New Wage Codes Impact & Immediate Actions Required on Payroll of December 2025

Rajiv Nigam 18 Dec 2025 3,933 Views 1 comment Print
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Effective November 21, 2025, all four wage codes have been implemented, rendering 29 previous labour laws redundant. Consequently, *significant adjustments are required for the December 2025 payroll*, as outlined by the respective Acts.:

(It is important to clarify a common misconception within the industry regarding the effective date of these codes. The belief that these codes will only become effective once states notify their respective Acts and Rules, with a maximum timeline of March 2025 for states to establish certain rules, leading to an April 2026 effective date, is inaccurate. As previously communicated and further elaborated herein, only specific sections of various codes, which are subject to notification by the appropriate government, will be impacted by state notifications, not the entirety of the codes.)

Also Read: ESIC Registration Mandated After Social Security Code Rollout

*ESI IMPLEMENTATION ESI* The ESI department at the Mumbai Regional Office has, to my understanding, pioneered the implementation of new codes as per Order No. File No.35/SPREE/2025 dated December 11, 2025. This implementation incorporates the definition of wages as outlined in Section 2(88) of the “Code of Social Security, 2020 (CSS-2020).”

*To illustrate this with an example*: if an individual’s gross salary is ₹40,000, the basic salary would be 50%, or ₹20,000. As this amount is below the maximum ESI limit of ₹21,000, the minimum ESI contribution would be calculated on ₹20,000. Alternatively, contributions up to ₹21,000 are permissible in this scenario.

*PF* – *Reconstruct the wages in payroll* – as per definition of employee under the CSS-2020 u/s 2(26) – the term “employee” shall mean such employee drawing wages less than or equal to the wage ceiling notified by the Central Government *which is currently 15000/- unless next change is notified*. So, if anyone gross salary is 29000/- then Basic wages shall be 14,500/- which is below 15,000/- or in case of where minimum wages are being paid which is actually only Basic + DA that can not be further bifurcated so PF shall be payable on whole wages, of course if it crosses the limit of 15,000/- then it is not mandatory.

*FOR GRATUITY* Here is also wage definition is important so you can not pay Gratuity less than 50% of gross wages. For fixed term contract employees 1 year service is enough to pay gratuity and in regular employees still 5 year serving limit is in the code.

*Understanding of Wages/Salary/Gross Salary* As per the definition given in *THE CODE ON WAGES, 2019* u/s 2(y) in simple language – you may pay salary to an employee in the following components:

Basic pay
DA
Retaining Allowance
Bonus (in addition to term of employment)
Value of accommodation, electricity, water, washing, attire, medical attendance or other amenity
Employer contribution PF/pension fund along with interest
Conveyance allowance/travelling concession value
Sum paid to defray the special expenses of employee
HRA
remuneration payable under any award
any overtime allowance
any commission payable to the employee;
or any other allowance whatsoever you called and defined as per the company policy

Now you add all above and the divide by 2 i.e. 50% of gross or CTC shall be Wages on which all benefits shall be calculated. Alao, current limits of ESI/PF shall also be calculated on new Wage as per the code.

THE RELEVANT SECTIONS OF CODES WHICH SHALL BE IMPLEMENTED WITH AMENDMENTS OR DEFINED AMOUNT OR RATIO ETC WHEN CENTRAL GOVT. OR APPROPRIATE GOVT. WILL NOTIFIES THE DATE OF IT’S IMPLEMENTATION

CODE OF WAGES 2019:

The sections where the Govt has referred section will be implemented when appropriate Govt will notified or when rules will come in force:

Central Government may Notify/Specify/Order

Section	Brief Context of Notification/Specification	Source
1(3)	To appoint the date on which the Code (or different provisions thereof) shall come into force, by notification in the Official Gazette. 21/11/2025 is date notified for all codes
2(1)(j)(ii)	To declare, by notification, any other tax to be a “direct tax” for the purposes of the Code.
2(1)(zzj) Proviso	To notify a percentage (other than one-half) to be used when calculating wages, specifically concerning payments that exceed half of the total remuneration.
2(d)	To notify an amount exceeding fifteen thousand rupees per month for the maximum wage of a person employed in a supervisory capacity.
41(1)(g)	To specify public sector financial institutions (other than a banking company) to which Chapter IV (Bonus) does not apply, having regard to certain factors, by notification.
42(3)(c)	To specify, by notification, the extent to which women may be employed in certain establishments or employments.
50(2)	To provide, by notification, for the manner of making set on or set off for the sixth and seventh accounting years. (This reference is to the rule-making power for Section 26(7)(i) and (ii), but the function itself relates to rules made by the Central Government).
68(1)	To make provisions to remove difficulties in giving effect to the Code, by order published in the Official Gazette (within three years of commencement).
69(2)	To repeal notifications, nominations, etc., made under repealed enactments by notification to that effect.

State Government may Notify/Specify

		Source
42(4)(c)	To specify, by notification, the extent to which women may be employed in certain establishments or employments (based on advice from the State Advisory Board).

Appropriate Government may Notify/Appoint/Specify (Central or State)

Section	Brief Context of Notification/Specification	Source
2(k)	To declare a person to be an employee.
4	To notify the authority responsible for deciding disputes as to whether a work is of the same or similar nature for the purposes of section 3.
5	To notify the minimum rate of wages, which employers must not pay below.
7(2)	To appoint, by notification, the authority to compute the cost of living allowance and cash value of concessions, and to specify directions for computation.
8(1)(b)	To publish proposals for fixing or revising minimum rates of wages, by notification, specifying a date for considering representations.
8(3)	To fix or revise the minimum rates of wages, by notification, after considering recommendations or representations.
13(3)	To declare an employee’s employment as “essentially intermittent” if daily hours of duty normally include periods of inaction.
15 Proviso	To specify, by notification, the industrial or other establishments whose employers must pay wages only by cheque or by crediting wages to a bank account.
18(1) Explanation (b)(iii)	To issue a notification specifying the requirements that must be met if loss of wages resulting from suspension is not to be deemed a deduction.
18(2)(d)	To specify (by notification) any authority engaged in subsidising house-accommodation, deductions for which may be made from wages.
18(2)(e)	To authorise, by general or special order, deductions for specified amenities and services supplied by the employer.
25	To apply the provisions of Chapter III (Payment of Wages) to Government establishments, by notification.
26(1) & 26(2)	To determine, by notification, the maximum amount of wages per month for the purpose of calculating employee eligibility for, and the quantum of, bonus.
31(3)	To notify the authority having jurisdiction to call upon the employer to produce a balance sheet where there is a dispute regarding the quantum of bonus.
39(1) Proviso	To specify an authority that may extend the period for payment of bonus beyond eight months.
41(1)(i)	To exempt any establishment (or employees thereof) from the provisions of Chapter IV (Bonus), having regard to overall benefits under any other scheme, by notification.
45(1)	To appoint one or more authorities, not below the rank of a Gazetted Officer, to hear and determine claims arising under the Code, by notification.
49(1)	To appoint the appellate authority having jurisdiction to hear appeals against claims orders passed under Section 45, by notification.
51(1)	To appoint Inspector-cum-Facilitators for the purposes of the Code, by notification, and assign their geographical limits or establishments.
51(2)	To lay down an inspection scheme, by notification.
51(3)	To confer jurisdiction of randomised selection of inspection for the purposes of the Code to the Inspector-cum-Facilitator, by notification.
56(1)	To specify a Gazetted Officer who may compound offences, by notification.
62	To direct, by notification, that any power exercisable by the appropriate Government shall also be exercisable by a specified subordinate officer or authority, subject to conditions.

CODE OF SOCIAL SECURITY 2020:

Section Number	Brief Description
Section 2(6)	Defines “building or other construction work.” Excludes work employing more than such number of workers as may be notified by the appropriate Government.
Section 2(44)	Different classes of medical practitioners with specific qualifications (for chapters other than Chapter IV) may be notified by the appropriate Government.
Section 2(57)(a)(ii)	Pertaining to plantations, the State Government (which may be the appropriate Government) may, by notification, so direct that the Code applies to certain lands for growing plants if specific criteria and Central Government approval are met.
Section 2(57)(b)	The State Government (which may be the appropriate Government) may, by notification, declare certain lands used for growing plants to be a plantation, even if the area is less than five hectares.
Section 57(1)	The date on which every employer (except Government/State-controlled entities) must obtain insurance for their gratuity liability shall be effective from such date as may be notified by the appropriate Government.
Section 58(1)	The appropriate Government may, by notification, appoint any officer to be a competent authority for implementing the provisions of Chapter V (Gratuity) in a specified area.
Section 75, Explanation (ii)	Pertains to compensation in plantations. The exclusion of certain workers (excluding medical officers) applies if their monthly wages exceed the amount as determined by the appropriate Government, by notification.
Section 75, Explanation (iii)	Pertains to compensation in plantations. The exclusion of managerial or administrative persons applies if their monthly wages exceed the amount as determined by the appropriate Government, by notification.
Section 102	The appropriate Government may, by notification, exempt any employer or class of employers from paying the cess if a corresponding law is already in force in that State.
Section 122(1)	For the purposes of provisions outside Chapters III and IV, the appropriate Government may, by notification, appoint Inspector-cum-Facilitators.
Section 122(2)	The appropriate Government may, by notification, lay down an inspection scheme for provisions outside Chapters III and IV.
Section 122(3)	The appropriate Government may, by notification, confer such jurisdiction of randomised selection of inspection for the purposes of the Code (outside Chapters III and IV).
Section 143(1)	The appropriate Government may, by notification, grant exemption to an establishment or employees from any or all provisions of the Code.
Section 148	The appropriate Government may, by notification, deprive an establishment or person of any benefit provided under the Code if it is satisfied that the benefit has been misused.
Section 152(2)	The appropriate Government may, by notification amend the Second Schedule and Third Schedule by way of addition (listing employees and occupational diseases, respectively).
Section 162	The appropriate Government may, by notification, direct that all or any of the powers and functions exercisable by that Government may also be exercised by specified Social Security Organisations or officers.
First Schedule, V(b)	Specifies that the application of Chapter V (Gratuity) extends to such other shops or establishments as may be notified by the appropriate Government from time to time.
First Schedule, VI(b)	Specifies that the application of Chapter VI (Maternity Benefit) extends to such other shops or establishments notified by the appropriate Government.

INDUSTRIAL RELATIONS CODE, 2020

Section Number	Brief Description
Section 28(2)	This sub-section specifies that the provisions of Chapter IV (Standing Orders) shall not apply to workers in an industrial establishment to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, or other similar central rules, or any other rules or regulations that may be notified in this behalf by the appropriate Government, apply.
Section 40, Proviso (b)	This sub-section lists exceptions to the requirement of giving notice before effecting a change in conditions of service. Notice is not required where the workers affected are subject to specified central civil service rules or any other rules or regulations that may be notified in this behalf by the appropriate Government in the Official Gazette.

The Industrial Relations Code, 2020

Section Number	Brief Description
Section 1(3)	The Code shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint; different dates may be appointed for different provisions.
Section 2(b)(i)	The definition of “appropriate Government” includes the Central Government in relation to any industrial establishment or undertaking concerning any controlled industry as may be specified in this behalf by the Central Government.
Section 2(q)(iv)	The definition of “industry” excludes “any other activity as may be notified by the Central Government”.
Section 2(zq), Proviso	For calculating the wage under this clause, if certain non-wage payments exceed one-half, or such other per cent. as may be notified by the Central Government, the excess amount shall be deemed to be remuneration and added to wages.
Section 2(zr)(iv)	The definition of “worker” does not include a person 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.
Section 92(3)	The Central Government may, by notification, and for reasons stated, empower a Tribunal constituted by the State Government to handle cases where the appropriate Government is the Central Government.
Section 101(1)	The Central Government may, by notification, add to or alter or amend the First Schedule or the Second Schedule or the Third Schedule.
Section 214(2)(a)	The Worker Re-skilling Fund shall consist of an employer’s contribution equal to fifteen days’ wages last drawn by the worker, or such other number of days as may be notified by the Central Government, for every retrenched worker.

THE OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS CODE, 2020

Here are the relevant sections where “Government may notify” or similar powers are mentioned:

Central Government may Notify

Section	Brief Context of Notification/Specification	Source
1(2)	The date on which the Code shall come into force; different dates may be appointed for different provisions by notification.
2(1)(d)(i)	Concerning any controlled industry as may be specified in this behalf by the Central Government (in relation to determining the “appropriate Government”).
2(1)(f)	The maximum amount of remuneration (monthly wages or lump sum) for an “audio-visual worker”.
2(1)(h)	Specification of other works (beyond the listed examples like buildings, roads, etc.) as “building or other construction work,” by notification.
2(1)(v) Proviso	Notifying establishments or class of establishments where the threshold of workers specified shall not apply if hazardous or life-threatening activity is carried on.
2(1)(zf)	Notifying a higher amount than eighteen thousand rupees per month for the maximum wages of an “inter-State migrant worker”.
2(1)(zi)(vii)	Notifying other processes (beyond the listed examples like making, altering, pumping, printing, etc.) as a “manufacturing process”.
2(1)(zp)	Notifying other classes of printed periodical work as “newspaper”.
2(1)(zzj) Proviso	Notifying a percentage (other than one-half) to be used when calculating wages, specifically concerning payments that exceed half of the total remuneration.
2(1)(zzl)(iv)	Notifying an amount exceeding eighteen thousand rupees per month for the maximum wage of a worker employed in a supervisory capacity.
3(8)(b)	Notifying any other law under which an establishment’s existing registration shall be deemed registered under this Code.
16(1)	Constitution of the National Occupational Safety and Health Advisory Board by notification.
18(1)	Declaration of standards on occupational safety and health for workplaces by notification.
18(3)	Amendment of the Second Schedule by notification, based on the recommendation of the National Board.
25(1) Proviso (i)	Notifying the maximum hours of work per day for persons employed below ground in a mine.
114(1)	Notifying an officer who may compound certain penalties or offences.
116	Notifying that Central Government powers may be exercised by the State Government or subordinate officer/authority.
131	Notifying an amendment (addition, alteration, or omission) to any Schedule.

State Government may Notify

Section	Brief Context of Notification/Specification	Source
2(1)(zx)(a)(ii)	Directing, by notification, that land of five hectares or more used for growing plants (other than specified ones) is a “plantation,” subject to Central Government approval.
2(1)(zx)(b)	Declaring, by notification, any land used for growing specified plants to be a “plantation,” even if it measures less than five hectares.
18(4)	Amending the standards made under sub-sections (1) and (2) for establishments in the State, with prior approval of the Central Government, by notification.
127(2)	Exempting any new factory or class of new factories from all or any of the Code’s provisions by notification, in the public interest to create economic activities and employment opportunities.

Appropriate Government may Notify (Central or State)

Section	Brief Context of Notification/Specification	Source
2(1)(h)	Notifying a higher amount (above fifty lakhs) for the total cost of construction work for own residential purposes, or the maximum number of workers, above which the Code applies.
9(5)	Notifying hazards associated with the maintenance and upkeep of structures, which designers must account for.
25(1)(b)	Notifying the maximum hours, intervals, and spread overs of work per day.
26(2)	Exempting workers from the provision requiring a weekly holiday (Section 26(1)) by notification.
32(2)	Extending the provisions for annual leave with wages to any establishment other than a railway establishment, by notification.
34(1)	Appointing Inspector-cum-Facilitators by notification.
34(3)(i)	Laying down an inspection scheme by notification.
34(3)(ii)	Providing for randomized selection of establishments and Inspector-cum-Facilitators under the scheme by notification.
34(4)	Notifying the manner of assignment of unique numbers, timely uploading of inspection reports, parameters for special inspections, and characteristics of employment/workplaces for the inspection scheme.
34(5)	Appointing Chief Inspector-cum-Facilitators by notification.
34(6)	Appointing Additional/Joint/Deputy Chief Inspector-cum-Facilitators or any other officer by notification.
34(9)	Appointing public officers as Inspector-cum-Facilitators in addition to existing ones by notification.
37(1)	Formulating a scheme to empanel experts for third party audit and certification for start-up establishments by notification.
57(2)(a)	Appointing a designated authority by notification to advise on whether an activity is a core activity or otherwise.
58	Directing, by notification, that all or any provisions of the Code shall not apply to any establishment or class of establishments in case of an emergency.
66(1)(b)	Notifying the competent authority with whom the written agreement for audio-visual workers must be registered.
81(1)	Declaring, by notification, that all or any of the provisions of the Factories Part shall apply to any place where a manufacturing process is carried on, irrespective of the number of workers.
119(1)	Designating an authority, by notification, to issue common or single licenses for factories, beedi/cigar industrial premises, and contract workers.
127(1)	Directing, by notification, that all or any of the provisions of the Code shall not apply to or in relation to any establishment or class of establishments.
129	Exempting any workplace or work activity or class thereof from all or any of the provisions of the Code during a public emergency or disaster by notification.

Summary of Authorities Notifying

The Appropriate Government (which definitionally is either Central or State Government, depending on the establishment).

The Central Government primarily handles policy decisions, national standards (such as establishing the National Board, declaring standards, amending the Second Schedule, and setting wage/remuneration limits for certain employees), and the commencement of the Code.

The State Government holds powers to notify specific local conditions, such as declaring a tract of land a plantation, or exempting new factories for economic development.

The Appropriate Government (which may be Central or State) handles operational decisions such as appointing inspectors, formulating inspection schemes, constituting appellate authorities, and issuing various exemptions in special cases or emergencies.

Author Bio

Name: Rajiv Nigam

Qualification: CA in Practice

Company: RAJIV NIGAM & ASSOCIATES

Location: NEW DELHI AND NOIDA, Uttar Pradesh, India

Member Since: 17 Jul 2017 | Total Posts: 44

RUNNING RAJIV NIGAM FCA 29 YEARS PRACTISING FIRM FOR DIRECT & INDIRECT TAXATION & VIRTUAL CFO FOR STARTUPS View Full Profile

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Author Bio

Name: Rajiv Nigam

Qualification: CA in Practice

Company: RAJIV NIGAM & ASSOCIATES

Location: NEW DELHI AND NOIDA, Uttar Pradesh, India

Member Since: 17 Jul 2017 | Total Posts: 44

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