Indian Labour Law Updates 2026

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.

Where the rules now stand: the Central Rules under all four Codes were notified in the Gazette on 8 May 2026, so the central procedural framework is final, not draft. They bind establishments where the Central Government is the appropriate government. State rules still vary, and most single-state SMEs are governed by their state’s notification; where a state has not notified, the central rules apply as a fallback. What the Central Rules require of an employer — the named registers, the wage slip, the five-year retention — is set out in our 2026 labour code compliance checklist. KPMG Flash Alert ↗

One of the biggest practical changes from the Code on Wages is the new definition of “wages” in Section 2(y), mirrored by Section 2(88) of the Code on Social Security:

Fisher Phillips: Wage Definition Analysis ↗

Minimum wages are still set separately by each state under state-specific rules. The national floor is currently ₹178/day (last revised 2017, and a statutory floor rather than the actual rate). Central rates: CLC portal ↗

Minimum wages are revised every 6 months. Always check your state labour department portal for the current rate in your industry and skill category.

Hours of work are Section 25 of the OSH Code, 2020 (in force 21 Nov 2025), weekly and compensatory holidays are Section 26, and extra wages for overtime are Section 27. The daily and weekly figures below come from Section 25, but the specific caps are set by state rules made under it, so check your own state before you build a roster on them:

States moving fast: Karnataka, Gujarat (Factories Amendment Bill 2025), and Haryana have already relaxed night-shift rules for IT/ITeS. Trilegal Quarterly Update ↗

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 under the Maternity Benefit Act, 2017 ↗ . Mandatory for establishments with 10+ employees
• Paternity Leave: No central law yet; check your state rules

Gratuity now sits in Section 53 of the Code on Social Security, 2020 (in force 21 Nov 2025), which replaced the Payment of Gratuity Act, 1972. What changed: Fisher Phillips analysis ↗

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.

Section 2(o) of the Industrial Relations Code defines fixed term employment as engagement under a written contract for a fixed period, recognising it nationwide for the first time. Note the word written: an oral fixed-term arrangement is not one: 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, so no notice pay or compensation is owed
• Early termination before the contract end date can constitute retrenchment
• Beneficial for seasonal hiring in retail, agriculture, e-commerce, and project-based industries

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

ESI is Chapter IV of the Code on Social Security, with contribution rates under Section 29. The ceiling itself is not in the Code at all, it is set by rules, which is why it can move without Parliament. The ESIC wage ceiling remains at ₹21,000/month (₹25,000 for Persons with Disability) as of August 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 under the Social Security Code uses the 50% rule described above, not Basic + DA alone. That changes which employees fall inside or outside the ₹21,000 ceiling, even though the ceiling itself has not moved. Some employees who were previously outside ESIC may now fall in. Audit your ESIC coverage.

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 ↗.