Context and Immediate Relevance
On 12 February 2026, bank unions across India observed a strike in response to the enforcement of the new Labour Codes, bringing renewed attention to the compliance implications for banking institutions. For public sector banks and pan-India banking entities dependent on award staff, outsourced support services, and contract labour, the notification of the four Labour Codes on 21 November 2025 represents a structural regulatory shift implemented without an express transition framework.
The strike foregrounds a critical compliance question: whether banks are operationally and contractually prepared to align legacy employment structures with the new statutory regime.
India’s banking sector faces immediate compliance obligations under the Code on Wages, 2019; Code on Social Security, 2020; Industrial Relations Code, 2020; and Occupational Safety, Health and Working Conditions Code, 2020, which together repeal 29 prior labour enactments. These reforms significantly affect wage structuring, social security contributions, industrial relations, and occupational safety—areas where banks maintain complex, multi-tiered workforce arrangements.
With uneven notification of state rules—Gujarat and Arunachal Pradesh being among the few states with comprehensive implementation—principal employers such as public sector banks must urgently review payroll practices, outsourcing arrangements, and vendor compliance. For banks operating across multiple jurisdictions, the absence of harmonised implementation heightens enforcement, litigation, and reputational risk.
Notification Without Transition
The Ministry of Labour and Employment has notified all four Labour Codes, triggering preparatory compliance obligations despite the staggered and incomplete notification of state rules. In the absence of a statutory grace period, employers bear immediate responsibility for alignment, with existing rules under repealed enactments continuing only to the extent they are consistent with the Codes, in terms of Section 24 of the General Clauses Act, 1897.
Banks qualify as “commercial establishments” under the Codes, bringing branch operations within their ambit. This position is further reinforced by the classification of banking services as public utility services under the Industrial Relations Code.
The shift disrupts existing bipartite settlements governing award staff, negotiated through Indian Banks’ Association (IBA) frameworks, and expands principal employer exposure for outsourced support staff (including IT/ITES, housekeeping, and security services) and contract labour. Delayed state-level implementation—such as partial notification in Karnataka and Mizoram, and absence of rules in West Bengal—creates operational inconsistencies for banks with nationwide branch networks.
Banking Workforce Under Scrutiny
Banking institutions typically segment their workforce into distinct categories, each of which is now redefined under the Labour Codes:
- Award Staff: Classified as workmen under bipartite settlements, award staff retain collective bargaining rights but are subject to the Industrial Relations Code’s move towards single negotiating unions or councils.
- Support Staff: Fixed-term employees or vendor-engaged personnel (including call centres and data processing units) gain expanded statutory protection, including gratuity eligibility after one year and equal pay mandates.
- Contract Labour: Engaged for non-core activities through contractors, with banks exposed to liability for provident fund, ESI, and gratuity contributions where contractors default, due to the broadened definition of “employee”.
- Other Categories: Provisions relating to gig and platform workers impact fintech-linked outsourcing, while women employees gain statutory rights to night shifts subject to prescribed safety measures.
Principal employer risk is particularly acute where contract labour performs perennial or core functions—such as security or IT infrastructure—or where banks exercise direct supervision, increasing the likelihood of sham contracting claims.
Code on Wages: Restructuring Salary Architecture
The Code on Wages mandates that basic pay and dearness allowance constitute at least 50% of total remuneration, effectively dismantling allowance-heavy salary structures prevalent in the banking sector. Narrowed exclusions inflate the statutory base for provident fund, gratuity, bonus, and overtime calculations, with pronounced impact on award staff.
| Pre-2025 Regime | Post-Code Position | Compliance Impact |
| Wage ceilings under specific enactments | Universal application; state-notified minimum wages and bonus thresholds | Senior managerial employees gain statutory grievance redressal and timely payment protections |
| Scheduled employments only | Equal pay for equal work across employments | Vendor parity obligations for outsourced staff |
Statutory timelines for wage payment—by the 7th of the succeeding month (or earlier in certain states)—expose banks to penalties for procedural delays. Divergent bonus thresholds across states further complicate uniform payroll compliance for multi-state operations.
Social Security and OSH: Expansion of Principal Employer Liability
The Code on Social Security extends ESI coverage on a pan-India basis up to the ₹21,000 wage threshold, mandates gratuity for fixed-term employees after one year, and introduces social security mechanisms for gig and platform workers. Banks, as principal employers, must actively audit contractor compliance, with judicial trends increasingly favouring economic reality over contractual form.
The OSH Code restricts engagement of contract labour in core and perennial activities, subject to notified exemptions, and mandates enhanced safety compliance, women’s committees, and digital inspections through the Shram Suvidha portal. Non-compliance may result in regulatory action, industrial unrest, or litigation, particularly within unionised public sector banks.
Industrial Relations: Recalibration of Union Structures
Under the Industrial Relations Code, strongly unionised public sector banks must transition from multi-union bargaining frameworks to single negotiating councils. Mandatory grievance redressal committees with women representation and stricter notice requirements for strikes and lockouts aim to streamline dispute resolution, while simultaneously generating legal challenges to outsourcing and employee classification.
Compliance Roadmap for Banking Institutions
Immediate risk mitigation measures include:
- Payroll Audits: Restructuring allowances to comply with the 50% wage floor and modelling cost implications.
- Vendor Contract Review: Embedding statutory compliance warranties, indemnities, and conducting periodic audits.
- HR and Compliance Systems: Integrating Shram Suvidha portals and training HR teams on grievance redressal and equal pay obligations.
- Legal Alignment: Reviewing bipartite settlements and scenario-planning based on draft and notified state rules.
- Risk Mapping: Identifying core versus peripheral functions and assessing exposure to retrospective PF/ESI liabilities.
Broader Implications Amid Regulatory Asymmetry
The February 2026 bank strike reflects not resistance to labour reform, but resistance to regulatory ambiguity. In the absence of harmonised state rules and transitional guidance, banks face significant challenges in achieving uniform compliance across jurisdictions. For public sector banks, non-compliance carries governance and reputational consequences beyond statutory penalties.
Institutions that proactively audit, restructure, and renegotiate workforce arrangements may absorb short-term costs, while delayed compliance is likely to translate into prolonged litigation and supervisory scrutiny.
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Author: Law student specialising in Banking and Insolvency Law, National Law University Odisha.
Disclaimer: Views expressed are personal
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