Labour Codes & Statutory Employment Obligations Employment Compliance in India
India’s employment law framework has undergone its most significant restructuring in decades. The four Labour Codes came into force on 21 November 2025, replacing 29 central labour laws administered by the Ministry of Labour and Employment. Implementing rules are still being finalised, creating a dual-compliance environment that requires active monitoring. ATB Legal advises employers on statutory employment compliance across the new Labour Codes framework and the continuing legacy obligations.
Employment compliance in India is not a one-time exercise– it is a continuous obligation that changes with every workforce addition, every salary revision, and now with every new rule notification under the four Labour Codes.
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Employment Compliance in India: The Labour Codes Framework
The four Labour Codes are remaking India’s employment compliance landscape– 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– all of which came into force on 21 November 2025. Together, these Codes replace 29 separate central statutes with a consolidated framework designed to simplify compliance and extend protections to a broader workforce, including gig and platform workers. Since the Central and State implementing rules are still being notified, many legacy provisions continue to apply during the transition. ATB Legal advises employers on navigating this dual compliance environment– identifying what has changed, what continues to apply, and what must be restructured. The complete reference: Labour Codes of India.
Wage Structure Compliance– Code on Wages 2019
The Code on Wages 2019 introduces a uniform definition of wages that reshapes compensation structuring for every employer in India. Basic pay and dearness allowance must constitute at least 50% of total remuneration– any component not in the statutory list of exclusions counts as wages if excluded components exceed 50% of total pay. This has significant implications for employers who have structured compensation with a low basic salary and high allowances, as the new definition affects provident fund contributions, gratuity calculations, overtime, and bonus entitlements– all of which are computed on wages. Employers must audit existing compensation structures against the new wage definition, model the financial impact of restructuring, and update payroll systems and employment contracts. ATB Legal advises on wage structure compliance, payroll impact analysis, and the documentation required to evidence compliant compensation arrangements.
Industrial Relations, Contract Labour & Fixed-Term Employment
The Industrial Relations Code 2020 raises the threshold for retrenchment, lay-off, and closure requiring prior government approval from 100 to 300 workers, giving smaller establishments greater operational flexibility on workforce changes. Contract labour is now expressly restricted 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 must review their arrangements against the new definition. Fixed-term employment is now formally recognised across all sectors: fixed-term employees are entitled to the same wages, benefits, and social security as permanent employees for equivalent work, and may be entitled to proportionate gratuity after a single year’s service. Our firm advises on industrial relations compliance, contract labour restructuring, standing orders, and fixed-term employment frameworks.
Social Security– EPF, ESIC, and Gratuity
The Code on Social Security 2020 extends provident fund and ESIC coverage to a broader employee base, including gig workers and platform workers. Employers registered with the Employees’ Provident Fund Organisation and the Employees’ State Insurance Corporation must review their coverage obligations against the expanded definitions under the Code. Gratuity obligations– consolidated within the Code on Social Security– continue with the five-year qualifying period, though fixed-term employees may be entitled to proportionate gratuity after a single year. We advise on EPF and ESIC registration, contribution compliance, gratuity calculations, and social security obligations during the transitional period when legacy rules continue alongside the new Code framework.
Shops & Establishments, OSH Code and Entity-Level Compliance
Beyond the four Labour Codes, employment compliance in India is also governed by state-specific Shops and Establishments Acts– which regulate working hours, leave, overtime, and mandatory registers for commercial establishments– and by the Occupational Safety, Health and Working Conditions Code 2020. The OSH Code now requires mandatory appointment letters for all workers, free annual health checks for workers over 40, and prescribed welfare facilities. For foreign companies establishing India operations, employment compliance also includes FEMA-compliant structuring of payroll arrangements for expatriate employees and management of employment visa and work permit obligations. ATB Legal advises on complete employment compliance frameworks– from initial entity setup through to ongoing compliance management as the workforce and regulatory requirements evolve.
FAQFrequently Asked Questions- Employment Compliance
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.
Uncompromising QualityWhy Choose ATB Legal
- Labour Codes Expertise: Current, working knowledge of the four Labour Codes framework and the transitional dual compliance environment– essential while implementing rules are still being notified across Central and State levels.
- Compliance Setup for New Entities: End-to-end employment compliance setup for companies establishing India operations– registration, payroll structuring, documentation, and statutory filings managed from the same team.
- Wage Structure Review: Compensation structure analysis and restructuring against the new wage definition under the Code on Wages 2019– with payroll impact modelling and employment contract updates.
- Contract Labour Advisory: Review of existing contract labour arrangements against the new core activity restrictions under the Industrial Relations Code 2020, with restructuring advice where arrangements require change.
- Integrated Employment Practice: Employment compliance, contracts, termination, and dispute resolution from the same India-enrolled team– without the handoffs and inconsistencies of separate specialist advisers.
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Micro Case Studies
Representative Experience
GCC Company– India Subsidiary Employment Compliance Setup
Advised a GCC-based company establishing a wholly owned subsidiary in India on its complete employment compliance framework. The mandate covered Shops and Establishments registration, EPF and ESIC registration, wage structure design compliant with the Code on Wages 2019, mandatory appointment letters, statutory forms and returns, and a compliance calendar covering all filing and renewal obligations for the entity's first operating year.
Mid-Size Manufacturer– Labour Codes Compliance Audit
Conducted an employment compliance audit for an Indian manufacturer following the notification of the four Labour Codes– assessing the impact on compensation structures, contract labour arrangements, standing orders, and ESIC coverage. The mandate identified gaps against the new wage definition and core activity restrictions, and produced a prioritised compliance roadmap with draft amendments to employment contracts and a revised contract labour policy.
Technology Company– Workforce Restructuring and Retrenchment
Advised an Indian technology company on the compliance requirements for a workforce reduction across multiple states. The mandate covered the applicable retrenchment procedure under the Industrial Relations Code 2020, state-specific notice and compensation requirements, preparation of retrenchment notices and settlement documentation, and the Reskilling Fund contribution obligation– producing a compliant, documented exit process.
Advised a GCC-based company establishing a wholly owned subsidiary in India on its complete employment compliance framework. The mandate covered Shops and Establishments registration, EPF and ESIC registration, wage structure design compliant with the Code on Wages 2019, mandatory appointment letters, statutory forms and returns, and a compliance calendar covering all filing and renewal obligations for the entity's first operating year.
Mid-Size Manufacturer– Labour Codes Compliance Audit
Conducted an employment compliance audit for an Indian manufacturer following the notification of the four Labour Codes– assessing the impact on compensation structures, contract labour arrangements, standing orders, and ESIC coverage. The mandate identified gaps against the new wage definition and core activity restrictions, and produced a prioritised compliance roadmap with draft amendments to employment contracts and a revised contract labour policy.
Technology Company– Workforce Restructuring and Retrenchment
Advised an Indian technology company on the compliance requirements for a workforce reduction across multiple states. The mandate covered the applicable retrenchment procedure under the Industrial Relations Code 2020, state-specific notice and compensation requirements, preparation of retrenchment notices and settlement documentation, and the Reskilling Fund contribution obligation– producing a compliant, documented exit process.
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ATB Legal advises employers, multinational companies, and India-entering businesses on employment compliance across the four Labour Codes and the full spectrum of statutory employment obligations.