New Indian Labour Law: What Really Changes For Wages, Gratuity, Bonus, Gig Workers & Compliance In 2026?

For many years India spoke about labour codes in future tense. The four codes were passed in Parliament, draft rules were published, and panel discussions spoke about a new era. Yet, daily life in factories, offices and HR departments still ran on the old patchwork of separate labour Acts.

With the recent commencement of the Code on Wages, the Code on Social Security, the Industrial Relations Code and the Occupational Safety, Health and Working Conditions Code, that phase is over. The new regime is now in force in law.

At the same time, what HR and finance teams see on their screens still looks familiar. Portals carry old Act names. Forms and returns have not changed overnight. As the December to March compliance season approaches, many Good Returns readers are asking:

• What has truly changed on the ground
• What happens to gratuity, bonus, gig and platform workers
• What should we do differently this year

This article tries to answer these questions in simple Indian language.

Four codes, twenty nine Acts, and what sits outside

The four labour codes consolidate and rationalise twenty nine central labour Acts into one integrated framework.

Broadly:

• The Code on Wages takes in Payment of Wages, Minimum Wages, Payment of Bonus and Equal Remuneration.
• The Code on Social Security combines laws such as Employees Provident Fund, Employees State Insurance, Payment of Gratuity, Maternity Benefit and Employees Compensation
• The Industrial Relations Code covers areas earlier dealt with by the Industrial Disputes Act, Trade Unions Act and related laws
• The OSH Code brings together the Factories Act, Contract Labour Act, Inter State Migrant Workmen Act, Building and Other Construction Workers Act and several other safety and working condition laws

As per Pratik Vaidya, Managing Director and Chief Vision Officer of Karma Management Global Consulting Solutions Pvt. Ltd, this does not mean that every labour related law of India is now inside the codes. Important laws that continue to operate separately include:

• State Shops and Establishments laws
• Professional tax laws
• State Labour Welfare Fund laws
• The law on prevention of sexual harassment at workplace
• Many sector specific laws and local regulations

The correct mental picture is:

The four labour codes are now the backbone of Indian labour regulation for wages, social security, industrial relations and safety. Other central and state laws still apply in their domains and must be read together with the codes.

Social Security Code beyond gratuity and PF

Most discussions on the Social Security Code stop at provident fund and gratuity. The reality is much wider.

Under the Code on Social Security:

• Employees Provident Fund, pension and allied schemes continue, but under a single social security umbrella
• Employees State Insurance continues to provide medical and cash benefits for sickness, maternity and employment injury
• Payment of Gratuity is now part of this integrated social security framework
• Maternity Benefit and Employees Compensation are also housed under the same code
• Building and construction cess and welfare boards are anchored here

The code also recognises newer work arrangements. For the first time at the central level:

Unorganised workers, gig workers and platform workers are defined in the main law
Certain aggregators in sectors such as ride hailing, delivery, e commerce and similar platforms are expected to contribute to social security funds for such workers

"This does not mean an instant social security revolution for gig and platform workers. Many details will depend on future schemes and state capacity. But it does mean that gig and platform work is no longer sitting outside the legal radar," said Pratik Vaidya.

For gratuity, the broad five year rule for continuous service largely continues. However, fixed term employees can be eligible for gratuity on a pro rata basis, without waiting for five full years, because their contract itself may be for a shorter definite period. This is a significant protection for skilled staff hired on fixed term roles.

Wage Code, bonus and the new wage logic

The Code on Wages brings together the earlier payment of wages, minimum wages, bonus and equal remuneration laws and adds the idea of a floor wage.

Pratik Vaidya says, the most important change is the new definition of wages. While the fine print is technical, the basic idea is that:

• Basic pay and dearness allowance form the core
• Some allowances are excluded but the total of such exclusions is capped
• If exclusions exceed that limit, the extra portion is pulled back into wages

This definition matters because many benefits are linked to wages. For example:

• Provident fund contribution
• Gratuity calculation
• Statutory bonus eligibility and amount
• Leave encashment and certain compensation

In the past, many organisations reduced their statutory liabilities by keeping basic pay low and shifting a large part of the package into allowances. Under the Wage Code logic, such strategies become less effective and more risky.

"Bonus also changes in a subtle way. The concepts of eligibility, minimum and maximum bonus and set on or set off remain, but the base wage for calculation will often be higher. This can increase bonus outgo for large junior workforces unless salary structures are carefully reworked," stated Pratik Vaidya.

The Wage Code also tightens timelines:

Wages must be paid within the prescribed time after the wage period
Full and final settlement after separation is expected within a very short time frame, for example within two working days in many situations

In the Indian context, where full and final settlement often drags for weeks or months, this is a major cultural shift.

OSH Code, CLRA licensing and principal employer risk

Under the OSH Code, several earlier Acts on health, safety, contract labour and migrant workers are merged. One important feature is the possibility of a common licence which may cover factory operations, engagement of contract labour and certain building and construction activities.

For principal employers this implies:

• Fresh examination of which units and sites are covered as factories or other notified establishments under the OSH Code
• Clear understanding of thresholds for engaging contract labour and inter state migrant workers
• Tighter duties for facilities, safety, welfare, wages and social security of contractor workers

"For contractors there is less room to hide. Authorities will increasingly expect both principal employer and contractor to show clean registration, licence, wage records, PF and ESI compliance and safety systems," commented Pratik Vaidya.

From a risk perspective, contract labour and occupational safety under the OSH Code are likely to be major focus areas for inspection and litigation in the coming years.

Industrial Relations Code, unions, standing orders and strikes

The Industrial Relations Code is often ignored in payroll focused conversations, but it has deep implications for restructuring, industrial peace and union relations.

Some key features:

• Standing orders and the three hundred worker threshold
• The threshold for mandatory standing orders has been set at three hundred workers in many cases
• This is higher than the earlier threshold of one hundred that was common in many states
• For units below the threshold, there is more formal flexibility, but they still need clear HR policies and contracts to avoid disputes

Recognition of negotiating union or council

• The IR Code encourages clear rules for recognition of a negotiating union or a negotiating council
• Where a single union enjoys a prescribed percentage of membership, it can act as the negotiating union
• In fragmented situations, a negotiating council may be formed
• This is intended to move away from a scenario where management negotiates with many unions without clarity on representation

Strike and lock out notice

• The code prescribes advance notice and a cooling period before strikes and lock outs in many establishments
• Sudden flash strikes without notice in notified sectors can attract consequences
• For employers this makes planning easier, but it also demands more serious grievance handling and communication, since employees lose some tactical surprise

Fixed term employment and reskilling

• Fixed term employees are recognised clearly and are entitled to many benefits at par with permanent workers for the period of their contract
• There is a concept of a reskilling fund where an employer retrenching a worker pays an amount equal to fifteen days wages into a fund for that worker
• This connects industrial restructuring with some support for displaced workers

For boards and promoters, the IR Code is not just a legal issue. It changes the grammar of how companies hire, separate and deal with collective voice.

Rules, state role and the December to March compliance season

The central notifications have brought the codes into force. However, the day to day compliance experience depends heavily on rules and portals, many of which are state specific.

The transition can be understood in three layers:

• Central codes are now legally in force
• Central rules exist in some form for all codes
• State rules and forms are at different stages, so many states are still using their existing rules and formats for factories, contract labour, shops and similar areas

"Because of repeal and savings clauses, those old state rules and forms do not vanish. They continue as if they were made under the new codes, till states formally replace them," added Pratik Vaidya.

For the December to March compliance period, most employers will still deal with familiar looking filings, for example:

• Annual return under the Factories framework, or a unified annual labour return where the state has introduced one
• Half yearly return for engagement of contract labour or migrant workers for the July to December period
• Registers and statements for payment of statutory bonus for the previous financial year
• Periodic PF and ESI returns for each wage month
• Professional tax, Labour Welfare Fund and similar state level contributions and returns

The correct way to think about them is:

• These are now filings under the labour codes and saved rules, even if the form still carries the old Act name on top.
• This mental shift is important for internal literacy, even before forms and portals visually change.
• Old versus new and a short list of dos and do nots
• A simple old versus new view can help company teams realign.

Old view

• Many separate Acts, each with its own language
• PF, ESI, gratuity and bonus seen in silos
• Contract workers seen as vendor responsibility
• Registers and returns treated as paper formalities

New view

• Four codes as the main framework, plus other laws
• Wage definition as a common thread affecting PF, gratuity and bonus
• Contract labour, migrant workers and safety sitting under one OSH umbrella
• Registers and returns as digital evidence in a more data driven inspection system

Some practical dos and do nots for the coming months:

Dos

• Map each old central labour Act in your internal compliance register to the relevant code and section
• Revisit salary structures to see the real impact of the wage definition on PF, gratuity and bonus
• Review contracts and documentation for gig and platform workers where your business model or vendors use such labour
• Re examine contractor engagements, licences and safety systems under the OSH lens
• Train HR, payroll and IR teams on new timelines for wage payment and full and final settlement, and on basic IR Code features related to standing orders and unions

Don'ts

• Assume that old Acts remain live for one year in a blanket manner
• Delay bonus, gratuity or full and final settlement on the argument that codes are new and there is time to adjust
• Treat gig workers, platform workers and contractor staff as someone else problem
• Rely only on consultants and software without building internal understanding of the new regime

The way forward for organisations and advisers

For companies and advisers, this is not only a legal shift. It is a systems shift.

"At Karma we are in the process of recasting our trackers, registers, returns engines and advisory templates code wise, state wise and sector wise. The goal is to ensure that a factory in Maharashtra, a warehouse in Karnataka, a platform company in Gurugram and an IT firm in Hyderabad can all see a clear path for code compliance in their specific context," said Pratik Vaidya, Managing Director and Chief Vision Officer of Karma Management Global Consulting Solutions Pvt. Ltd.

If employers, employees, platforms, unions, advisers and governments use this moment to move from confusion to clarity, the labour code era can support a more formal, productive and fair economy. The real test will not be the notification date. It will be how India uses the next five years to turn these four codes into lived reality on the shop floor and in the lives of workers.