India’s labour codes have been in force since November 2025, but implementation remains uneven. The central government has issued rules, while many states are still finalizing their own requirements.
During our webinar this week, Atul Gupta of Trilegal and Dr. Augustus “Augie” Azariah of Kyndryl outlined the legal questions and practical decisions employers are facing during this transition.
Employers should prepare for the new codes while closely tracking state-level developments. As states finalize their rules, we encourage members to share questions and implementation concerns with us. The session recording and presentation will be available on our resources page in the coming days.
Possible Impact of India Labour Codes
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Wage definitions could raise costs. The codes revise the definition of “wages,” affecting calculations for gratuity, overtime and retrenchment compensation – India’s statutory severance pay. Employers should review pay structures, allowances, and provident fund contributions to understand the potential cost impact. Atul noted that employees have already begun bringing claims for higher gratuity payments under the new codes.
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Working-hour rules create new questions. The eight-hour daily standard may require changes for employers that currently use nine-hour schedules. State laws and emerging rules will also shape requirements for overtime, leave accumulation, and payout of unused leave (encashment).
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Contract labour arrangements need another look. Restrictions on using contract workers for core activities may affect vendor models, particularly when contract workers perform ongoing work alongside regular employees.
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Employee-relations requirements are changing. Employers with 20 or more workers must consider the new grievance redressal committee requirement, including how worker representatives will be selected. That obligation can apply even when employees are already represented by unions.
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State compliance remains a patchwork. Multistate employers will need to track state-specific rules as well as changes to Shops and Establishments laws. A single national policy may not address every local requirement.
From Legal Requirements to Implementation
Augie shared several key considerations for employers turning those requirements into an implementation plan:
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Map requirements by state. Continue meeting applicable state-specific obligations while comparing existing policies and processes against the new codes. The transition may temporarily require employers to manage overlapping requirements.
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Budget for costs even where procedures remain unclear. Augie described provisioning for the worker reskilling fund while awaiting clearer guidance on how payments should be made.
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Model the workforce impact of provident (i.e., retirement) fund changes. A change in the contribution threshold may affect a significant number of employees at a large employer. HR and finance teams should assess the cost and decide how it will be handled in compensation planning.
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Explain pay changes to employees. Even when the employer absorbs additional costs, changes to contributions or pay structures may affect employees’ take-home pay. Augie stressed the need for clear, early communication.
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Review existing employee relations processes. Employers should assess how the representative grievance committee requirement fits with current complaint channels and whether existing standing order exemptions remain applicable.
