What replaces the 29 central labour laws
Parliament passed four labour codes in 2019 and 2020:
- Code on Wages 2019 — wage definition, minimum wages, payment of wages, bonus, equal remuneration.
- Code on Social Security 2020 — PF, ESI, gratuity, maternity, pension, gig workers.
- Occupational Safety, Health and Working Conditions Code 2020 — factory regulations, contract labour, inter-state migrant workers, working hours.
- Industrial Relations Code 2020 — trade unions, retrenchment, layoffs, standing orders.
Implementation has been phased — rules notified by the central government, effective dates depend on each state notifying its own rules. Many provisions are not yet in force; some came into force in late 2025 / early 2026.
The unified wage definition & its downstream impact
The biggest practical change is the unified wage definition in the Wage Code. ‘Wages’ now includes basic + DA + retaining allowance, and excluded components (HRA, conveyance, overtime, bonus, etc.) cannot exceed 50% of total remuneration. Many CTC structures with low basic and high allowances must be restructured.
This impacts:
- PF contribution base — goes up.
- Gratuity accrual base — goes up.
- Leave encashment computation — goes up.
- Bonus eligibility — threshold per Bonus Act.
- Take-home pay — potentially down (more deductions).
- Employer cost — potentially up (higher employer contributions).
Central codes & Karnataka state rules
The relevant references:
- Code on Wages 2019 and Rules notified by central / state governments.
- Code on Social Security 2020 and Rules.
- OSH Code 2020 and Rules.
- IR Code 2020 and Rules.
- Karnataka State Rules — once notified, govern Bengaluru-based employers.
How we run a labour-code transition
- Code-applicability mapping — which provisions are in force at central and Karnataka level for the client’s sector and headcount.
- Wage-definition impact analysis — we re-cost current CTCs under the new definition and quantify employer-cost change.
- CTC restructuring — we recommend changes to keep employee net within tolerance while staying compliant.
- Policy & SOP updates — leave policy, working hours, retrenchment procedures, contract labour engagement.
- Registration consolidation — previously many registrations (Factories Act, ESI, EPF, Contract Labour, Inter-state Migrant Workmen Act) coexist. The codes consolidate, but only when state rules go live.
- Filing & reporting calendar — consolidated annual return, single inspection.
- Training — HR and finance teams briefed on revised concepts and obligations.
What you’ll need to share
- Current CTC structures with breakup of basic, HRA, allowances and reimbursements.
- Headcount split by employee type (regular, contract, fixed-term, gig).
- Existing labour registrations (Factories, ESI, EPF, Contract Labour, etc.).
- Standing orders and HR manual.
- Last-year payroll registers and PF / ESI returns.
- Contracts with manpower agencies.
How long a transition project runs
The labour-code transition project for a 100–500 employee company typically runs 6–10 weeks. Phase 1 is impact analysis and CTC modelling (2–3 weeks). Phase 2 is policy / SOP / contract redrafting (3–4 weeks). Phase 3 is rollout and training (1–2 weeks). Indicative fee is fixed scope-based; we share the proposal on the discovery call.
Common questions on labour-code compliance
Are all four codes in force?
Not yet uniformly. Central rules have been notified for several provisions; state rules vary. We track Karnataka, Maharashtra, Tamil Nadu, Karnataka, Telangana and Gujarat closely — the typical client geography for our practice.
Will my employees see a take-home pay cut?
Possibly — if higher PF base means higher employee deduction. We model the change before recommending it; CTC restructuring can mitigate the take-home impact.
Does gig / platform-worker coverage apply already?
Section 113-114 of the Social Security Code provide for gig and platform worker schemes. These need a notification of scheme details, contributions, and benefit framework — partially in place at the central level.
Do we need to redo our employment contracts?
Recommended, especially for companies with formal contracts. Definitions of wages, working hours, retrenchment terms, dispute-resolution clauses change. We provide template updates.
Talk to a partner.
A 30-minute call with a partner — no deck, no follow-up email blasts. Just a read on whether we’re the right team to handle your labour-code transition.