) and Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 (“Migrant Workers Act”).
Key changes introduced by the OSH Code are set out below:

(A) Uniform definition of ‘establishment’ & employee benefits

• Historically, employee entitlements such as annual leave, working hours and basic welfare facilities were governed in a disparate manner across various States in India. While the Factories Act set out detailed rules for factory workers at a central level, state-specific legislations, such as Shops & Establishments (S&E) Acts, regulated similar matters for offices, shops and other commercial establishments, each with its own definitions and thresholds. This fragmented framework meant that whether an employee received a particular statutory benefit often depended not only on the nature of the workplace but also the State in which it operated.

• The OSH Code addresses this fragmented approach by classifying all premises where an industry, trade, business, manufacturing or occupation is carried on and 10 (ten) or more workers (earlier referred to as ‘workmen’) are ordinarily employed as an “establishment”. The OSH Code does not replace the State level legislations so the manner in which the OSH Code will ultimately operate in each State will still depend on the notification of the rules and the relevant State’s alignment with the OSH Code. However, where the OSH Code introduces more beneficial employee-friendly protections, those provisions will override conflicting State-specific standards and therefore serve as a base for the minimum employee benefits applicable for all States going forward. Key changes to employee benefits under the OSH Code include:

o Working hours & overtime – The OSH Code provides for a standard 8 (eight) hours workday for all workers (as defined under the IR Code). Overtime mandatorily requires the worker’s consent and is payable at twice the rate of wages (on a daily or weekly basis, whichever benefits the worker).

o Night shifts for women – Women can be engaged for work from 7 p.m. to 6 a.m. subject to their consent and prescribed safety, holiday and working-hour safeguards and protective measures being in place, in contrast with the provisions of the Factories Act which prohibited the same.

o Leave framework – Workers having worked for a minimum of 180 days in a calendar year are entitled to paid annual leave of 1 (one) day for every 20 (twenty) days of work and are permitted to carry forward up to 30 (thirty) days of accrued but un-availed leaves to the following calendar year. Workers who apply for but are denied annual leave can carry forward such denied leave to the following calendar year without any limit. Workers are also entitled to leave encashment for accrued leaves at: (i) the end of each calendar year (including encashment of leaves accrued in excess of 30 (thirty) days); and (ii) the time of discharge, dismissal, voluntary resignation, super-annuation or death while in service (as applicable).

(B) Registration requirements

• The OSH Code requires every establishment that comes into existence after its commencement to register itself within 60 (sixty) days from the date the OSH Code applies to such establishment and not employ any person without having obtained such registration. Any establishment which is already registered under any other central labour law or any other law which may be notified by the Central Government will be deemed to be registered under the OSH Code.

• Any change in the ownership or management of a registered establishment, or other particulars that have been submitted at the time of registration (in such form as may be prescribed), must be intimated to the registering officer within 30 (thirty) days of such change.

(C) Revised factory classification thresholds

• Under the Factories Act, a ‘factory’ is defined as premises which have (i) 10 (ten) or more workers where the manufacturing process is carried on with the aid of power; or (ii) 20 (twenty) or more workers where the manufacturing process is carried on without the aid of power. Further, various States notified State-specific amendments to these thresholds.

• The OSH Code raises the above thresholds to (i) 20 (twenty) or more workers with the aid of power; and (ii) 40 (forty) or more workers without the aid of power, and further clarifies that the existing State-specific thresholds shall prevail until they are amended by the respective State legislature.

(D) Contract labour & restrictions on outsourcing

• Scope of contract labour – Contract labour refers to workers engaged through a contractor in connection with work of an establishment, including migrant workers and part-time employees of contractors. However, the definition expressly excludes workers who (i) are employed by a contractor for any activity of the contractor’s establishment; (ii) are employed on mutually accepted standards of employment; and (iii) receive welfare benefits from their employer including pay increments and social security coverage under applicable law. These exclusions narrow the definition prescribed under the CLRA, which defined ‘contract labour’ as workmen employed in connection with the work of an establishment who are “hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer”. The narrowed definition under the OSH Code limits the applicability of provisions relating to contract labour and the liability of principal employers toward such workers, such that various categories of workers previously considered contract labour (for instance, permanent employees of a contractor offering services to the contractor’s clients) may no longer be considered as contract labour.

• Applicability – The threshold for applicability of provisions relating to contract labour have also been revised and now apply to: (i) every establishment in which 50 (fifty) or more contract workers were engaged on any day in the preceding 12 (twelve) months; and (ii) every manpower-supply contractor who has employed 50 (fifty) or more contract workers in the preceding 12 (twelve) months. This represents a substantive departure from the earlier regime under the CLRA, which applied to establishments and contractors engaging 20 (twenty) or more contract workers, thereby reducing the number of establishments falling within the central contract labour regulatory framework. Note, however, that while such establishments do not fall within the contract labour framework, workers earlier protected as ‘contract labour’ may still be classified as gig workers or self-employed workers and receive labour law protections on that basis (see paragraph (A) on the SS Code).

• Prohibition on contract labour in core activities – The OSH Code introduces the concept of ‘core activity of an establishment’ which is the activity for which the establishment has been set up and includes any activity which is essential or necessary to such primary activity. Employers can no longer engage contract labour for the core activity of an establishment except where contract labour is customarily used for such activity in the course of normal functioning, during a surge in the volume of work or where full-time workers are unnecessary.

• Registration – Contractors are required to obtain a license in order to supply contract labour or undertake work through contract labour in any establishment. The OSH Code prescribes a uniform validity period of 5 (five) years for the license, whereas licenses issued under the CLRA were valid for the period set out in the respective licenses. Further, contractors who have already obtained a license under the CLRA are only required to obtain a license under the OSH Code post-expiry of their existing licenses.

(E) Inter-state migrant workers

• The OSH Code revises the concept of an inter-state migrant worker by replacing the narrower framework under the Migrant Workers Act, which covered individuals recruited by or through a contractor in one state for employment in an establishment in another state and expressly excluded persons employed in a managerial, administrative or supervisory capacity.

• Under the OSH Code, employers are mandated to provide journey allowances and other benefits to be prescribed to inter-state migrant workers. Such workers now include any person employed in an establishment who: (i) has been recruited directly by the employer or indirectly through a contractor in one state for employment in another state; or (ii) has moved from their home state and sought employment in an establishment in another state. Significantly, the OSH Code introduces an upper wage limit of INR 18,000 per month (or such higher amount as may be notified) for a person to be classified as an ‘inter-state migrant worker’. In addition, the previous exclusion for persons employed in managerial, administrative, or supervisory roles has also been omitted, thereby extending coverage to individuals whose wages fall below the statutory threshold.

(F) Additional duties & obligations of employers

The OSH Code also introduces certain new employer obligations, such as:

• Appointment letters – Employers must issue a formal appointment letter to every employee in such form as may be prescribed and provide appointment letters to existing employees within a period of 3 (three) months from commencement of the OSH Code.

• Annual health examinations – Employers must provide free periodic or annual health examinations or tests for such classes of employees, or such ages or categories of establishments, as may be prescribed by the appropriate Government.

• Employee rights to information & remedial action – The OSH Code introduces a statutory right for employees to obtain information relating to their health and safety at the workplace. Employees may also raise a notice to the employer regarding any inadequate protective measures or the presence of imminent risks of injury, danger or death, with a right to escalate such concerns to the Inspector-cum-Facilitator if no action is taken.

(G) Penalties

Non-compliance with the OSH Code can attract a monetary fine ranging from INR 50,000 to INR 500,000 (plus an additional fine of INR 2,000 to INR 25,000 per day for continuing offences) and/or imprisonment for a term of 3 (three) months up to 3 (three) years depending on the nature of the offence.

IR Code

The IR Code replaces the Trade Unions Act, 1926 (“TU Act”), the Industrial Employment (Standing Orders) Act, 1946 (“IESO Act”) and the Industrial Disputes Act, 1947 (“ID Act”). While the broad framework of these legislations has been preserved, some significant changes have been made in relation to recognition of negotiating unions and councils, conditions of employment in industrial establishments, industrial disputes and resolution of conflicts between employers and workers, as set out below.

(A) Scope of workman

Worker (earlier referred to as ‘workman’ under the ID Act) now includes persons engaged in a supervisory capacity who earn less than INR 18,000 per month i.e., an increase of INR 8,000 over the limit prescribed under the ID Act. Accordingly, the benefits under the IR Code extend to a wider spectrum of the labour force than provided for under the erstwhile ID Act.

(B) Grievance Redressal Committee (GRC)

Employers in every industrial establishment with 20 (twenty) or more workers need to constitute a GRC to resolve disputes arising out of worker grievances. The GRC must have equal representation of both the employer and the workers (in a manner to be prescribed) and adequate representation of women workers (in the proportion of the number of women workers to total workers in the establishment). Aggrieved workers have been granted a 1 (one) year period from the date on which the cause of action arose to file an application before the GRC. The GRC is required to complete its proceedings within 30 (thirty) days from receipt of such application. All decisions of the GRC must be based on the majority view of the GRC but more than half of the members of the GRC representing the workers must agree to such decision, failing which no decision will be deemed to have been taken by the GRC.

(C) Recognition of negotiating unions and councils

• The IR Code introduces the concept of negotiating unions and negotiating councils for collective bargaining at industrial establishments, which was earlier dealt with by trade unions. Each industrial establishment with a registered trade union needs to put in place a negotiating union or council (as the case may be) to negotiate with the employer on behalf of the workers on such matters as may be prescribed by the Government.

• Where an industrial establishment has only one registered trade union, such union will be recognised as the sole negotiating union, subject to certain conditions to be prescribed. In case there are more than one registered trade unions, the union which is supported by at least 51% of workers will be recognised as the sole negotiating union. If there are multiple registered trade unions and no such union has the support of 51% of workers, the employer is required to constitute a negotiating council, consisting of representatives of trade unions which have the support of at least 20% of the total workers in that industrial establishment.

• Any agreement reached between an employer and a negotiating council must be agreed to by the majority of representatives of the trade unions represented in the negotiating council. Recognition of negotiating unions/councils will remain valid for a maximum of 5 (five) years.

(D) Standing orders

• The IR Code makes several changes to IESO Act framework on standing orders, which are now applicable to only industrial establishment (including commercial establishments) with 300 (as opposed to 100 earlier) or more workers in the preceding 12 (twelve) months. While both the IR Code and the IESO Act require employers to prepare and submit draft standing orders to the certifying officer (appointed by the appropriate Government under the IR Code) within 6 (six) months from commencement of the IR Code/applicability of the IESO Act to an industrial establishment, the IR Code now requires employers to prepare draft standing orders based on model standing orders to be published by the Government and forward these to the relevant authority for certification.

• Draft standing orders must cover all matters specified in the IR Code, including worker classification, termination of employment, misconduct and redressal mechanisms for workers against unfair treatment. The employer is also required to consult with trade unions/recognised negotiating union or members of the negotiating council in respect of the draft standing orders. However, the employer also has the option to adopt the model standing orders framed by the Government, in which case such orders will be deemed to have been certified. All existing standing orders shall continue and be deemed to have been certified, to the extent they are not inconsistent with the IR Code.

(E) Prior notice for strikes & lock-outs

The IR Code aims to prevent flash strikes and sudden work stoppages by introducing a requirement to provide prior notice for strikes and lock-outs, with the maximum notice period being 60 (sixty) days prior to the date of the strike and a minimum notice period of 14 (fourteen) days. The aim is to provide a cooling-off period to facilitate negotiations and conciliation prior to any disruption so a strike or lock-out cannot commence prior to the date specified in such notice. Strikes and lock-outs are also not permitted during the pendency of dispute resolution proceedings or while a settlement or award is in effect. These conditions were only applicable to public utility services under the ID Act but have now been extended to all industrial establishments under the

(F) Enhanced thresholds for government approval for lay-off, retrenchment & closure

A significant change in the IR Code is the increased threshold in respect of prior governmental approval required for lay-off or retrenchment or closure of the establishment. The ID Act required such prior approval for industrial establishments with 100 or more workers, which has now been increased to 300 workers. While this amendment had already been incorporated by several States through rules issued under the ID Act, the IR Code now standardises this threshold for all States.

(G) Worker Re-skilling Fund

The Government has also set up a Worker Re-skilling Fund for the benefit of retrenched workers. The employer is required to contribute the equivalent of 15 (fifteen) days’ last drawn wages for each retrenched worker to this fund within 45 (forty five) days of such retrenchment.

(H) Penalties

Non-compliance with the IR Code can attract a monetary fine of up to INR 1,000,000, which may increase to INR 2,500,000 and/or imprisonment up to 6 (six) months for repeated offences.

Compounding of offences

The Labour Codes have introduced stricter penalties for non-compliance as compared to the relatively nominal penalties under the erstwhile labour statutes. However, a common reform introduced across the Labour Codes is the ability to compound certain offences, thereby allowing employers to settle specified contraventions without undergoing criminal prosecution.

The SS Code, OSH Code and IR Code each adopt a largely uniform structure, where certain offences can be compounded with payment of:

• 50% of the maximum fine provided for that offence, where the offence is punishable with fine only; and
• 75% of the maximum fine provided for that offence, where the offence is punishable with imprisonment up to 1 (one) year and fine.
No compounding is possible where an offence has been committed a second time within a period of 3 (three) years of commission of a similar offence which was previously compounded or for which the relevant person was earlier convicted.
Although the Wages Code has a similar compounding construct as the other Labour Codes, unlike the other Labour Codes, compounding requires payment of 50% of the maximum fine provided for the relevant offence, with the compounding amount being the same regardless of whether the relevant offence is punishable only with fine or with fine and imprisonment up to 1 (one) year. Compounding is not permitted for an offence which has been committed a second time within a period of 5 (five) years of commission of a similar offence (as against 3 (three) years under the other Labour Codes) which was previously compounded or for which the relevant person was earlier convicted.

Way forward

The Labour Codes aim to overhaul India’s labour regime by providing greater uniformity, reduced compliance burden and a more balanced framework to support businesses while safeguarding worker rights. The implementation of these codes is largely dependent on the rules and schemes yet to be published by the Central and State Governments so we are currently in a hybrid situation where the erstwhile regime still continues to govern certain day to day matters, especially procedural filings etc.
However, given that the Labour Codes have been notified and need to be adhered to the extent possible sans the awaited rules, it is advisable for employers to immediately identify their updated obligations and ensure compliance with this new framework.

Authors: Neville Golwalla – Partner, Jasel Mundhra – Senior Associate, Pranav Kandada , Nandini Pradhan and Atik Saiyed – Associates

Disclaimer: This publication only highlights key issues and is not intended to be comprehensive. The contents of this publication do not constitute any opinion or determination on, or certification in respect of, the application of Indian law by Talwar Thakore & Associates (“TT&A”). No part of this publication should be considered an advertisement or solicitation of TT&A’s professional services. This communication is confidential and may be privileged or otherwise protected by work product immunity.