New labour codes: what a small employer should check

Start with what happened. The four codes are 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. The Ministry of Labour and Employment announced on 21 November 2025 that all four were being made effective, rationalising 29 existing central labour laws. The codes set the framework, and rules fill in the detail. The Centre notified its rules in May 2026, according to published reports. State rules are at different stages in different states, and whether central or state rules govern a particular small business depends on which government is the appropriate government for it. So the first question for your adviser is a simple one: which rules apply to us, and what has our state notified so far?

Second, appointment letters. The Ministry describes appointment letters as mandatory for all workers, where before there was no such general requirement. A good letter sets out the designation, wages, working hours, place of work, probation, notice period and social security entitlements. If your people work without letters, a single standard letter with individual details, signed by each person, is a modest job. Do it this month.

Third, wages. The Ministry's compliance handbook describes several duties under the Code on Wages. Wages must be paid within set times; for monthly wages, before the seventh day of the following month. Deductions are permitted only for authorised purposes and within a cap. Wage slips go to employees on or before payment. Registers of attendance, wages, overtime and deductions are to be kept, and the handbook says records should be preserved for five years. When an employee leaves, all dues are to be paid within two working days. Covered employees who work beyond normal hours are to be paid at least twice the normal rate, and equal pay applies regardless of gender. Check your payroll against each of these.

Fourth, the definition of wages, which is where calculations can quietly change. The Code includes basic pay, dearness allowance and retaining allowance, and excludes certain items such as house rent allowance and conveyance allowance. But if the excluded items together exceed 50 per cent of total pay, the excess is counted as wages. Anything calculated on wages, such as provident fund contributions or gratuity, may be affected, depending on how the rules apply. Ask your chartered accountant to look at your salary structure against this definition.

Fifth, thresholds. The Code on Social Security's First Schedule applies provident fund provisions to establishments with twenty or more employees, and Employees' State Insurance to establishments with ten or more persons, with exceptions and some voluntary coverage for smaller ones. Gratuity applies to specified establishments, including shops and establishments with ten or more employees. It is generally payable after five years of continuous service, and the Ministry says fixed-term employees become eligible after one year. Maternity benefit is 26 weeks for eligible women, and establishments with 50 or more employees must provide crèche facilities, directly or through a shared arrangement. Count your headcount carefully and see which of these you are at or near.

Sixth, fixed-term and contract workers. The Ministry describes fixed-term employees as entitled to wages and benefits equal to permanent employees in comparable work. Contract labour provisions in the safety code apply to establishments with 50 or more contract workers, and a principal employer has responsibility for welfare facilities and, if a contractor defaults, for wages. If you use a contractor or agency, review the arrangement.

Seventh, health and safety. The safety code requires establishments with ten or more employees to register, and the handbook describes registration within 60 days for the central sphere. The Ministry says workers above 40 are to get a free annual health check-up. Women may work at night in all types of work, with their consent and safety measures. Smaller employers should also check drinking water, toilets, rest areas and other basic facilities.

Here is a practical order. First, find out which government's rules apply to you and what your state has notified. Second, count your headcount by category. Third, audit appointment letters, wage slips and records. Fourth, ask your chartered accountant to check provident fund, ESI and gratuity positions against the wage definition. Fifth, update your policies, notices and registers, and set a date to review again, because the rules are still settling. None of this replaces professional advice, and it will not cover your sector or your state in full. It will give you a better conversation with the person who can.