Labour Codes & Employment: FAQs

The Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 came into force on 21 November 2025 and replaced 29 central labour laws, including the Payment of Wages Act, the Industrial Disputes Act, the Payment of Gratuity Act and the Factories Act. Existing rules continue to apply to the extent they are consistent with the Codes while new central and State rules are notified.

Broadly, a person employed to do manual, unskilled, skilled, technical, operational, clerical or supervisory work. Those employed mainly in a managerial or administrative capacity are excluded, and so are those in a supervisory capacity drawing wages of more than ₹18,000 a month. The distinction matters for retrenchment, standing orders and industrial disputes.

Yes. The Codes require every employer to issue an appointment letter to every employee, setting out the prescribed particulars of the employment.

Monthly wages must be paid before the end of the seventh day of the following month. When an employee is removed, dismissed, retrenched or resigns, the wages due must be paid within two working days.

“Wages” under the Codes excludes certain components, such as house rent allowance, conveyance and overtime. If the excluded components together exceed 50% of total remuneration, the excess is added back to wages. Because wages are the base for provident fund, gratuity and other benefits, salary structures with a low basic pay may cost employers more.

Yes. Fixed-term employees are entitled to gratuity on a pro-rata basis without having to complete the five years of continuous service required of permanent employees; the government has explained that one year’s service qualifies. They must also receive the same hours, wages and benefits as permanent employees doing similar work.

Yes. The Occupational Safety, Health and Working Conditions Code allows women to work in all establishments and at night, with their consent and subject to the safety, holiday and working-hour conditions the government prescribes.

Under the Industrial Relations Code, prior government permission for lay-off, retrenchment and closure is required in factories, mines and plantations employing 300 or more workers, up from 100 under the old law. Retrenched workers are entitled to notice and compensation, and the employer must also contribute fifteen days’ wages per worker to a re-skilling fund.

Yes, to industrial establishments with 300 or more workers. Such establishments must have standing orders on the matters the Code lists, such as classification of workers, working hours, leave, misconduct and termination, either their own or adopting the model standing orders.

No person employed in an industrial establishment may strike without giving notice within sixty days before the strike, or within fourteen days of giving such notice, or while conciliation or other specified proceedings are pending. The requirement now applies to all industrial establishments, not only to public utility services.

Every employer with ten or more employees must constitute an Internal Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Complaints from smaller workplaces go to the Local Committee for the district. Non-compliance can attract a fine of up to ₹50,000, with higher penalties and possible cancellation of licences for repeat contraventions.

Generally not. Section 27 of the Indian Contract Act makes post-employment non-compete clauses void. Employers can enforce confidentiality obligations, IP assignments, garden leave during the notice period and narrowly drawn non-solicitation clauses. See our article on non-compete clauses in India.

Not always. Section 7 of the Digital Personal Data Protection Act, 2023 treats processing for the purposes of employment, or to safeguard the employer from loss or liability, as a “legitimate use” that does not need consent. Notice, security, retention and other duties still apply from 13 May 2027.