India's Labour Codes in 2026: What's Actually in Force, State-by-State, and What HR Must Do Now
India's four Labour Codes are no longer a “future change” — they are law. But nearly a year after they took effect, most HR teams still aren't sure what that actually means for their day-to-day compliance. Is the 50% wage-in-basic rule mandatory yet? Does the new one-year gratuity rule for fixed-term employees apply in your state? Can you rely on the old Payment of Bonus Act calculations for this financial year?
This is the update to our earlier piece, Understanding the New Labour Codes: What Employers Need to Know — written when the codes were still pending. A lot has changed since then, and the honest answer to “are the Labour Codes in effect?” is: yes, but unevenly, and the gap between “in force” and “fully enforceable” is exactly where most compliance risk is hiding right now.
This falls squarely under the Compliance pillar of our PACE framework for HR strategy — building the safeguards that keep organisations ahead of regulatory change rather than reacting to it.
The timeline so far
- 21 November 2025 — The Government of India notified all four Labour Codes as effective law: the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020. The 29 central labour laws they replace stand repealed.
- 30 December 2025 — The Ministry of Labour and Employment published draft central rules for all four codes and opened a public comment window (30 days for the Industrial Relations Rules, 45 days for the other three).
- 8–9 May 2026 — The Ministry notified the final central rules: the Code on Wages (Central) Rules 2026, the Social Security (Central) Rules 2026, the Industrial Relations (Central) Rules 2026, and the OSH (Central) Rules 2026.
- Mid-2026 to present — Because labour sits on the Concurrent List, every state and Union Territory must separately frame and notify its own rules before the codes are fully enforceable in that jurisdiction. This is where implementation has slowed.
In short: the codes are law, the central rules exist, but full enforcement is still waiting on states — and states are moving at very different speeds.
Where states actually stand
As of mid-2026, state readiness falls into three rough buckets:
- Notified final rules for all four codes: Gujarat, Karnataka, Haryana, Madhya Pradesh, Uttar Pradesh, Uttarakhand, Jharkhand, Odisha, Bihar, Chhattisgarh, and Assam are among the states that have completed the process.
- Still in draft or partial notification: Several major industrial and employment hubs — including Maharashtra, Tamil Nadu, Kerala, Punjab, Rajasthan, Telangana, Andhra Pradesh, and West Bengal — have published draft rules but not yet finalised them.
Practical implication for multi-state employers: if you have employees across several states, you may genuinely be operating under a mix of old and new compliance regimes simultaneously, depending on where each employee is based. There is still no single central “go-live” date that harmonises this across the country — track your specific states individually rather than assuming a uniform national position.
Because this changes frequently, verify current status against your operating states' official gazette notifications before making payroll or policy decisions — this article reflects the position as of August 2026.
What's changing that HR should act on now, regardless of state notification status
A few provisions carry real cost and process implications, and waiting for perfect regulatory clarity in every state is not a good reason to delay preparation.
1. The 50% wage-in-basic rule
Under the Code on Wages, an employee's “wages” for statutory calculation purposes (PF, gratuity, ESI, and other benefits tied to basic pay) must constitute at least 50% of total compensation. Many Indian employers have historically structured CTC with a lower basic and higher allowances specifically to reduce statutory contribution costs. That structure is no longer compliant under the new definition.
What to do: Model the cost impact of restructuring CTC to a 50% basic-pay floor across your workforce. Depending on your current structure, this can increase statutory costs (PF, gratuity, ESI) by an estimated 3–15%. This is a budget conversation your finance team needs now, not after enforcement begins in your state.
2. Gratuity eligibility for fixed-term employees
Under the Code on Social Security, fixed-term employees become eligible for gratuity after one year of continuous service, compared to the five-year threshold that applied under the old Payment of Gratuity Act for permanent employees. Fixed-term employees must also receive wages, benefits, and working conditions on par with equivalent permanent employees.
What to do: If you rely on fixed-term contracts for project-based or seasonal roles, recalculate your gratuity liability projections. This is a meaningful shift for organisations that use fixed-term hiring as a flexible, lower-obligation category — that flexibility has narrowed.
3. Retrenchment, layoff, and strike thresholds
The Industrial Relations Code raises the threshold for requiring prior government permission before layoffs, retrenchment, or closure from establishments with 100+ workers to those with 300+ workers (with states given discretion to set their own threshold above this floor). It also introduces a requirement of 75% member consent to call a legal strike, along with extended notice periods.
What to do: If your workforce reduction planning has assumed the old 100-worker threshold, revisit it. Establishments between 100 and 300 workers may now have materially more flexibility — but this varies by state, so confirm your specific state's adopted threshold before acting.
4. Occupational safety and working hours
The OSH Code consolidates 13 erstwhile laws and introduces provisions such as the option for a four-day work week (with capped total weekly hours), enhanced welfare facility requirements, and simplified licensing for smaller establishments.
What to do: Audit your current welfare facility compliance (canteens, crèches, restrooms, first aid) against OSH Code thresholds, which apply at a lower headcount than several of the old factory- and shop-specific laws.
5. Universal social security coverage, including gig and platform workers
The Code on Social Security extends coverage — for the first time — toward gig and platform workers, with aggregator contribution rates expected in the range of 1–2% of turnover. Final rules on this specific piece are still pending central notification.
What to do: If your organisation engages gig or platform-based workers (delivery, logistics, on-demand services), this is the single biggest open item to track. Build it into your 2026–27 budget as a contingent liability even before rates are finalised.
A practical HR action checklist
- Map your states. List every state where you have employees and check that state's current rule-notification status individually — don't assume a single national position.
- Run a CTC restructuring model. Quantify the cost of moving to a 50% basic-pay floor and get finance sign-off on a phased implementation plan.
- Recalculate gratuity liability for all fixed-term employees under the one-year threshold.
- Review your retrenchment and workforce reduction playbook against the revised 300-worker threshold in each relevant state.
- Audit welfare facilities and working-hour policies against OSH Code requirements.
- Flag gig/platform worker exposure, if applicable, as a tracked compliance item pending final contribution rules.
- Don't discard your old-regime compliance processes yet — in states where rules aren't finalised, you may still need to demonstrate compliance under the previous legislation for that jurisdiction.
- Assign ownership. Given how state-specific this is, designate one person or team to track the Ministry of Labour & Employment gazette and your operating states' notifications on an ongoing basis, rather than treating this as a one-time project.
The bottom line
The Labour Codes represent the most significant overhaul of India's employment law framework in decades — but “in force since November 2025” does not mean “fully enforceable everywhere today.” The real risk for HR teams isn't the codes themselves; it's the transition period, where old and new rules coexist unevenly across states and it's easy to either move too fast (implementing changes your state hasn't yet mandated) or too slow (missing genuine new obligations that already apply).
The organisations that come out of this transition well are the ones treating it as a continuous compliance-tracking exercise rather than a single project with an end date.