India: Long-awaited labor codes in effect

Employer action code: Act

The central government has announced that the Codes on Wages, Social Security, Industrial Relations and Occupational Safety, Health and Working Conditions (OSHWCC) have come into effect, replacing 29 preexisting laws. The four codes were notified on November 21, 2025, almost five years following their approval by Parliament.

Key details

While the codes primarily codify the preexisting laws’ requirements, they also introduce a substantial number of changes with wide-ranging impacts. From an employer’s perspective, some of the more noteworthy changes affecting compensation and benefits include the following:

• The Code on Wages introduces a uniform definition of “wages” used for state and mandatory benefits that suggests that specific allowances exceeding 50% of an employee’s total remuneration in aggregate must be included as part of wages. In light of this, a common interpretation is that wages must now equal at least 50% of remuneration. The new definition may result in an increase in employer and employee contributions to the social security Employees' Provident Fund and Employees’ Pension Scheme. It may also result in an increase in the mandatory employer-paid defined benefit gratuity scheme (GS) end-of-service payment and possibly other employer liabilities (e.g., for encashment of unused leave at termination). The code also calls for the central government to establish a national minimum wage; individual states may continue to set minimum rates, but they may not be less than the to-be-determined national rate
• The Code on Social Security extends the GS entitlement to employees on fixed-term employment contracts, on a pro rata basis without the need to complete five years of service (which was required for permanent staff in the case of retirement or resignation). The code also expands general eligibility for various state benefit schemes to previously excluded types of workers (e.g., gig workers) and expands employer coverage under the Employees’ State Insurance Corporation for healthcare
• The OSHWCC includes provisions that allow “workers” (as defined by the OSHWCC) to cash out accrued but unused paid annual leave exceeding 30 days at the end of the year. It also introduces mandatory employer-paid annual medical checkups for employees over age 40 and mandatory health and safety committees at establishments with 500 or more employees

Employer implications

Overall, the codes represent some of the most significant changes to India’s compensation, benefits and employment landscape in decades and will require employers to carefully review a broad range of policies to ensure compliance, understanding and recognition of cost and liability impacts (most notably relating to GS) and cost-effective reward design. Companies should take action to ensure compliance with the changes. Detailed implementation rules are yet to be released by the government; these are expected early in 2026.

Contacts

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Jude Vijay

Rewards Leader – India

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Varun Jain

Head of Retirement, India

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Abhishek Singh

Head of Advisory, Health and Benefits, India

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