Employment Compliance-India FAQs
- What are the four Labour Codes, and when did they come into force?
The four Labour Codes– 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– came into force on 21 November 2025, replacing 29 central labour laws. Central and State implementing rules are still being notified, meaning many legacy provisions continue to apply during the current transition period.
- How does the new wage definition affect compensation structures?
Under the Code on Wages 2019, basic pay and dearness allowance must constitute at least 50% of total remuneration. Employers who have structured compensation with a low basic salary and high allowances need to review their structures– the new definition affects provident fund contributions, gratuity, overtime, and bonus calculations, all of which are computed on wages. Payroll systems and employment contracts must be updated accordingly.
- Has the threshold for retrenchment without government approval changed?
Yes. The Industrial Relations Code 2020 raises the threshold for retrenchment, lay-off, and closure requiring prior government approval from 100 to 300 workers. Establishments with fewer than 300 workers now have greater operational flexibility on workforce changes, though procedural requirements for retrenchment compensation and notice remain unchanged.
- Is contract labour still permitted in India?
Contract labour remains permitted, but the Industrial Relations Code 2020 now expressly bars its use for core business activities– with exceptions for work that is ordinarily outsourced, does not require full-time roles, or is needed to handle a temporary workload increase. Employers using contract labour for core functions need to review their arrangements against the new definition of core activities.
- Who is required to register with EPFO and ESIC?
Registration with the Employees’ Provident Fund Organisation is required for establishments employing 20 or more employees. Registration with the Employees’ State Insurance Corporation is required for factories and specified establishments employing 10 or more employees (or 20 in some states). The Code on Social Security 2020 extends coverage to gig and platform workers and may change thresholds once full implementing rules are notified.
- What employment compliance is required when setting up a new Indian entity?
A new Indian entity must register under the applicable state Shops and Establishments Act, obtain EPF and ESIC registration once the employee threshold is crossed, comply with the applicable minimum wage schedule, issue appointment letters to all workers, implement a POSH-compliant Internal Committee, and maintain statutory registers and returns. ATB Legal advises on the complete compliance setup for new Indian entities.