In light of the recent enactment of the new Labour Codes, a consolidated high-level summary is provided below for immediate reference.
The new Labour Codes are partially in force, effective November 21, 2025. While the core substantive provisions are mandatory, the full operational implementation of several areas is pending the issuance of detailed Central and State Rules and notifications from respective departments.
Given the novelty of these Codes, significant ambiguity and lack of clarity persist across government departments, tribunals, and industry federations. Continuous monitoring is essential during this transitional phase.
1. Impact on Gratuity, ESI, and New Wage Definition
1.1 Uniform Wage Definition (Section 2(88) of the CoSS, 2020) – Effective 21 November 2025
The definition of “wages” has been standardized across all four Labour Codes. A key change is the 50% Rule, which states that the total value of the excluded components (HRA, conveyance, bonus, commission, overtime, special allowance reimbursements, etc.) cannot exceed 50% of total remuneration.
If excluded components exceed 50%, the excess must be added back to wages.
50% Rule – Proviso to Section 2(88):
- Condition: If payments under sub-clauses (a) to (i) exceed 50% of all remuneration;
- Result: The excess amount is deemed “wages” and must be added back.
2. ESIC Communication and Impact on ESI Wage Base
ESIC (Big Employer Cell) via its official communication dated 10 December 2025 has confirmed that the new wage definition under Section 2(88) is applicable for ESI purposes.
Earlier (Under Section 2(22) of ESI Act, 1948):
ESI contributions were computed on Gross Wages.
Now (w.e.f. 21 November 2025):
ESI contributions must be calculated on Core Wages as defined under Section 2(88) of the CoSS 2020, including the 50% add-back rule.
Effective Date & Compliance Position:
- Old ESI wage definition applies up to 20 November 2025.
- New ESI wage definition under Section 2(88) applies from 21 November 2025 onward.
- ESIC has directed immediate compliance.
This ESIC communication serves as a formal enforcement instruction for adopting the new wage definition for ESI.
3. Areas Where Notifications Are Still Awaited
- The following provisions are legally in force but operational implementation requires Central/State Rules. Until notified, organisations should continue with existing practices:
- Effective in law from 21 November 2025, the new wage definition will impact gratuity (including past‑service liability), OT, leave encashment where linked to wages, PF wage base, and other wage‑linked benefits; in practice, full impact will crystallise as and when sectoral rules, schemes and notifications are issued. This is likely to increase basic/statutory components and overall payouts for gratuity, PF and OT for many organisations.
- Effective from Nov 21, 2025. Fixed-term employees are now entitled to pro-rata gratuity after completing just one year of service (compared to the earlier 5-year requirement for permanent employees).
- Effective from Nov 21, 2025. Overtime wages must be paid at twice (double) the rate of the normal wage for work beyond the prescribed working hours.
- Effective from Nov 21, 2025 GRC to be constituted by Establishments with 20+ employees, A worker must now mandatorily approach the GRC before moving to conciliation for disputes.
- EPFO circular is expected in the coming days, But EPFO does not have jurisdiction beyond the 15000/- wage ceiling, hence if the employers declare the existing Basic Wages under “PF Wages” Pay head, it will mitigate additional liability on Employer & Employee. Sec 3(2) still governs not to reduce wages.
- Leave Rules prescribed in OSHWC code, will have to refer to both S&E and OSHWC code. As per OSHWC code, leave encashment must now be paid on “Wages”, all other Leave entitlement, carry forward, Encashment provisions shall be regulated under the respective State S&E Acts.
- Effective from 21 November 2025, wage payment timelines are standardised (e.g., by the 7th of the following month for monthly‑paid employees, as per the Code on Wages).
- Effective from 21 November 2025, the previous ₹24,000 ceiling under the Payment of Wages Act stands removed; wage‑payment protections apply to all employees.
- Effective from 21 November 2025, final settlement of wages upon exit is required within two working days in specified cases (e.g., resignation, dismissal, retrenchment or removal).
Dependent on rules / further notifications
- Floor minimum wages and uniformity of annual revision are to be implemented once Central and State governments issue detailed notifications and rules.
- The applicability threshold for Certified Standing Orders under the Industrial Relations Code has increased from 100 to 300 workers for covered industrial establishments; detailed Central and State Rules are awaited.
- The threshold for applicability of contract labour provisions under the OSHWC/IR/CLRA framework increases from 20 to 50 contract workers, and engagement of contract workers in “core activities” is generally restricted subject to specified exceptions; Central and State Rules will clarify implementation.
- The Central Labour Department has informally indicated that no CLRA amendments for establishments below the new 50‑worker threshold will be processed for the time being for Central‑sphere establishments (airport, telecom, passport offices, railways, ports, etc.), and that an official communication will follow.
- For procedural/administrative matters (forms, fees, registers, etc.) where new State Rules are not notified, Central guidance is that organisations should continue to follow the corresponding existing/erstwhile Rules and Forms until the new ones take effect.
- The definition of “inter‑State migrant worker” is broadened, and organisations will need to identify and declare ISMWs and additional compliances for specified travel‑related benefits, leave benefits to be followed.
- Social security arrangements for gig workers, including the Social Security Fund and aggregator contribution on turnover, are pending detailed notification.
- Employment Exchanges are to be re‑designated as “Career Centres”; employers with 20 or more employees (earlier 25) will be required to notify vacancies within prescribed timelines once the corresponding rules and portals are operationalised.
- One‑time / unified registration for establishments having 10 or more workers is envisaged under the labour codes; operational details and portals are awaited.
- Mandatory periodic health check‑ups and expanded coverage under the OSHWC Code will follow once definition of covered establishments and health‑check parameters are specified in Central and State rules.
- Provisions for a single licence/registration covering multiple States for certain activities are provided in the Codes; detailed procedures and electronic platforms are awaited from the appropriate governments.