Your HR Policy Is Probably Illegal

What India’s New Labour Codes Changed.

And no, “we’ll update it later” is no longer an answer.

India’s four New Labour Codes became effective on 21 November 2025. Four codes. 44 old laws consolidated. One sweeping reset of every employment obligation you thought you understood.

I’ve spent the last several weeks auditing the HR policy frameworks of companies across sectors — startups, HealthTech, consumer tech, services. Companies with smart leadership, good intent, and genuinely committed HR teams.

And almost every single one has the same problems. Here are the ones that are going to hurt.

Your Basic Salary Is Too Low — and That’s Now Illegal

This is the one nobody wants to talk about.

The Code on Wages, 2019 mandates that “wages” — which includes basic salary — must constitute at least 50% of an employee’s total remuneration.

For years, Indian companies structured CTCs with a low basic and inflated allowances — not out of malice, but to reduce PF liability. It was smart. It was common. And it is now non-compliant.

We reviewed a compensation structure recently: Basic at ₹7 lakh on a fixed CTC of ₹14 lakh — exactly 50%. Technically compliant. But the moment a ₹1 lakh performance bonus was folded into “total remuneration,” the ratio dropped to 46.7%.

Below the threshold = Liable. Many companies haven’t even run this calculation. RUN IT NOW! 

Full & Final Settlement in 2 Working Days

Not 30 days. Not “as per standard HR process.”

Section 17(2) of the Code on Wages is unambiguous: all wages due to an employee upon cessation of employment must be paid within two working days of the last working day.

We’ve seen exit policies that say 45 days. We’ve seen offer letters that say 60 days. We’ve seen companies where Finance doesn’t even receive separation papers until Week 3.

Every single one of those is now in violation. Update your exit policy. Update your payroll workflows. Brief your Finance team. This one has teeth.

No Appointment Letter = OSH Code Violation

Section 6 of the Occupational Safety, Health and Working Conditions Code, 2020 makes a written appointment letter mandatory for every employee at the time of appointment — full-time, part-time, fixed-term, everyone.

This sounds obvious. It isn’t. In the companies we reviewed, offer letters existed. Appointment letters — separately issued, signed, filed — often didn’t. And in several cases, gig workers and consultants engaged through informal arrangements had nothing in writing at all.

The OSH Code doesn’t accept “they received the offer email” as compliance.

Your Working Hours Clause Is Writing Cheques the Law Won’t Cash

Here’s a clause we found in a recent offer letter, verbatim: “Regular working hours shall be from 9:30 AM to 6:30 PM, six days a week.”

That’s 9 hours a day. Six days. 54 hours per week. The OSH Code caps working hours at 8 hours per day and 48 hours per week.

The same offer letter also said the employee “shall be required to work such hours as are necessary” and “refusal to carry out such orders will constitute misconduct.”

Both clauses conflict with the Code. One of them will win in a dispute. It won’t be the employer.

You Cannot Compel Women to Work Night Shifts

Section 43 of the OSH Code is explicit: women employees cannot be deployed on night shifts (7 PM to 6 AM) without their prior written consent.

We found this in a standard offer letter:
“You are further liable to be transferred from one shift to another, whether day or night. Your refusal to carry out such orders will constitute misconduct.”

Stop and read that again. Applied to a woman employee without written consent, this clause is not just non-compliant. It is a potential harassment and discrimination trigger.

The Grievance Redressal Committee Nobody Has

Section 4 of the Industrial Relations Code, 2020 mandates that every establishment with 20 or more workers must constitute a formal Grievance Redressal Committee (GRC): equal employer and worker representation, proportionate women representation, a 30-day resolution timeline, named members, documented procedure.

In all the companies we audited, exactly zero had a formally constituted GRC as defined by the Code.

They had grievance policies. They had HR escalation matrices. They did not have a GRC. These are not the same thing.

Your Health Coaches and Gig Workers Have a Social Security Problem

This one is specific to companies in the platform economy — HealthTech, logistics, edtech, delivery, on-demand services.

The Code on Social Security, 2020 introduces a formal definition of “gig workers” and “aggregators.” If your platform engages workers outside traditional employment — health coaches, delivery partners, freelance consultants — they may legally qualify as gig workers under Section 2(35).

And if your company qualifies as an aggregator? You may owe 1–2% of annual turnover to the Central Government’s Social Security Fund for their welfare.

Nobody is talking about this. Everyone in the platform economy should be. The classification question — employee or gig worker — is now the most consequential HR decision a platform company makes.

The Re-skilling Fund (Nobody Has Heard of This One)

This is the one that blindsides everyone.

Section 78 of the Industrial Relations Code, 2020: whenever an employer retrenches a worker, the employer must contribute 15 days of the worker’s last drawn wages to the National Re-skilling Fund — within 45 days of the retrenchment order.

Not a gratuity. Not notice pay. A separate statutory contribution to a government fund.

We reviewed exit policies across multiple companies. Not one mentioned it. HR teams didn’t know it existed. Finance teams hadn’t budgeted for it.

Companies with regular retrenchments are accumulating a liability they don’t know about.

Twenty-Seven Policies. Ten Contradictions.

Here’s what a real policy audit looks like.

One company we worked with had 27 HR policies — a mix of Word docs and PDFs, versions ranging from 2019 to 2024. On paper, comprehensive. In practice:

• Unauthorised absence defined as 2 days in the Leave Policy, 4 days in the Exit Policy.
• PF opt-out language contradicting statutory requirements.
• A Leave Policy amended by a separate document that contradicted the original.
• A POSH Policy covering “employees” — but not the 40+ gig workers operating under the same brand.

Inconsistent policies don’t just create confusion. In a dispute, they become evidence against the employer.

When did you last audit your policies against each other?

Crèche Is Now Mandatory at 50 Employees

Section 82 of the Code on Social Security mandates a crèche facility — or reimbursement of crèche expenses — for establishments with 50 or more employees.

Not 500. Fifty.

This threshold catches a lot of growth-stage companies off guard. If you crossed 50 employees in 2024 or 2025, this obligation is already active.

The Uncomfortable Truth

The New Labour Codes don’t create obligations that are impossible to meet. Most of what they require is genuinely reasonable — fair wages, safe workplaces, grievance access, social security for gig workers.

What they don’t accommodate is the comfortable assumption that compliance will be “handled when it becomes an issue.”

It has become an issue. Audit your policies. Recalibrate your salary structures. Constitute your GRC. Issue compliant appointment letters. And please — run the 50% basic salary calculation before someone else does it for you.