New Era of Indian Labour Laws: A Strategic Impact Analysis for IT Industry

Summary: The Code on Wages, 2019 consolidates four earlier wage-related laws and introduces a uniform framework governing wages, minimum wages, payment timelines, deductions, overtime, bonus, and gender equality across all sectors, including IT companies. A key change is the expanded definition of “wages” with the 50% rule, ensuring that exclusions such as allowances cannot exceed half of total remuneration, thereby preventing manipulation of wage structures and directly impacting PF, ESI, gratuity, and bonus calculations. The Code mandates universal applicability without wage ceilings, faster wage payments, strict timelines for final settlements, capped deductions, and explicit prohibition of gender-based wage discrimination covering all genders. Alongside this, the Code on Social Security, 2020 merges nine social security laws to extend benefits to organized, unorganized, gig, platform, and contract workers, redefining employees, wages, and contract labour obligations. Together, these reforms significantly increase compliance, documentation, cost, and governance responsibilities for employers, particularly IT companies operating across skill levels and geographic wage zones.

1. The code of wages, 2019

The Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976

Definitions

Wages – All remuneration capable of being expressed in terms of money, payable to a person employed in respect of his employment or work done.

Note: This 50% rule is critical – it prevents employers from structuring compensation to minimize wage-linked obligations

Exclusions

• Bonus payable under any law
• Value of house accommodation, supply of light, water, medical attendance, or other amenity excluded by government order
• Employer’s PF or pension contribution
• Conveyance allowance or value of travelling concession
• Sum paid to defray special expenses
• House rent allowance
• Remuneration payable under any award or settlement
• Overtime allowance
• Commission payable to employee
• Gratuity on termination
• Retrenchment compensation

Thresholds & Limits

• If exclusions exceed 50% of total remuneration, the excess amount is added back to wages. Gratuity & Retrenchment compensation are not to be included while calculating the exclusion.

Employee – Any person employed on wages by an establishment to do any skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work. (Exclusion – Apprentices engaged under the Apprentices Act, 1961)

Floor Wage – Minimum wage fixed by the Central Government below which no State Government can fix minimum wages.

Worker – Any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes –

(i) Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; and

(ii) Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person –

(a) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or

(b) who is employed in the police service or as an officer or other employee of a prison; or

(c) who is employed mainly in a managerial or administrative capacity; or

(d) who is employed in a supervisory capacity drawing wage of exceeding fifteen thousand rupees per month or an amount as may be notified by the Central Government from time to time.

Key Provision

Prohibition of Discrimination:

No employer shall discriminate between employees on grounds of gender in matters relating to wages.

• Equal remuneration for same work or work of similar nature
• Experience can be a ground for discrimination
• Applies to ALL genders (male, female, transgender)
• No discrimination in recruitment except where employment of women is prohibited
• Prohibition of discrimination in conditions of employment
• Certain wage components shall not form part of the wages, while computing equal wages

Minimum Wages:

The appropriate Government shall fix minimum wages for different classes of employees.

• Minimum wages applicable to all employments (organized and unorganized sectors)
• Components include basic rate of wages and allowances
• Different minimum wages may be fixed for different classes of work, age groups, and regions
• Review of minimum wages at intervals not exceeding 5 years

 Floor Wage – NEW:

(Floor wages refer to the minimum wage level set by the government that cannot be lower than a specified amount.) The Central Government shall fix the floor wage taking into account living standards of workers.

• No state government can fix minimum wage below the floor wage
• Floor wage may be different for different geographical areas
• Factors considered include minimum living standards of workers
• Binding on all states – creates national minimum benchmark

Payment of Wages:

Wages shall be paid in current coin or currency notes or by cheque or digital mode.

• No wage limit for the applicability of the provisions dealing with payment of wages
• Monthly wage period: wages paid before expiry of 7th day of succeeding month
• Wages may be paid via bank account transfer or digital payment
• On termination: Full wages within 2 working days

Definition of Wages – 50% Rule – NEW:

If exclusions from wages exceed 50% of total remuneration, the excess is added back to wages.

• Critical for calculating PF, ESI, gratuity, and bonus
• Prevents manipulation of wage structures to minimize contributions
• Employers must track all allowances and exclusions
• May require restructuring of compensation packages

Overtime

Workers are entitled to overtime wages at twice the normal rate.

• Overtime rate: twice the normal rate of wages
• Working hours beyond normal working hours constitute overtime
• Night shift allowances as prescribed
• Must have employee consent for overtime work

Deductions from Wages – CHANGED:

Only specified deductions are permitted from wages, with a 50% cap.

• Maximum total deductions: 50% of wages
• Fines for acts or omissions specified by the employer
• Deductions for absence from duty
• Deductions for damage or loss caused by negligence
• Deductions for house accommodation and amenities
• Recovery of advances and loans
• Income tax and statutory deductions

Bonus Disqualification – NEW:

Employee may be disqualified from bonus for specific misconduct.

• Fraud
• Violent behavior in establishment premises
• Theft or sabotage of property
• Sexual harassment (NEW ground added

Claims and Limitation – NEW:

Claims for unpaid wages must be filed within specified period.

• Limitation period: 3 years from date wages become due
• Single application can cover multiple employees
• Inspector-cum-Facilitator receives complaints
• Simplified claim procedure introduced

Changes 

Coverage Threshold: (Universal coverage regardless of salary level)

Before – Payment of Wages Act applied only to employees earning up to ₹24,000/month

After – No wage ceiling – applies to ALL employees regardless of wages

Wage Payment Timeline: (3 days faster payment mandatory)

Before – Wages to be paid by 10th of succeeding month

After – Wages to be paid by 7th of succeeding month

Termination Wage Payment: (New strict timeline for full and final settlement)

Before – No specific timeline for final settlement

After – Within 2 working days of termination/resignation

Deductions Cap: (Explicit cap ensures worker receives at least half their wages)

Before – Various limits under different laws

After – Maximum 50% of wages can be deducted

Gender Equality: (Progressive inclusion of third gender in workplace rights)

Before – Equal Remuneration Act covered male and female

After – Covers ‘all genders’ including transgender persons

In-Kind Wages: (Clear limit on non-cash compensation)

Before – Not clearly defined

After – Maximum 15% of wages can be paid in kind

Practical Impact

Wage Restructuring Required

• Review compensation structures to check 50% exclusion rule impact
• Recalculate PF, ESI, gratuity bases if allowances exceed 50%
• Consider impact on cost-to-company calculations
• Update payroll software for new definitions

Payment Process Changes

• Update payroll processing calendar (7th instead of 10th)
• Implement 2-day full & final settlement process
• Set up digital payment infrastructure if not already present
• Create documentation trail for all deductions

Compliance Documentation

• Maintain records of wages paid for 3 years
• Display wage rates in establishment
• Issue wage slips to all employees
• File returns with Inspector-cum-Facilitator

Applicability on IT companies

The Code on Wages, 2019, and its draft central rules impose comprehensive wage, bonus, and compliance obligations on IT companies in India, treated as standard private sector establishments with no sector-specific exemptions.

This shifts IT firms from flexible compensation structures to regulated minimum standards, potentially raising costs for salary components and administrative burdens.

1. Wage Structure Changes:

(1) IT companies must restructure CTC to ensure “wages” (basic pay + DA + retaining allowance) form at least 50% of total remuneration, as exclusions like HRA, conveyance, and commissions exceeding this threshold count toward wages for minimum wage, bonus, and equal pay calculations.

(2) Minimum wages, fixed by skill (unskilled/semi-skilled/skilled/highly skilled, e.g., programmers as skilled) and geography (metropolitan like Bangalore at higher rates), cannot fall below national floor wages reviewed every 5 years.

It means three simple things: skill level matters, city/rural location matters, and there is a national “bottom line” which no one can go below.

*Skill categories (type of job)

Government will fix different minimum wages for different kinds of jobs:

Unskilled: Very basic work; almost no training needed.

Semi‑skilled: Some training/experience, usually works under guidance.

Skilled: Good technical or professional skills and experience; can work independently (typical software developer, tester, system admin, etc.).

Highly skilled: Very high expertise and responsibility (e.g., solution architect, senior specialist).

So a skilled IT job must get at least the “skilled” minimum wage, not the unskilled rate.

*Area categories (where the job is)

Minimum wage also depends on where the employee works:

Metropolitan area: Big cities with 40+ lakh population (Bengaluru, Mumbai, Delhi, etc.) – highest minimum wage.

Non‑metropolitan: Medium cities (10–40 lakh population) – middle level.

Rural area: Villages/small towns – lowest minimum wage.

So a skilled employee in Bengaluru will have a higher minimum wage than the same skilled employee in a rural area.

*National floor wage (India‑wide bottom line)

Central Government will declare a single “floor wage” for the whole country, based on cost of living (food, clothing, rent, education, medical, etc.).

State or Central minimum wages for each category/area cannot be less than this floor wage.

This floor wage will be reviewed and updated “ordinarily” every 5 years.

So, for IT companies: they must pay at least the minimum wage that applies to (a) the skill level of the role and (b) the city type, and that rate itself can never be lower than the national floor wage.

(3) Normal workday caps at 8 hours (spread over ≤12 hours), with double overtime beyond; payments must be monthly via bank/electronic mode by the 7th, backed by Form V wage slips.

2. Bonus and Payment Impacts:

All employees earning up to the notified threshold qualify for 8.33%-20% annual bonus on wages (min ₹100 or 8.33%, whichever higher) after 30 days’ work, computed via gross profit formulas in Schedules B/C/D with 4-year set-on/set-off.

Timely payments are mandatory (e.g., within 2 days of termination), with deductions capped at 50% of wages (fines ≤3%, absence/loss recovery with procedures); violations attract up to 10x unpaid amount as compensation.

3. Compliance and Cost Burdens:

IT firms must maintain electronic registers (Forms I/IV for employees/wages/fines), display notices, and face Inspector-cum-Facilitator audits, with single applications for claims and appeals.

Impacts include higher fixed costs (shifting variable pay to basic), audit risks (fines up to ₹50,000, imprisonment for repeats), and HR process overhauls, especially for contract labour treated as employees unless meeting permanence criteria.

Larger IT hubs in metropolitan areas face steeper minimums, prompting salary revisions and potential talent retention challenges.

Penalties

Non-payment of wages or less than minimum wages

Fine up to ₹50,000 (1st offence); Imprisonment up to 3 months and/or fine up to ₹1 lakh (repeat offence within 5 years)

Penalties enhanced for repeat offenders only

 Contravention of equal remuneration provisions

Fine up to ₹50,000 (1st offence); Imprisonment up to 3 months and/or fine up to ₹1 lakh (repeat offence)

Gender pay discrimination carries significant penalties

 Contravention of bonus provisions

Imprisonment up to 6 months and/or fine up to ₹20,000

Specific timeline for bonus payment enforcement

2. The Code on Social Security, 2020

The Code on Social Security, 2020 consolidates 9 central labour acts into a single comprehensive framework. This reform aims to extend social security benefits to both organized and unorganized sectors, including new categories like gig and platform workers.

The nine subsumed acts are:

1. The Employees’ Compensation Act, 1923: Relates to compensation for injuries or death during employment.

2. The Employees’ State Insurance Act, 1948: Provides for medical and cash benefits during sickness and maternity.

3.The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952: Governs retirement savings and family pensions.

4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959: Mandates reporting of job vacancies to career centers.

5. The Maternity Benefit Act, 1961: Regulates employment and paid leave for women before and after childbirth.

6. The Payment of Gratuity Act, 1972: Establishes a scheme for lump-sum payments to employees upon leaving service.

7. The Cine-Workers Welfare Fund Act, 1981: Focuses on financing welfare activities for cinema workers.

8. The Building and Other Construction Workers’ Welfare Cess Act, 1996: Levies a cess to fund welfare boards for construction workers.

9. The Unorganized Workers’ Social Security Act, 2008: Provides social security and welfare measures for the unorganized workforce.

Definitions

Contract Labour – It means a worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer and includes inter-State migrant worker but does not include an employee (other than part time employee) who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on permanent basis), and gets periodical increment in the pay, social security coverage and other welfare benefits in accordance with the law for the time being in force in such employment.

Contractor – in relation to an establishment means a person, who

(i) undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment through contract labour; or

(ii) supplies contract labour for any work of the establishment as mere human resource, and includes a sub-contractor.

Employee – means any person (other than an apprentice engaged under the Apprentices Act, 1961) employed on wages by an establishment, either directly or through a contractor, to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or any other work, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union:

Provided that for the purposes of Chapter III, except in case of the Employees’ Provident Fund Scheme and Chapter IV, the term “employee” shall mean such employee drawing wages less than or equal to the wage ceiling notified by the Central Government and includes such other persons or class of persons as the Central Government may by notification, specify to be employee, for the purposes of those Chapters:

Provided further that for the purposes of counting of employees for the coverage of an establishment under Chapter III and Chapter IV, as the case may be, the employees, whose wages are more than the wage ceiling so notified by the Central Government, shall also be taken into account:

Provided also that for the purposes of Chapter VII, the term “employee” shall mean only such persons as specified in the Second Schedule and such other persons or class of persons as the Central Government, or as the case may be, the State Government may add to the said Schedule, by notification, for the purposes of that Government;

Fixed term employment – means the engagement of an employee on the basis of a written contract of employment for a fixed period:

Provided that—

(a) his hours of work, wages, allowances and other benefits shall not be less than that of a permanent employee doing the same work or work of a similar nature; and

(b) he shall be eligible for all benefits, under any law for the time being in force, available to a permanent employee proportionately according to the period of service rendered by him even if his period of employment does not extend to the required qualifying period of employment;

Gig worker – means a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship;

Wages – means all remuneration, whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—

(a) basic pay;

(b) dearness allowance; and

(c) retaining allowance, if any,

but does not include—

(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;

(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;

(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(d) any conveyance allowance or the value of any travelling concession;

(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under any award or settlement between the parties

or order of a court or Tribunal;

(h) any overtime allowance;

(i) any commission payable to the employee;

(j) any gratuity payable on the termination of employment;

(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment, under any law for the time being in force:

Provided that for calculating the wages under this clause, if payments made by the employer to the employee under sub-clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in sub-clauses (d), (f), (g) and (h) shall be taken for computation of wage.

Key Provisions

Coverage of Gig and Platform Workers – NEW

First-time inclusion of gig economy workers in social security framework.

• Gig worker: person who performs work outside traditional employer-employee relationship
• Platform worker: worker who accesses organizations through online platforms
• Central Government may notify social security schemes for these workers
• Aggregators required to contribute to social security fund
• Examples: Ride-sharing, food delivery, logistics, e-marketplace, professional services

Aggregator Contribution – NEW

Mandatory contribution by digital platforms to gig worker welfare.

• Aggregators must contribute 1-2% of annual turnover, OR
• 5% of amount paid to gig/platform workers
• Whichever is LOWER applies
• Creates sustainable funding for gig worker benefits
• Applicable to ride-sharing, delivery, logistics, e-marketplace platforms

Wage Definition – 50% Rule – NEW

Exclusions over 50% of remuneration added back to wages.

• Same 50% rule as Code on Wages
• Affects calculation of EPF contributions
• Affects calculation of ESI contributions
• Affects gratuity calculation
• May increase employer contribution obligations

Aadhaar Linkage – NEW

Mandatory Aadhaar linkage for claiming social security benefits.

• Section notified: 30 April 2021
• Effective: 3 May 2021
• Mandatory for all benefit claims
• Enables digital verification of beneficiaries
• Links social security records across schemes

Voluntary EPF/ESIC Coverage – NEW

Establishments below threshold can opt into coverage.

• Available for establishments below mandatory threshold
• Requires employer + majority employee agreement
• Application to Director-General of ESIC
• Once opted in, normal contribution rules apply
• Enables social security for smaller workforces

Employees’ Provident Fund

Provident fund scheme for organized sector workers.

• Applicable to establishments with 20+ employees
• Employee contribution: 12% of basic wages
• Employer contribution: 12% of basic wages
• Central Board of Trustees administers the fund
• Voluntary coverage for smaller establishments available

 Employees’ State Insurance – CHANGED

Health insurance and medical benefits for workers.

• Applicable to establishments with 10+ employees
• Wage ceiling for coverage as prescribed
• Benefits include medical, sickness, maternity, disability, and dependants’ benefits
• ESIC administers the scheme
• Hospital and dispensary network
• Cash benefit continues to nominee/heir up to and including day of death

Gratuity – Fixed-Term Workers – CHANGED

Gratuity eligibility significantly expanded for fixed-term workers.

• Fixed-term employees: 1 year minimum service (not 5 years)
• Less than 1 year service: eligible for pro-rata gratuity
• Working journalists: 3 years minimum retained
• Calculation: 15 days’ wages per completed year
• Wider wage definition means higher gratuity payouts
• Payable on death even without qualifying service

Maternity Benefits

Benefits for women employees during maternity.

• 26 weeks paid leave for first two children
• 12 weeks for third child onwards
• 12 weeks for adopting mother (child below 3 months)
• Nursing breaks until child is 15 months old
• Crèche facility in establishments with 50+ employees
• Medical bonus as prescribed

Employees’ Compensation – CHANGED

Compensation for work-related injuries and deaths.

• Employer liable for compensation for injury by accident
• Compensation for occupational diseases
• Death benefit to dependants
• Compensation rates as prescribed
• No fault liability of employer
• Travel to/from work may be covered if deemed during employment

Building Workers Welfare – CHANGED

Special provisions for construction workers with exemption.

• Building and Other Construction Workers Welfare Boards
• Cess on construction cost (1-2%)
• Benefits include pension, medical expenses, education assistance
• Registration of building workers
• NEW: Residential construction below ₹50 lakh EXEMPT

Inspector-cum-Facilitator Powers – CHANGED

Wide powers for inspection and compliance facilitation.

• Inspect establishments for compliance
• Facilitate employer understanding of requirements
• Power to compound offences
• Compounding available for: fines only OR imprisonment <1 year + fine
• Emphasis on compliance facilitation over penalization

Welfare Scheme Funding Sources – NEW

Multiple funding sources for welfare schemes.

• Central Government contributions
• State Government contributions
• CSR (Corporate Social Responsibility) funds
• Beneficiary contributions
• Aggregator contributions (for gig workers)
• Construction cess for BOCW

Changes

Gig/Platform Worker Coverage: (Historic first-time coverage for gig economy)

Before – No social security coverage

After – Central Government may notify social security schemes; aggregators must contribute

 Aggregator Contribution: (Creates funding mechanism for gig worker welfare)

Before – Not applicable

After – 1-2% of turnover OR 5% of payments to gig workers (whichever is lower)

Gratuity for Fixed-Term: (Fixed-term workers get gratuity much earlier)

Before – 5 years minimum service required

After – 1 year minimum (pro-rata for less than 1 year)

Gratuity Calculation Base: (Higher gratuity payouts likely)

Before – Basic + DA only

After – Wider wage definition (50% rule applies)

ESIC Coverage: (Small businesses can opt into benefits)

Before – Mandatory only above threshold

After – Voluntary opt-in available for smaller establishments

Aadhaar Linkage: (Digital verification of beneficiaries)

Before – Not mandatory

After – Mandatory for claiming benefits (effective 3 May 2021)

BOCW Exemption: (Small residential projects excluded)

Before – All construction covered

After – Residential construction <₹50 lakh exempt

Accident Coverage: (Extended protection for commuting accidents)

Before – During employment only

After – Travel to/from work also covered if deemed during employment

Practical Impact

Wage Definition Impact

• 50% rule affects EPF, ESI, gratuity calculations
• Review compensation structures for compliance
• Higher employer outgo likely if allowances exceed 50%
• Update payroll software for new wage calculation

Gig Economy Compliance

• Aggregators must track payments to gig/platform workers
• Calculate contribution: 1-2% turnover OR 5% of payments
• Maintain records of gig worker engagements
• Comply with scheme notifications as issued

 Gratuity Administration

• Calculate gratuity for fixed-term employees from Year 1
• Pro-rata gratuity for service less than 1 year
• Higher gratuity base due to wider wage definition
• Working journalists: 3-year threshold retained

 EPF/ESIC Management

• Consider voluntary opt-in for establishments below threshold
• Requires employer + majority employee agreement
• Apply to Director-General of ESIC for voluntary coverage
• Track Aadhaar linkage for all employees

Welfare Scheme Funding

• Sources: Central Govt, State Govt, CSR funds, beneficiaries, aggregators
• BOCW cess continues for construction
• Track and remit applicable cess/contributions
• Residential construction <₹50 lakh exempt from BOCW

Applicability on IT companies

IT companies qualify as “establishments” under the Code on Social Security, 2020, since they conduct industry, trade, or business without involving manufacturing processes that would classify them as factories. Computer units or electronic data processing installations explicitly do not constitute factories, even with power usage, as no manufacturing occurs.

Key Applicability Thresholds:

The First Schedule outlines chapter-specific thresholds for establishments like IT firms (treated as shops/establishments)

Chapter	Provision	Threshold for establishment
III	Employee’s Provident Fund (EPF), Pension, Insurance Schemes	20+ employees
IV	Employees’ State Insurance (ESI)	10+ employees (non-seasonal); also applies to hazardous occupations with even 1 employee
V	Gratuity	10+ employees on any day in preceding 12 months
VI	Maternity Benefit	10+ employees on any day in preceding 12 months

Once applicable, coverage continues even if employee numbers drop below thresholds

Voluntary Extensions:

Employers and majority employees can opt into Chapter III (EPF) or IV (ESI) via application to authorities, even below thresholds; opt-out requires similar agreement. Central Government may extend Code provisions to smaller establishments with notice.

Exemptions and Notes:

Exemptions possible if similar/superior benefits provided, subject to conditions like trustee boards for funds; IT firms under Central Government control (e.g., major telecom-linked) fall under Central jurisdiction. Contributions cover direct and contract employees; wage ceilings apply for EPF/ESI eligibility (notified separately)

Penalties 

Non-payment of EPF/ESI contributions

Imprisonment up to 3 years and fine up to ₹1 lakh

Serious penalty for contribution default

Non-payment of gratuity

Imprisonment up to 2 years and/or fine up to ₹1 lakh (repeat: 3 years)

Employer liability for timely gratuity payment

 False statement for benefits

Imprisonment up to 6 months and/or fine up to ₹20,000

Applies to both employers and employees

3. Industrial Relations Code, 2020

The Industrial Relations Code, 2020 consolidates laws on trade unions, standing orders, and industrial disputes, effective from November 21, 2025. It introduces streamlined dispute resolution and worker protection while balancing employer flexibility.

The following draft rules, which the Central Government proposes to make in exercise of the powers conferred by section 99 of the Industrial Relations Code, 2020 (35 of 2020) read with section 24 of the General Clauses Act, 1897(10 of 1897) and in supersession of the –

(i) The Industrial Tribunal (Procedure) Rules, 1949;

(ii) The Industrial Tribunal (Central Procedure) Rules, 1954;

(iii) The Industrial Disputes (Central) Rules, 1957; and

(iv) The Industrial Employment (Standing Orders) Central Rules,1946

Changes from prior acts

Replaces Trade Unions Act 1926, Industrial Employment (Standing Orders) Act 1946, and Industrial Disputes Act 1947.

Raises standing orders threshold from 100 to 300 workers, introduces fixed-term employment, mandates negotiating unions (threshold-based recognition vs. optional), deems individual disputes as industrial disputes, and simplifies tribunals (one per state).

Retranchment compensation fixed at 15 days’ average pay (vs. variable), lay-off at 50% wages; prior government permission needed only for 300+ worker factories/mines/plantations.

Definitions

Employee – means any person (other than an apprentice engaged under the Apprentices Act, 1961) employed by an industrial establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;

Fixed term employment – means the engagement of a worker on the basis of a written contract of employment for a fixed period:

Provided that—

(a) his hours of work, wages, allowances and other benefits shall not be less than that of a permanent worker doing the same work or work of similar nature;

(b) he shall be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute; and

(c) he shall be eligible for gratuity if he renders service under the contract for a period of one year;

Retrenchment – means the termination by the employer of the service of a worker for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include—

(i) voluntary retirement of the worker; or

(ii) retirement of the worker on reaching the age of superannuation; or

(iii) termination of the service of the worker as a result of the non-renewal of the contract of employment between the employer and the worker concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or

(iv) termination of service of the worker as a result of completion of tenure of fixed term employment; or

(v) termination of the service of a worker on the ground of continued ill-health;

Wages – means all remuneration, whether by way of salary, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment,

and includes,—

(i) basic pay;

(ii) dearness allowance;

(iii) retaining allowance, if any,

but does not include –

(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;

(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;

(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(d) any conveyance allowance or the value of any travelling concession;

(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;

(h) any overtime allowance;

(i) any commission payable to the employee;

(j) any gratuity payable on the termination of employment; or

(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

Provided that, for calculating the wage under this clause, if any payments made by the employer to the employee under sub-clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed to be remuneration and shall be accordingly added in wages under this clause:

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages the emoluments specified in sub-clauses (d), (f), (g) and (h) shall be taken for computation of wage.

Explanation.—Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;

Worker – means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 and sales promotion employees as defined in clause (d) of section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—

(i) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or

(ii) who is employed in the police service or as an officer or other employee of a prison; or

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who is employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time:

Provided that for the purposes of Chapter III, “worker”—

(a) means all persons employed in trade or industry; and

(b) includes the worker as defined in clause (m) of section 2 of the Unorganised Workers’ Social Security Act, 2008.

Industry

Any systematic activity carried on by cooperation between employer and workers for production, supply or distribution of goods or services with a view to satisfy human wants.

Exclusions

× Institutions engaged in charitable, social or philanthropic services

× Sovereign functions including defence research and atomic energy

× Domestic services

× Any activity of Government relatable to sovereign functions

Key Provisions

Fixed-Term Employment – NEW

Employment for a fixed duration with benefits at par with permanent workers.

• Worker engaged for a fixed period based on written contract
• Same wages and benefits as permanent workers doing similar work
• Eligible for gratuity on pro-rata basis if he renders service for a period of one year (even if less than 1 year)
• No notice period or retrenchment compensation on expiry of tenure
• Cannot convert fixed-term to permanent on basis of duration alone
• Contract expiry does NOT constitute retrenchment

Definition of Worker – Expanded – CHANGED

Expanded definition includes supervisory employees up to a higher wage threshold.

• Includes persons in supervisory capacity drawing wages up to Rs. 18,000 per month (increased from Rs. 10,000)
• Includes sales promotion employees
• Includes working journalists
• Excludes persons in managerial or administrative capacity
• Excludes persons employed in police or armed forces
• Excludes apprentices under Apprentices Act, 1961

Negotiating Union – Statutory Right – CHANGED

Recognition of trade unions for collective bargaining is now a legal right.

• Negotiating Union: Trade union with 51% or more workers as members
• Recognition is now statutory, not at employer’s discretion
• Negotiating Council: Where no union has 51%, unions with 20%+ form council
• Council representation proportional to membership
• Five-year recognition period
• Only negotiating union/council can collectively bargain

Standing Orders – CHANGED

Rules governing conditions of employment in industrial establishments.

• Mandatory for establishments with 300 or more workers
• Threshold reduced from previous applicability to smaller establishments
• Model Standing Orders to apply where none certified
• Must be certified within 6 months of Code commencement
• Covers classification, shift work, attendance, leave, termination
• Digital display of standing orders required

Strikes and Lock-outs – Universal Notice – CHANGED

14-day notice now required for ALL establishments, not just public utilities.

• 14 days’ advance notice required for strike or lock-out
• Applies to ALL industrial establishments (major change)
• Previously only public utility services required notice
• Prohibition during conciliation and 7 days after conclusion
• Prohibition during arbitration proceedings and 60 days after
• Illegal strikes and lock-outs defined with penalties

Lay-off Provisions

Conditions under which lay-off does not attract compensation.

• Power shortage
• Natural calamity
• Mine-specific: Fire, flood, excess of inflammable gas, explosion
• Government permission required for 300+ worker establishments
• Lay-off compensation: 50% of basic wages + DA

Retrenchment and Closure – CHANGED

Provisions governing workforce reduction with higher threshold.

• Government permission required for establishments with 300+ workers (changed from 100)
• 60 days’ notice for closure of undertaking
• Retrenchment compensation: 15 days’ wages per year of service
• Last In First Out (LIFO) principle for retrenchment
• Re-employment preference for retrenched workers
• Fixed-term expiry NOT retrenchment

Re-skilling Fund – NEW

Fund for training retrenched workers.

• Employer to contribute 15 days’ wages per retrenched worker
• Fund used for re-skilling retrenched workers
• Contribution to be made within 45 days of retrenchment
• Government to frame re-skilling utilization rules

Dispute Resolution Mechanism – CHANGED

Multi-tier system for industrial dispute resolution.

• Works Committee: For matters of mutual interest (100+ workers)
• Grievance Redressal Committee: Internal resolution (20+ workers)
• Conciliation Officers: Government-appointed, 45-day timeline
• Industrial Tribunals: State-level adjudication (2-member)
• National Industrial Tribunal: Multi-state/national importance disputes
• Time-bound resolution mandated at each level

Industrial Tribunal – CHANGED

Two-member tribunal for adjudication of disputes.

• Consists of Judicial Member and Administrative Member
• Balanced composition for technical and legal expertise
• Jurisdiction over industrial disputes
• Appeal lies to National Industrial Tribunal
• Time-bound adjudication of disputes

Changes

Worker Wage Threshold: (More supervisors now classified as workers with union rights)

Before – Supervisory employees up to ₹10,000/month covered

After – Supervisory employees up to ₹18,000/month covered

 Fixed-Term Employment: (Legitimizes fixed-term hiring while protecting worker rights)

Before – Not recognized as separate category; often treated as contract labour

After – Explicit legal status with benefits equal to permanent workers

 Standing Orders Applicability: (Reduced compliance burden for smaller establishments)

Before – Establishments with 100+ workers

After – Establishments with 300+ workers (can be modified by state)

 Lay-off/Retrenchment Permission: (Greater flexibility for medium-sized establishments)

Before – Required for establishments with 100+ workers

After – Required for establishments with 300+ workers (can be modified by state)

 Trade Union Recognition: (Unions have legal backing for recognition)

Before – Recognition was employer’s discretion

After – Statutory right to recognition as negotiating union/council

 Strike/Lock-out Notice: (Uniform notice requirement across all industries)

Before – Only public utility services required 14-day notice

After – ALL industrial establishments require 14-day notice

 Industrial Tribunal Structure: (More balanced adjudication process)

Before – Single member tribunal

After – Two-member tribunal (Judicial + Administrative)

Practical Impact

Fixed-Term Employment Management

• Can use fixed-term workers for any role (not limited to temporary work)
• Must provide equal wages and benefits as permanent workers
• Pro-rata gratuity mandatory even for short contracts
• No retrenchment compensation on contract expiry
• Cannot convert to permanent based on duration alone

Trade Union Relations

• Must recognize negotiating union with 51%+ membership
• Must form negotiating council if no union has majority
• Recognition valid for 5 years
• Multiple unions can coexist but only one negotiates

Workforce Restructuring

• 300+ worker establishments need permission for lay-off/retrenchment
• 60-day notice required for closure
• 15-day wages per year compensation for retrenchment
• Contribute to re-skilling fund within 45 days

Standing Orders Compliance

• Certify standing orders within 6 months of IR Code commencement
• Model standing orders apply if not certified
• Must display standing orders digitally and physically
• Cover: classification, shifts, leave, termination, discipline

Applicability on IT companies

The Industrial Relations Code, 2020 and its Rules, effective November 21, 2025, apply to IT companies as “industrial establishments” since IT services qualify as systematic activities for goods/services distribution. IT firms gain flexibility on layoffs/retrenchments but face new compliance on committees and unions.

Layoff/Retrenchment Flexibility

IT companies (non-factory, non-mine, non-plantation) exempt from Chapter X prior government permission for layoff/retrenchment/closure unless employing 300+ workers. Requires only 1-month notice (or pay in lieu), 15 days’ average pay per year compensation, and Form-IX intimation 30-60 days prior; re-employment preference to prior retrenched Indian citizens within 1 year.

Fixed-Term Employment

Enables project-based hiring on fixed contracts with pro-rata permanent benefits (wages, hours, gratuity after 1 year), suiting IT’s variable workloads without permanent liability post-term. Non-renewal or term-end not “retrenchment,” easing staffing adjustments.

Compliance Requirements

Mandatory Grievance Redressal Committees (20+ workers, equal reps, women’s quota per proportion, 30-day resolution) and Works Committees (100+ workers, ≤20 members, quarterly meetings). Standing orders certification needed only for 300+ workers (adopt model or draft within 6 months, electronic filing).

Union and Dispute Rules

Unions need 10% or 100 workers (min. 7) for registration; negotiating union if 51% support, else council for 20%+ unions (valid 3-5 years).

Individual terminations deemed industrial disputes, allowing direct Tribunal access after 45-day conciliation failure (within 2 years).

60-day strike/lockout notice; mass casual leave (50%+) counts as strike.

HR Process Changes

Electronic filings via Samadhan Portal for grievances, conciliation, standing orders; Rules mandate women reps, rotational chairs, Trade Union verification for committees.

Worker Re-skilling Fund: 15 days’ wages contribution per retrenchment, transferable within 45 days.

Potential rise in disputes but streamlined tribunals (one per state).

Penalties

Illegal strike or lock-out

Workers: Imprisonment up to 1 month or fine up to ₹10,000. Employers: Imprisonment up to 1 month or fine up to ₹50,000

Penalties apply to initiators and participants

 Non-compliance with lay-off/retrenchment provisions

Fine up to ₹1 lakh; Imprisonment up to 6 months for repeat offence

Strict compliance required for 300+ establishments

 Failure to file standing orders

Fine up to ₹1 lakh

For establishments with 300+ workers

4. The Occupational Safety, Health and Working Conditions Code, 2020

The Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) consolidates 13 pre-existing labour laws into a single framework to regulate workplace safety, health, and conditions across various establishments. Effective from November 21, 2025, it emphasizes employer duties, standardized registration, and worker protections while introducing electronic compliance mechanisms.

The following draft rules, which the Central Government proposed to make in exercise of powers conferred by Sections 133 and 134 of the Occupational Safety, Health and Working Conditions Code, 2020 (37 of 2020) read with section 24 of General Clauses Act, 1897(10 of 1897) and in supersession of the-

1. The Dock Workers (Safety, Health and Welfare) Rules, 1990;

2. The Building and Other Construction Workers (Regulation of Employment and Condition of Services) Rules, 1998;

3. The Model Factories Rules;

4. The Mines Rules, 1955;

5. The Mines Rescue Rules, 1985;

6. The Mines Vocational Training Rules, 1966;

7. The Pithead Bath Rules, 1959;

8. The Mines Crèche Rules,1966;

9. The Contract Labour (Regulation and Abolition) Central Rules, 1971;

10. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Central Rules, 1979.

11. The Working Journalists (Conditions of Service) and Miscellaneous Provisions Rules, 1957;

12. The Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Rules, 1984;

13. The Sales Promotion Employees (Conditions of Service) Rules, 1976.

Definitions

Contract Labour – means a worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer and includes inter-State migrant worker but does not include a worker (other than part time employee) who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on permanent basis), and gets periodical increment in the pay, social security coverage and other welfare benefits in accordance with the law for the time being in force in such employment;

Workers employed by a contractor to work in or in connection with the work of an establishment.

Thresholds & Limits

• → Applicability threshold: 50 workers (new – previously 20)

Note: Higher threshold provides relief to smaller contractors

Contractor – in relation to an establishment, means a person, who —

(i) undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour; or

(ii) supplies contract labour for any work of the establishment as mere human resource, and includes a sub-contractor;

Principal employer – where the contract labour is employed or engaged, Means –

(i) in relation to any office or Department of the Government or a local authority, the head of that office or Department or such other officer as the Government or the local authority, may specify in this behalf;

(ii) in a factory, the owner or occupier of the factory and where a person has been named as the manager of the factory, the person so named;

(iii) in a mine, the owner or agent of the mine;

(iv) in relation to any other establishment, any person responsible for the supervision and control of the establishment;

Employee – means –

(i) in respect of an establishment, a person (other than an apprentice engaged under the Apprentices Act, 1961) employed on wages by an establishment to do any skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or any other work, whether the terms of employment be express or implied; and

(ii) a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union:

Provided that notwithstanding anything contained in this clause, in case of a mine a person is said to be “employed” in a mine who works as the manager or who works under appointment by the owner, agent or manager of the mine or with the knowledge of the manager, whether for wages or not –

(a) in any mining operation (including the concomitant operations of handling and transport of minerals up to the point of dispatch and of gathering sand and transport thereof to the mine);

(b) in operations or services relating to the development of the mine including construction of plant therein but excluding construction of buildings, roads, wells and any building work not directly connected with any existing or future mining operations;

(c) in operating, servicing, maintaining or repairing any part of any machinery used in or about the mine;

(d) in operations, within the premises of the mine, of loading for dispatch of minerals;

(e) in any office of mine;

(f) in any welfare, health, sanitary or conservancy services required to be provided under this Code relating to mine, or watch and ward, within the premises of the mine excluding residential area; or

(g) in any kind of work, whatsoever, which is preparatory or incidental to, or connected with, mining operations;

Wages – means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—

(i) basic pay;

(ii) dearness allowance; and

(iii) retaining allowance, if any,

but does not include –

(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;

(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;

(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(d) any conveyance allowance or the value of any travelling concession;

(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;

(h) any overtime allowance;

(i) any commission payable to the employee;

(j) any gratuity payable on the termination of employment;

(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under sub-clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in sub-clauses (d), (f), (g) and (h) shall be taken for computation of wages.

Worker – means any person employed in any establishment to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists and sales promotion employees, but does not include any such person –

(i) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or

(ii) who is employed in the police service or as an officer or other employee of a prison; or

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who is employed in a supervisory capacity drawing wage exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time;

Establishment (OSH Code) – Applicability varies by type of establishment and workforce size

A place where any industry, trade, business, manufacture or occupation is carried on.

Thresholds & Limits

→ Type 1: Industry/trade/business with 10+ workers (with aid of power) or 20+ workers (without power)

→ Type 2: Factory/plantation/construction with 10+ workers

→ Type 3: Mine/port/dock work – any number of workers

Inter-State Migrant Worker

A person who is recruited or has migrated from one state for employment in an establishment in another state.

Thresholds & Limits

• →Applicability: Establishments employing 10+ inter-state migrants

Note: Self-declaration based registration via Aadhaar-linked portal

 Key Provisions

Applicability Criteria – NEW

Different applicability thresholds based on establishment type.

• Any industry, trade, business, manufacturing – in which ten or more workers are employed
• Motor transport undertaking, newspaper establishment, audio-video production, building and other construction work or plantation – ten or more workers employed
• Factory – 10 or more workers employed
• Mines, ports – no threshold
• No thresholds for hazardous and life-threatening activities

Single Registration – NEW

One registration for establishment under this Code within 60 days.

• Single window registration for establishments
• Registration for establishments with 10 or more workers
• Common license for factory, contract labour and beedi establishments
• Validity period as prescribed by appropriate Government
• Registration within 60 days of applicability date

Appointment Letters – NEW

Mandatory issuance of appointment letters to all employees.

• Every employee to be issued an appointment letter
• Letter to contain terms and conditions of employment
• Applicable to all establishments covered under the Code
• No exemptions based on worker category

Employer’s Duties

Comprehensive duties of employers for workplace safety.

• Provide and maintain safe workplace free from hazards
• Provide information, instruction and training on safety
• Provide personal protective equipment
• Ensure welfare facilities for employees
• Notify accidents and dangerous occurrences
• Maintain health and safety records

Employee’s Duties – NEW

Employees also have statutory duties for workplace safety.

• Take reasonable care for health and safety of self and others
• Report to employer any unsafe situation
• Cooperate with employer in meeting statutory obligations
• Not misuse any safety equipment provided
• Comply with safety instructions

Working Hours – 8-Hour Limit – CHANGED

Maximum working hours reduced with overtime provisions.

• Maximum 8 hours work per day (reduced from 9 hours under Factories Act)
• Weekly and compensatory holidays mandatory
• Annual leave with wages
• Overtime at twice normal wages
• Overtime requires worker consent
• Night shift provisions with safeguards

Women in All Establishments – CHANGED

Women permitted to work in all establishments for all types of work.

• Women can work in ALL establishments for ALL types of work
• Night work (7 PM – 6 AM) permitted with safeguards
• Employer must ensure safety, security, and dignity
• Adequate transportation must be provided for night work
• Consent of woman required for night shifts
• No discrimination in recruitment or conditions

Contract Labour Provisions – CHANGED

Revised framework for contract labour engagement.

• Applicability threshold: 50 workers (increased from 20)
• Work-specific license for contractors (project-based)
• Contract labour prohibited in core activities with 3 exceptions
• Exceptions: Sudden increase in work, work not done by regular workers, intermittent work
• Principal employer responsible for wage payment on contractor default
• Duties matrix clearly defined between principal employer and contractor

Health and Welfare Facilities

Mandatory welfare provisions for employees.

• Cleanliness and disposal of wastes
• Adequate ventilation and temperature control
• Sufficient lighting (natural and artificial)
• Potable drinking water
• Sufficient latrines and urinals (separate for men and women)
• Washing facilities and locker rooms
• Canteen where 100+ workers employed
• First-aid facilities and medical examination
• Crèche where 50+ women employed
• Annual health checkup for hazardous processes

Inter-State Migrant Workers – CHANGED

Special provisions for migrant workers with portable benefits.

• Self-declaration based registration via Aadhaar
• Portability of benefits across states
• Annual journey allowance (corrected from one-time)
• Equal treatment with local workers
• Toll-free helpline for grievances
• Applicable to establishments with 10+ inter-state migrants

Deemed Factory Power – NEW

Government can declare any premises a factory.

• Appropriate Government can declare any premises as a factory
• Applicable regardless of number of workers employed
• Used to extend safety protections to high-risk premises
• Notification-based power

National OSH Advisory Board

Central advisory body on occupational safety.

• National Occupational Safety and Health Advisory Board at Central level
• State Boards at state level
• Advisory role on policy and standards
• Representation of employers, workers and experts

Changes

Working Hours: (Shorter standard workday with consent-based overtime)

Before – Up to 9 hours per day under Factories Act

After – Maximum 8 hours per day

Contract Labour Threshold: (Smaller contractors exempt from compliance burden)

Before – 20 workers triggered applicability

After – 50 workers trigger applicability

Contract Labour in Core Activities: (Clear legal framework for when contract labour can work in core activities)

Before – Prohibition on core activities often litigated

After – Explicit prohibition with 3 defined exceptions

Work-Specific License: (More flexible licensing for project-based work)

Before – Annual license for contractor

After – Work-specific license (can be for specific duration/project)

Women Night Shift: (Greater employment opportunities for women)

Before – Prohibited in factories

After – Permitted with safety safeguards and consent

Inter-State Migrant Registration: (Simplified process with benefit portability)

Before – Employer-registered system

After – Self-declaration via Aadhaar, portable benefits

Journey Allowance for Migrants: (Recurring benefit for migrant workers)

Before – Not standardized

After – Annual journey allowance (not one-time)

Single Registration: (Simplified compliance – single window)

Before – Multiple registrations under different laws

After – One registration for establishment under OSH Code

Practical Impact

Registration and Licensing

• Single registration within 60 days of applicability
• Common license for factory, contract labour, beedi establishments
• Work-specific licenses for contractors (project-based)
• Online registration through single-window portal

Contract Labour Management

• 50-worker threshold for registration requirement
• Cannot engage contract labour in core activities (with 3 exceptions)
• Principal employer responsible for wage payment if contractor defaults
• Maintain separate registers for contract workers
• Equal welfare facilities for contract workers

Working Hours and Welfare

• 8-hour workday maximum (reduced from 10.5 hours)
• Overtime at 2x wages with worker consent
• Canteen mandatory for 100+ workers
• Crèche mandatory where 50+ women employed
• Annual health check-up for hazardous processes

Women Employment

• Women permitted in all establishments for all types of work
• Night shift (7 PM – 6 AM) permitted with safeguards
• Must ensure safety, security, and transportation
• Woman’s consent required for night work
• No discrimination in recruitment or wages

Migrant Worker Compliance

• Annual journey allowance (not one-time)
• Portal registration for inter-state migrants
• Toll-free helpline access
• Portable benefits across states
• Equal treatment with local workers

Applicability on IT companies

The Occupational Safety, Health and Working Conditions Code, 2020 (effective November 21, 2025) consolidates 13 pre-existing laws and applies to IT companies as “establishments” employing 10+ workers in trade/business, requiring Shram Suvidha Portal registration.

Applicability to IT Firms

IT offices fall under Section 2(v) as non-factory establishments (computer units alone aren’t factories per Section 2(w) Explanation II), with State Governments as appropriate authority unless centrally controlled.

Thresholds: 10+ workers triggers registration; factories need 20+ (with power) or 40+ (without); hazardous activities exempt thresholds.

Registration and Compliance

Employers apply electronically via Form-I; certificates issue in 7 days or auto-generate; display required; update changes within 30 days; closure needs dues certification.

Maintain registers (Form-VIII for wages/overtime), notices (Form-VII for work periods), and annual returns (Form-IX by Feb 1).

Health and Safety Duties

Ensure hazard-free workplaces, free annual exams for 45+ workers (Form-V), appointment letters, accident reports (Form-VI within 12-48 hours), and disease notifications.

Safety committees mandatory for 500+ workers (quarterly meetings); safety officers for specific thresholds.

Working Hours and Leave

Max 48 hours/week; daily spread over ≤12 hours (≤5 hours before 30-min rest); overtime at 2x wages (≤125 hours/quarter).

Weekly off (≤6 days/week); compensatory holidays spaced; annual leave: 1 day/20 worked (carry forward ≤30 days, encash excess).

Contract Labour Rules

Licensing mandatory for 50+ contractors (5-year validity, security deposit); principal employer liable for wages/welfare if contractor defaults; core activities ban contract labour.

Penalties

Failure to register establishment

Fine up to ₹2 lakh; up to ₹5 lakh for continuing contravention

Registration mandatory within 60 days

Non-compliance causing death

Imprisonment up to 2 years and/or fine up to ₹5 lakh

Serious penalty for fatal safety violations

Non-compliance with safety provisions

Fine up to ₹2 lakh (1st offence); up to ₹5 lakh (repeat)

Graduated penalties

Employing contract labour in core activity illegally

Fine up to ₹1 lakh

Unless exception applies