Indian Labour Law Updates 2025–26
Last updated: June 2026 · For Indian businesses · Sources: Ministry of Labour, KPMG, EY, Trilegal
Major Update — All 4 Labour Codes now in force
On 21 November 2025, the Government of India brought all four Labour Codes into force simultaneously, repealing 29 pre-existing central labour laws. This is the largest overhaul of Indian labour law since Independence. EY Alert ↗ DLA Piper ↗
The 4 Labour Codes — Now in Force
The Government consolidated 44 central labour laws into 4 codes. All four received Presidential assent between 2019–2020 and came into force on 21 November 2025.
Consolidates the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act. Introduces a universal minimum wage floor across all establishments. Brings in the 50% wages rule — Basic + DA must be at least half of CTC.
Merges the Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act. Raises the retrenchment-permission threshold to 300 workers. Formally recognises fixed-term employment nationwide.
Combines EPF, ESI, Gratuity, Maternity Benefit, and other social security laws. Extends coverage to gig and platform workers for the first time. Reduces gratuity eligibility for fixed-term employees from 5 years to 1 year.
Replaces the Factories Act and 12 other safety laws. Standardises working hours (daily cap up to 12 hours with consent; weekly cap 48 hours). Permits 4-day compressed work weeks where states allow. Women may now work night shifts with consent.
What is still pending: Central procedural rules (draft published 30 Dec 2025, finalisation in progress). State rules vary — 11+ states have notified at least one code; Maharashtra, Tamil Nadu, Kerala, and West Bengal are still in draft/consultation stage. Where state rules are absent, central rules apply as a fallback. KPMG Flash Alert ↗
The 50% Wages Rule — A Major Payroll Change
One of the biggest practical changes from the Code on Wagesis the new definition of “wages”:
Basic Salary + Dearness Allowance must be ≥ 50% of total CTC
Many businesses previously paid high allowances (HRA, special allowance, conveyance) with a low basic — to reduce EPF, gratuity, and bonus liability. The new definition closes this gap. If your basic is below 50% of CTC, you need to restructure salary — and expect higher EPF contributions, higher gratuity payouts, and higher bonus bases.
Minimum Wages — Key States (2025–26)
Minimum wages are still set separately by each state under state-specific rules. The national floor is currently ₹178/day (last revised 2017 — a statutory floor, not the actual rate). Central rates: CLC portal ↗
| State | Unskilled (monthly) | Skilled (monthly) | Effective |
|---|---|---|---|
| Delhi ↗ | ₹19,846 | ₹23,905 | Oct 2025 |
| Karnataka (Zone 1 / Bengaluru) ↗ | ₹11,588 | ₹14,014 | Apr 2025 |
| Maharashtra (Zone I) ↗ | Varies by industry | Varies by industry | Jan 2025 |
| Tamil Nadu (Zone A) ↗ | ~₹13,783 | ~₹14,703 | Apr 2025 |
Minimum wages are revised every 6 months. Always check your state labour department portal for the current rate in your industry and skill category.
Working Hours & Overtime
Under the OSH Code, 2020 (in force 21 Nov 2025):
| Rule | Limit |
|---|---|
| Standard daily hours | 8 hours; up to 12 hours permitted with breaks and worker consent |
| Weekly cap (absolute) | 48 hours — non-negotiable, even under 4-day work weeks |
| 4-day compressed week | Permitted where states allow — 12-hour days, 3 days off, still ≤48 hrs/week |
| Overtime rate | 2× ordinary wages (unchanged) |
| Overtime consent | Must be voluntary — employer cannot mandate compulsory overtime |
| Quarterly overtime cap | 50 hours (project-based exemptions possible via state authority) |
| Women & night shifts | Now permitted with written consent and employer-provided safety measures |
| Annual health check | Mandatory for all workers above age 40 |
States moving fast: Karnataka, Gujarat (Factories Amendment Bill 2025), and Haryana have already relaxed night-shift rules for IT/ITeS. Trilegal Quarterly Update ↗
Leave Entitlements
Minimum statutory leave under current law (Factories Act / state Shops Acts — still applicable; OSH Code updates coming):
- Earned / Privilege Leave: 1 day for every 20 days worked (factories); can be carried forward up to 30 days
- Sick Leave: Typically 12 days/year (varies by state Shops Act)
- Casual Leave: Typically 12 days/year
- National & Festival Holidays: 3 national holidays mandatory; state festivals vary
- Maternity Leave: 26 weeks for first two children — Maternity Benefit Act, 2017 ↗ — mandatory for establishments with 10+ employees
- Paternity Leave: No central law yet; check your state rules
Gratuity — Key Changes in 2025
Under the Code on Social Security, 2020 (in force 21 Nov 2025), the gratuity rules changed significantly: Fisher Phillips analysis ↗
| Item | Old Rule | New Rule (from Nov 2025) |
|---|---|---|
| Min. service — fixed-term employees | 5 continuous years | 1 year (major change) |
| Min. service — permanent employees | 5 continuous years | 5 years (unchanged) |
| Payment deadline | Not specified | 30 days from due date |
| Max exempt ceiling (private) | ₹20 lakh | ₹20 lakh (unchanged) |
| Calculation formula | (Last wages × 15 × years) ÷ 26 | Same — but higher base due to 50% wages rule |
Payroll impact:Because the 50% wages rule raises the “last drawn wages” base, actual gratuity payouts could be 40–70% higher than under the old structure — even with the same formula. Audit your salary structures now.
Fixed-Term Employment — Now Formally Recognised
The Industrial Relations Code formally recognises fixed-term contracts nationwide for the first time: Full guide ↗
- Fixed-term employees receive the same statutory benefits (ESI, EPF, bonus) as permanent employees, proportionate to tenure
- Gratuity after 1 year of service (down from 5 years)
- Expiry of contract at its natural end is NOT retrenchment — no notice pay or compensation owed
- Early termination before the contract end date can constitute retrenchment
- Beneficial for seasonal hiring in retail, agriculture, e-commerce, and project-based industries
Gig & Platform Worker Social Security
For the first time in Indian law, gig workers and platform workers are recognised as a distinct class entitled to social security under the Code on Social Security, 2020: Fisher Phillips ↗
- Aggregators (Swiggy, Zomato, Ola, Uber, etc.) must contribute 1–2% of annual turnover (capped at 5% of payments to gig workers) to a government-managed Social Security Fund
- Workers must register via Aadhaar-linked portals to access benefits
- Benefits may include life/disability insurance, health and maternity cover, and old-age protection
- Actual benefit schemes are yet to be notified state-by-state — the code creates the framework, not the payments
Karnataka leads the way
Karnataka became the first state to enact its own standalone gig worker law — Karnataka Platform Based Gig Workers Act, 2025 ↗ (in force 30 May 2025). Platforms must pay 1–5% of each transaction to a welfare board, and give 14 days' notice before deactivating a worker.
ESIC — Current Status
The ESIC wage ceiling remains at ₹21,000/month (₹25,000 for Persons with Disability) as of June 2026. A proposed hike to ₹25,000–₹30,000/month has been widely reported but no official gazette notification has been published. ESIC official coverage page ↗
Contribution rates remain: Employee 0.75%, Employer 3.25% of wages.
Important:The new “wages” definition (Basic + DA only) under the Social Security Code changes which employees fall inside or outside the ₹21,000 ceiling — even without a ceiling change. Some employees who were previously outside ESIC may now fall in. Audit your ESIC coverage.
Recent Updates Timeline
Karnataka Gig Workers Act in force
First state-level gig worker welfare law in India. Platforms must register, pay welfare contributions, and give 14 days' notice before deactivating workers.
Source: Trilegal ↗All 4 Labour Codes come into force (21 Nov 2025)
29 central laws repealed. New wage definitions, fixed-term employment rules, gig worker rights, and OSH standards now apply nationwide.
Source: EY India Alert ↗Draft Central Rules published
Ministry published draft procedural rules for all four codes with a 30–45 day comment window. Finalisation targeted for April 2026.
Source: KPMG Flash Alert ↗ESIC ceiling hike — proposed but not yet official
Proposed increase to ₹25,000–₹30,000/month reported. No official gazette notification as of June 2026. Current ceiling stays at ₹21,000.
Source: ESIC portal ↗Ministry releases Labour Codes FAQ
Ministry of Labour clarified ambiguous provisions on wages, contract labour, fixed-term employment, and retrenchment thresholds.
Source: labour.gov.in ↗How Shiftelio Helps You Stay Compliant
Accurate working hours tracking
GPS-based clock-in/out records exact hours per employee — including breaks. Overtime is immediately visible so you can act before breaching the quarterly limit. Essential with the new OSH Code rules.
Leave management built in
Employees apply for leave through the app. Managers approve with one tap (or via Telegram). Leave balances update automatically — no spreadsheets, no disputes.
Minimum wage compliance in payroll
Payroll reports show per-employee daily and monthly earnings. Verify at a glance that no one is being paid below the state minimum wage.
Employee records for all statutory requirements
Onboarding captures Aadhaar, PAN, bank details, date of joining, and designation — the data you need for PF, ESI, gratuity, fixed-term contracts, and labour inspection records.
Audit-ready attendance reports
Download month-wise attendance and payroll reports in PDF or CSV — exactly the format a labour inspector or CA expects during an audit.
Official Government Sources
Disclaimer
This guide summarises key Indian labour laws for informational purposes only and is not legal advice. Laws vary significantly by state, industry, and establishment type. Some code provisions may still be in transition in your state. Always consult a qualified labour law consultant or CA for your specific compliance obligations. For the latest notifications, refer to the Ministry of Labour & Employment ↗.
Let Shiftelio handle the hard part
Attendance, leave, payroll, and employee records — all in one place, all audit-ready.
Start Free Trial