The Four Labour Codes: What Actually Changed for Employees

The four labour codes came into force on 21 November 2025, and the central rules followed on 30 December 2025. They 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. Between them they replaced a stack of central labour statutes, including the Industrial Disputes Act, 1947, the Payment of Gratuity Act, 1972, the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Factories Act, 1948, the Industrial Employment (Standing Orders) Act, 1946 and the Trade Unions Act, 1926.

Part of the employment and labour law practice at S Jain & Attorneys, Bangalore.

For an employee the practical question is narrower than the constitutional one. Nine things changed that you would actually notice. One of them, the shortening of the limitation period for raising a dispute, takes away a year of protection and has had almost no publicity. This guide goes through all nine, and then through the one Karnataka statute that survived and now does most of the work in Bengaluru.

What was repealed, and by which code

Each code carries its own repeal section, and reading them together is the only reliable way to know whether an old Act still applies to you.

Change one: workman is now worker

The word workman has gone. Section 2(zr) of the Industrial Relations Code defines worker as any person, other than an apprentice under the Apprentices Act, 1961, employed in any industry to do manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward. Working journalists and sales promotion employees are included by name.

Two substantive shifts sit inside what looks like a drafting change. The word operational has been added to the list of work types, which widens the definition. And the supervisory exclusion threshold moved from ten thousand rupees to eighteen thousand rupees a month, which brings a band of supervisors inside the Code who were outside it before. The managerial and administrative exclusion is unchanged and still has no salary component: a person employed mainly in a managerial or administrative capacity is outside the Code at any pay. We have set out the full test, the exclusions and the case law in our guide on whether you are a worker under the Industrial Relations Code.

Change two: the limitation period got shorter

This is the change that costs people cases. The proviso to Section 53(1) of the Industrial Relations Code says that the conciliation officer shall not hold conciliation proceedings relating to an industrial dispute after two years from the date on which the dispute arose. Under the repealed Industrial Disputes Act the equivalent window for an individual dispute was three years.

Section 53 also imposes an internal timetable. The conciliation officer must send the report to the parties and the appropriate Government within forty-five days of the commencement of the proceedings, or within a shorter period fixed by the appropriate Government. Where conciliation fails, the application to the Tribunal must be made within ninety days of the failure report.

Change three: the definition of wages, and why it changes your take home

Section 2(y) of the Code on Wages defines wages as all remuneration payable to a person employed, including basic pay, dearness allowance and retaining allowance, and excluding eleven categories: statutory bonus, house accommodation and utility amenities, employer contributions to pension or provident fund and interest on them, conveyance allowance and travelling concessions, sums to defray special expenses, house rent allowance, remuneration under an award or settlement, overtime allowance, commission, gratuity, and retrenchment compensation or other retirement benefit or ex gratia payment on termination.

Then comes the proviso that does all the work. If the payments falling within clauses (a) to (i) of the exclusion list exceed one half of all remuneration, or such other percentage as the Central Government may notify, the amount exceeding one half is deemed to be remuneration and is added back into wages. In other words, an employer cannot keep basic pay at twenty per cent of the package and load the rest into allowances. Where the excluded components cross fifty per cent, the excess is pulled back into wages.

Because gratuity, provident fund contributions and retrenchment compensation are all calculated on wages, the effect for many employees is a higher statutory entitlement and, correspondingly, a lower net monthly figure once employer and employee contributions rise. There is also an Explanation treating remuneration in kind up to fifteen per cent of total wages as part of wages, and a second proviso requiring conveyance, house rent, award remuneration and overtime to be counted for the purpose of equal wages across genders and for the payment of wages.

Change four: gratuity for fixed term employees

Section 53(1) of the Code on Social Security makes gratuity payable on termination of employment after five years of continuous service, on superannuation, on retirement or resignation, on death or disablement due to accident or disease, on termination of the contract period under fixed term employment, or on any event notified by the Central Government.

The second proviso is the change: completion of five years of continuous service is not necessary where the termination is due to death or disablement, the expiration of a fixed term employment, or a notified event. A fixed term employee therefore earns gratuity on the expiry of the term even if the term was shorter than five years. Under Section 53(2) the rate remains fifteen days' wages, or such number of days as the Central Government may notify, for every completed year of service or part in excess of six months, based on the rate of wages last drawn. For working journalists the qualifying period is three years rather than five. The calculation mechanics are set out in our note on gratuity rules, eligibility and calculation in India.

Change five: an appointment letter is now a statutory duty

Section 6(1)(f) of the Occupational Safety, Health and Working Conditions Code makes it a duty of every employer to issue a letter of appointment to every employee on appointment, with such information and in such form as the appropriate Government prescribes. Where an employee had not been issued an appointment letter before the Code commenced, the employer must issue one within three months of commencement.

For anybody who has ever tried to prove a date of joining or a salary figure without paperwork, this is a real gain. It matters most for people at the informal end of white collar employment: staff at small firms, people hired on a handshake, and employees whose terms were changed verbally over the years. If you do not have an appointment letter, you are entitled to ask for one, and the request is now founded on a statutory duty rather than on goodwill. The clauses to look for once you have it are covered in employment agreements in India.

Change six: thresholds moved from 100 to 300, but not everywhere

Two separate thresholds moved, and they moved differently. Section 28 of the Industrial Relations Code applies the standing orders chapter to every industrial establishment with three hundred or more workers employed, or employed on any day of the preceding twelve months. Section 29 requires the Central Government to make model standing orders and deems those model orders adopted until certified standing orders come into operation.

Section 77 applies Chapter X, the successor to the old Chapter V-B, to industrial establishments with not less than three hundred workers, or such higher number as the appropriate Government notifies. But Section 77(3) defines industrial establishment for that Chapter as a factory, a mine or a plantation. That restriction is the whole point for Bengaluru: the requirement of prior government permission before retrenchment under Section 79, or before lay off under Section 78, does not touch an IT office, a bank, a hospital or a retail chain no matter how many people it employs. Section 79 also provides that where the appropriate Government does not communicate its decision within sixty days, permission is deemed to have been granted.

Change seven: the worker re-skilling fund

Section 83 of the Industrial Relations Code sets up a worker re-skilling fund. The employer of an industrial establishment contributes an amount equal to fifteen days' wages last drawn by the worker immediately before retrenchment, or such other number of days as the Central Government notifies, for every retrenched worker. Under Section 83(3) the fund is used by crediting fifteen days' wages last drawn to the retrenched worker's account within forty-five days of the retrenchment.

This sits on top of, and not instead of, the retrenchment compensation in Section 70(b), which is fifteen days' average pay for every completed year of continuous service or part in excess of six months. A retrenched worker with, say, six years of service is looking at compensation under Section 70 plus notice pay or wages in lieu under Section 70(a) plus the Section 83 credit.

Change eight: strike notice now applies to every industrial establishment

Under the repealed Industrial Disputes Act the notice requirement before a strike applied to public utility services. Section 62 of the Industrial Relations Code extends it to every industrial establishment. No person employed in an industrial establishment may go on strike in breach of contract without giving notice of strike within sixty days before striking, or within fourteen days of giving that notice, or before the date of strike specified in the notice expires, or during conciliation proceedings and seven days after their conclusion, or during proceedings before a Tribunal or National Industrial Tribunal and sixty days after, or during arbitration proceedings and sixty days after where a notification has been issued, or while a settlement or award is in operation on the matters it covers. Section 62(2) imposes the mirror requirements on an employer before a lock out.

The practical effect is that a lawful strike now requires more planning than it once did, and the sequence of notice periods has to be followed exactly. Section 84 separately prohibits any employer, worker or trade union from committing the unfair labour practices listed in the Second Schedule.

Change nine: retrenchment procedure in the ordinary case

For an employee who is a worker and whose employer is not a factory, mine or plantation, the operative sections are 70 to 72 rather than the Chapter X provisions.

1. One year of continuous service is the gateway. Section 70 applies only to a worker with not less than one year of continuous service under the employer.
2. One month's written notice, with reasons. The notice must indicate the reasons for retrenchment, and the period must expire, or wages for the notice period must be paid in lieu.
3. Compensation at the time of retrenchment. Fifteen days' average pay, or such number of days as notified, for every completed year of continuous service or any part in excess of six months.
4. Notice to the appropriate Government. Section 70(c) requires notice in the prescribed manner to the appropriate Government or the specified authority. This is a condition precedent, not a formality.
5. Last in, first out within the category. Section 71 requires the employer ordinarily to retrench the last person employed in that category, unless reasons are recorded for departing from the rule.
6. Preference on re-hiring for a year. Section 72 requires the employer who proposes to hire within one year of the retrenchment to give retrenched workers an opportunity to offer themselves, with preference over other persons.
7. The re-skilling credit. Section 83 requires fifteen days' wages last drawn to be credited to the worker's account within forty-five days of the retrenchment.

What did not change for Bengaluru employees

The Karnataka Shops and Commercial Establishments Act, 1961 is not in any of the four repeal lists. Section 39 continues to apply, and for most white collar terminations in Bengaluru it is the route that actually gets used, because it does not require the employee to establish that he is a worker.

Section 39(1) prohibits removal or dismissal of an employee with not less than six months of continuous service except for a reasonable cause and without one month's previous notice or pay in lieu, with a proviso removing the notice requirement where misconduct is brought on record with proof at an enquiry held for the purpose. Section 39(2) provides an appeal to the prescribed authority. Section 39(3) caps compensation at one month's pay for every year of service where the employer does not agree to reinstate. Section 39(4) allows a revision to the District Judge. Section 39(7) preserves any more favourable notice or terms under another law, an award, an agreement or the contract of service.

Provident fund and pension also continue on familiar lines. Section 15 of the Code on Social Security empowers the Central Government to frame the Employees' Provident Fund Scheme, the Employees' Pension Scheme and the Employees' Deposit Linked Insurance Scheme, so the schemes carry forward under the Code rather than being replaced.

What an employee should do now

Ask for an appointment letter if you do not have one, because Section 6(1)(f) of the OSH Code now makes issuing one a duty. Check your salary structure against the Section 2(y) definition, because if excluded allowances exceed half your package the excess is deemed to be wages and your gratuity and provident fund base should reflect it. If you have been terminated, work out the date the dispute arose and count two years forward, not three. And if you are in Bengaluru and unsure whether you are a worker, resolve that question before choosing a forum, because the two routes have different limitation periods and different reliefs.

For founders and employers reading this from the other side, the compliance work sits mostly in the appointment letter format, the salary structure and the standing orders position. Our notes on legal documents for startups in India and startup registration in Bengaluru deal with the surrounding paperwork, and the harassment framework, which the codes did not touch, is covered in POSH complaint time limits under Section 9.

Frequently Asked Questions

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

Related Guides

Our employment and labour law practice advises on transitions to the codes for employers and on terminations for employees. These guides cover the individual questions in more detail.

• Are You a Worker Under the Industrial Relations Code?
• Wrongful Termination and Employee Rights in India
• Gratuity Rules, Eligibility and Calculation in India
• Employment Agreements in India
• Moonlighting and Dual Employment in India
• Is a Non Compete Clause Enforceable in India?
• Temporary Status, Casual Labourers and Pension
• Notice of Change: The Twenty One Days Before Your Terms Can Be Altered
• Unfair Labour Practices: The List of Things an Employer Cannot Do
• Mass Casual Leave Is Now a Strike in Law
• Corporate and Commercial Law Practice