What the Labour Codes Did to Your Payroll
On 21 November 2025 the Ministry of Labour and Employment issued four notifications, one for each Labour Code, and twenty-nine central Acts stopped being law. The change that matters most to payroll is not any single repeal. It is that the four Codes share one statutory definition of wages, and that definition is now the base for provident fund, gratuity, bonus, overtime, leave encashment and retrenchment compensation at the same time.
- The four commencement notifications and what each one actually commences
- The definition of wages in full, including the two provisos that do the work
- What was repealed, what was saved, and why the provident fund repeal is not in the November notification
- The central rules of May 2026 and why state rules still decide your position
The four notifications, read properly
All four Codes were brought into force on the same day by four separate notifications, all dated 21 November 2025. Getting the pairing right matters, because at least one widely read legal publisher has two of them transposed. The opening recital of each notification names the Code it commences, and that recital is the thing to check.
| Code | Commencement notification | Extent |
|---|---|---|
| Code on Social Security, 2020 | S.O. 5319(E) | Partial. A listed set of sections. |
| Industrial Relations Code, 2020 | S.O. 5320(E) | In full. |
| Occupational Safety, Health and Working Conditions Code, 2020 | S.O. 5321(E) | In full. |
| Code on Wages, 2019 | S.O. 5322(E) | Partial. A listed set of sections. |
Read on 18 August 2026 from the gazette text as hosted by a state labour department. The e-Gazette itself was not reachable during this build.
The two partial commencements are the interesting ones. The Code on Wages notification commences sections 1 to 41, section 42(4) to (9), sections 43 to 66, section 67 in part, and sections 68 and 69, other than provisions already commenced in December 2020. The Code on Social Security notification commences sections 1 to 14, section 15(1) and (2), section 16(1)(c), sections 17 to 141, section 143, sections 144 to 163, and then, critically, section 164(1) items 1, 2 and 4 to 9.
Section 164(1) is the repeal list, and item 3 of it, the provident fund statute, is not in that set. The reason is not that the statute survived, and it is the subject of the next section.
What went, what was saved, and the repeal that looks missing
Twenty-nine central Acts were repealed across the four Codes. On the wages side, section 69 of the Code on Wages repealed the Payment of Wages Act 1936, the Minimum Wages Act 1948, the Payment of Bonus Act 1965 and the Equal Remuneration Act 1976. On the social security side, section 164 of the Code on Social Security repealed nine Acts, and this is where the care is needed.
| Statute | Position from 21 November 2025 |
|---|---|
| Employees' Compensation Act, 1923 | Repealed (item 1). |
| Employees' State Insurance Act, 1948 | Repealed (item 2). |
| Employees' Provident Funds and Miscellaneous Provisions Act, 1952 | Repealed (item 3), but not on 21 November 2025. Section 164(1), so far as it repeals the corresponding provisions of that Act, was commenced earlier, by S.O. 2060(E) of 3 May 2023, which is why item 3 is not repeated in the November 2025 notification. |
| Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 | Repealed (item 4). |
| Maternity Benefit Act, 1961 | Repealed. |
| Payment of Gratuity Act, 1972 | Repealed. |
| Cine Workers Welfare Fund Act, 1981; Building and Other Construction Workers Welfare Cess Act, 1996; Unorganised Workers' Social Security Act, 2008 | Repealed. |
The provident fund entry is the one to be careful with, and it catches careful readers rather than careless ones. Anybody who reads only the November 2025 notification sees items 1, 2 and 4 to 9 commenced, sees item 3 passed over, and concludes that the 1952 Act is still standing. It is not. That part of the repeal had already been commenced in May 2023, so by November 2025 there was nothing left to commence. What survives of the 1952 Act is its application to rights, liabilities, defaults and proceedings belonging to the earlier period. It is not the source of any prospective provident fund obligation. Those run under Chapter III of the Code on Social Security, and the Employees' Provident Funds Scheme, the Employees' Deposit-Linked Insurance Scheme and the Employees' Pension Scheme 2026 were notified on 29 June 2026 under section 15(1)(a), (c) and (b) of the Code respectively.
Each repeal section carries a savings clause. Schemes, rules, notifications, registrations, licences and pending proceedings made under the repealed Acts continue until superseded, which is why existing registrations kept working through the transition and why a minimum wage notification issued before November 2025 did not evaporate. Rules, regulations and schemes under the repealed employees' state insurance statute continue under section 164(2)(b) of the Code, so far as they are consistent with it, for one year from 21 November 2025 or until corresponding instruments are made under the Code, whichever comes first. No extension and no replacement scheme had been identified as at 6 September 2026, so on the present position that saving expires on 20 November 2026. That is the nearest hard date on these pages.
One collision nobody appears to have reconciled: the Companies (Accounts) Second Amendment Rules 2025 require a board report statement on compliance with the Maternity Benefit Act 1961, an Act repealed on 21 November 2025. If you are a company preparing a board report, that is a question for your company secretary, not a drafting choice.
A topic-by-topic view of the same change
This guide covers the wages side in depth. If you want the whole map instead, our Labour Code Helper sets each repealed Act against the Code that replaced it across forty-seven topics, with what changed and what it means for an employer, in plain language rather than section numbers. It is free, and it carries the date it was last checked.
What counts as wages now, and the fifty per cent rule
All four Codes use substantially the same definition of wages. In the Code on Wages it is section 2(y). Wages means all remuneration expressed in money, which in practice means basic pay, dearness allowance and retaining allowance, and then excludes a list.
The excluded list is: statutory bonus; the value of house accommodation, light, water and medical attendance; employer contribution to provident fund or pension and interest on it; conveyance allowance and travelling concession; sums paid to defray special expenses; house rent allowance; remuneration under an award or settlement; overtime allowance; commission; gratuity; and retrenchment compensation or other retiring benefit or ex gratia.
The first proviso is the rule that changes your cost base
Where the aggregate of the excluded payments exceeds one half of all remuneration, the excess is deemed to be remuneration and is added back to wages. The practical effect is that the statutory wage base floors at half of gross, however your salary structure is drawn. A structure built on a low basic and a stack of allowances no longer reduces the base it was designed to reduce.
A second proviso deals with payment in kind: remuneration in kind not exceeding fifteen per cent of total wages payable is deemed to form part of wages.
Two points of detail decide how much the first proviso actually costs you. The first is which exclusions are inside the fifty per cent test. The test operates on the first nine items in that list, clauses (a) to (i), running from statutory bonus down to commission. That includes the value of house accommodation and of the supply of light, water, medical attendance and other amenities at clause (b), which is excluded from wages in the first place and then counts towards the fifty per cent aggregate along with the rest. Where those in aggregate exceed one half of all remuneration, the excess is added back. Gratuity, at clause (j), and retrenchment compensation, other retiring benefits and termination ex gratia, at clause (k), sit outside it. Employer contribution to employees' state insurance is outside it as well, but on a different footing: it is a statutory payment to the Corporation rather than remuneration payable to the employee, so it does not enter the computation at all. The Ministry's frequently asked questions of 16 March 2026 say the same thing from the other direction, confirming that employer provident fund contribution, employer pension contribution, statutory bonus and overtime allowance count, while gratuity, employees' state insurance, other retirement benefits and annual performance incentives do not.
The second is what 'all remuneration' means for the test, and it is neither of the two numbers a payroll team already has to hand. It is not gross payable to the employee and it is not cost to company. It is remuneration as section 2(y) itself builds it: the included wage components plus the clause (a) to (i) exclusions. That brings in employer provident fund and pension contributions, which the employee never receives as cash, and leaves out gratuity, employer employees' state insurance contribution, other retirement and termination benefits, genuine reimbursements and non-contractual performance incentives. Run the test on gross salary or on cost to company and the add-back comes out wrong, in opposite directions.
Two things follow that are just as easy to get wrong in the other direction. Only the aggregate excess over one half is added back, not the whole of the accommodation or utility value that took you over the line. And what enters an individual employee's computation is the value of the benefit that employee receives, as the statutory definition measures it, not a share of what running the accommodation, the transport or the canteen costs the employer. Read that together with the payment in kind proviso rather than counting the same benefit under both.
Where the deeming provision bites, it does not bite evenly. Provident fund cost only rises where wages sat below the monthly ceiling, because contributions above the ceiling are not compulsory. Gratuity and leave encashment carry no ceiling at all, so they rise with the wage base without limit. For most employers that is the larger number, and it is a balance sheet number as much as a payroll one.
Wage periods, payment dates, deductions and overtime
| Item | Position under the Code on Wages, 2019 |
|---|---|
| Wage period | Fixed as daily, weekly, fortnightly or monthly, and in no case longer than one month (section 16). |
| Payment date | Daily wages at the end of the shift; weekly before the weekly holiday; fortnightly within two days of the fortnight ending; monthly before the seventh of the succeeding month. |
| On exit | Where employment ends by removal, dismissal, retrenchment, resignation or closure, wages are payable within two working days. This is much tighter than most full and final settlement processes assume. |
| Deductions | A closed list in section 18: fines, absence, damage or loss, accommodation, amenities, advances and loans, statutory levies, social security contributions, union dues and authorised fund contributions. Total deductions cannot exceed fifty per cent of wages in a wage period, with the excess carried forward under the 2026 central rules. |
| Overtime | Not less than twice the normal rate of wages, beyond eight hours a day or forty-eight hours a week, payable at the end of each wage period. The Ministry's March 2026 guidance extends this to every employee for whom a minimum wage is fixed, including supervisory and managerial staff, which is not how most employers have treated it. |
| Bonus | Minimum 8.33 per cent of wages earned or ₹100, whichever is higher; maximum 20 per cent where allocable surplus permits; qualifying service thirty days in the accounting year; payment within eight months of the close of the accounting year. |
| Bonus eligibility ceiling | Notified, and backdated. For the central sphere, S.O. 4711(E) of 25 August 2026 fixes the eligibility limit under section 26(1) at ₹21,000 a month, and S.O. 4710(E) of the same date provides that where an eligible employee's wages exceed ₹7,000 a month, bonus is computed on ₹7,000 or the minimum wage fixed by the Central Government, whichever is higher. Both operate retrospectively from 21 November 2025. A state-sphere establishment has to find the corresponding state notification under section 26: a state publishing its rules does not by itself fix these two amounts. |
Central rules in May 2026, state rules still arriving
A Code without rules is not a working compliance regime. The central rules under all four Codes were notified on 8 May 2026: the Industrial Relations (Central) Rules 2026 as G.S.R. 342(E), the Code on Wages (Central) Rules 2026 as G.S.R. 343(E), the Social Security (Central) Rules 2026 as G.S.R. 344(E), and the Occupational Safety, Health and Working Conditions (Central) Rules 2026 as G.S.R. 345(E). Each came into force on the date of its own publication in the gazette. They carry the operational detail: minimum wage computation, deduction carry-forward, bonus mechanics, contribution rates and registration timing.
State rules are the problem. Rule-making is uneven and still moving: a number of states and union territories have notified final rules under one or more Codes, many still have draft rules only, and comparatively few have finished across all four. Until a state notifies, the working position is central rules read with such legacy state law as survives by saving. For a multi-state employer that means the Codes are in force everywhere and operable unevenly, which is an awkward thing to explain to a group head office and an important thing to get right before an inspection. The position has to be checked Code by Code and state by state; a national headline count is not something to plan on.
This is dealt with properly in guide 4, which is the state-by-state guide.
Five things worth doing before the next payroll run
1. Recompute the wage base
Take one employee at each salary band and rebuild the statutory wage base under section 2(y) with the first proviso applied. If basic plus dearness allowance is below half of gross, you have a deemed add-back and every downstream number moves.
2. Reprice gratuity and leave encashment
These are the two that carry no ceiling, so they absorb the whole of the increase in the wage base. If you carry an actuarial liability, it needs revisiting from 21 November 2025 forward, not from the start of a financial year.
3. Fix the exit timetable
Two working days for termination dues is the single change most likely to be breached quietly and repeatedly.
4. Purge repealed statute references
Employment contracts, HR policies, offer letters and board reports that cite the employees' state insurance statute, the gratuity statute, the bonus statute or the provident fund statute by name are citing repealed law. All four are gone, though not all of them on the same date.
5. Check your sphere on bonus, and check the back period
The central bonus limits were notified in August 2026 with retrospective effect from 21 November 2025, so a central-sphere employer now computes on a settled basis and should check whether the retrospection changes an accrual already booked. A state-sphere establishment still has to find its own state's notification.
Where to go next
Payroll Services
Back to the main payroll page: who we work with, how an engagement is put together, and how to reach us.
Provident Fund, ESI and Gratuity: Rates, Ceilings and the Transition
Contribution rates and wage ceilings, the provident fund ceiling's rise to ₹25,000 on 17 September 2026, what changed for gratuity on fixed-term contracts, and how the new wage base feeds each of the three.
Salary TDS Under the Income-tax Act 2025
Two Acts running at once, the new section numbers, the slab and rebate position for FY 2025-26 and tax year 2026-27, the renumbered forms, and the quarterly calendar a payroll team has to work to.
Running Payroll Across States: Registrations, Professional Tax and Minimum Wages
Why a single national payroll process still breaks at the state line: the uneven rollout of state rules under the Codes, professional tax by state, minimum wage computation, and the registers and returns that stayed local.
Cross-border Payroll: International Workers and Social Security Agreements
Provident fund for international workers and the litigation hanging over it, the twenty operational social security agreements, certificates of coverage, and the India and United Kingdom agreement, in force since 15 July 2026.
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If you want one thing from this page, ask us to recompute your statutory wage base and tell you what it does to provident fund, gratuity and leave encashment. It is a short piece of work and it is the input to everything else.
This page is general information, not professional advice. Indian payroll law changed more between November 2025 and June 2026 than in the twenty years before it. The four Labour Codes commenced on 21 November 2025, central rules under them followed in May 2026, and the Income-tax Act 2025 replaced the 1961 Act on 1 April 2026. State rules under the Codes are still being notified and differ by state, so the correct answer for one employer is not automatically the correct answer for another. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.