The Rules Changed: Did Your Payroll?
Four Labour Codes commenced on 21 November 2025 and swept away twenty-nine central Acts, including the ones that governed employees' state insurance, gratuity, minimum wages, the payment of wages and statutory bonus. They replaced the definition of wages itself, which is the number every other payroll calculation hangs off. Central rules arrived in May 2026 and state rules are still arriving. In the middle of all that, on 1 April 2026, a new Income-tax Act renumbered salary withholding. A payroll run that was correct in October 2025 is not automatically correct now.
- Written against the commencement notifications themselves, not against a summary of them. Where a notification commences a statute in part rather than in full, we say which part.
- Every date, rate, ceiling and section number on these pages sits in a claims register with its source and the date it was checked. Anything we could not confirm against a primary source is marked on the page rather than smoothed over.
- Payroll is where employment law, social security law and tax law meet. We have treated all three, because getting two of the three right still produces a wrong payslip.
What we do differently on payroll
We read the notification, not the headline
The commencement notifications for the Code on Wages and the Code on Social Security do not bring those Codes into force in full. They commence a listed set of sections and pass over others, and the repeal list itself was commenced in more than one tranche, so a statute missing from the November 2025 notification is not necessarily a statute that survived. Only the itemised text tells you which is which, and it is how we date every statutory reference on these pages.
We treat the wage definition as the whole problem
Almost every question an employer asks about payroll cost after November 2025 resolves to one question: what counts as wages now. The answer changes provident fund, gratuity, bonus, leave encashment, overtime and retrenchment compensation at the same time. Solving it once, properly, is worth more than solving six calculations separately.
We say which state, and when we do not know
The Codes are central law. The rules that make them operable are partly central and partly state, and the states are not moving together. For a multi-state employer the honest position in 2026 is that compliance is state by state and some of it is transitional. We will tell you where that is the case rather than present a single national answer that is only true in half the country.
Four employers with the same problem in different shapes
You run payroll in-house and it is now a compliance risk
Your team is competent and your process worked. Then the statutory wage base changed, the Acts your policies cite were repealed, and the section number on your salary withholding changed in the middle of a financial year. The process did not break loudly. That is the difficulty.
You are an overseas group with an Indian entity
Headcount is small, the local finance function is thin, and payroll is the one obligation that is unforgiving about dates. You need someone who can run it and who will tell you, in language a group controller can act on, what changed and what it costs.
You have people in several states
Registrations, professional tax, minimum wage notifications, registers and returns are all state-level, and the Labour Codes have made the map more uneven rather than less for the time being. This is where a single payroll process usually fails first.
You employ people who are not Indian, or Indians who are not in India
International workers, secondees and outbound postings bring social security agreements, certificates of coverage and a live constitutional question about whether the special provident fund treatment of international workers survives at all. This is the most expensive area to get wrong.
How a payroll engagement is put together
1. Establish the wage base
Before anything is processed, we rebuild your salary structure against the statutory definition of wages and the fifty per cent rule, and quantify what it does to provident fund, gratuity, bonus and leave encashment. This is the number everything else depends on.
2. Map the obligation by state and by headcount
Which registrations you hold, which you need, which thresholds you are near, and which state has notified rules under the Codes and which has not.
3. Rebuild the tax side against the correct Act
Salary withholding for a period up to 31 March 2026 is governed by one Act and for a period after it by another. Payroll has to hold both vocabularies at once for at least the next few years.
4. Run it, with the calendar visible
Monthly deposits, quarterly statements, half-yearly and annual returns, all with owners and dates, so that nothing depends on one person remembering.
5. Review on a schedule, not on an incident
State rules are still being notified, the provident fund wage ceiling has been litigated once already, and an incentive scheme runs to July 2027. We re-check this material against primary sources on a schedule.
Five guides, from what changed to what it costs across borders
Guide 1 is the one to read first, because the definition of wages it deals with is the input to everything in guides 2, 3 and 4. Guide 5 stands alone and is the one to read if you have people crossing a border in either direction.
What the Labour Codes Did to Your Payroll
The commencement notifications read properly, the new statutory definition of wages and the fifty per cent rule, which Acts were actually repealed, and why the provident fund repeal is dated earlier than the rest.
Provident Fund, ESI and Gratuity: Rates, Ceilings and the Transition
Contribution rates and wage ceilings as they stand in August 2026, why the provident fund ceiling did not move, 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.
Free tools you can use before you speak to anyone
No sign-up and nothing to install. We build these out of the questions that come up in almost every payroll conversation, and we date them so you can see how current they are.
EXI Labour Code Helper
Forty-seven topics across wages, industrial relations, social security, and occupational safety and working conditions. For each one: what the old Act said, what the Code says now, what actually changed, and what it means for an employer. Written in plain language rather than in section numbers.
Open the Labour Code HelperTell us what would save you time
We are adding to this set. If there is a calculation or a check your team keeps doing by hand, a wage-base test against the fifty per cent rule, a state-by-state registration matrix, a gratuity computation on fixed-term contracts, tell us and we will look at building it.
Send us the ideaThe scope of a payroll engagement
Processing and administration
Monthly salary computation on a statutory wage base we have agreed with you, payslips, variable pay, bonus and reimbursement handling, full and final settlements, and integration with whatever attendance and leave system you already run. Termination dues are payable within two working days under the Code on Wages, which is materially tighter than most existing processes assume.
Statutory contributions and returns
Provident fund, employees' state insurance, professional tax and labour welfare fund computation, deposit and return filing, with the deposit and filing calendar visible to you rather than held inside our office.
Salary withholding and reporting
Monthly tax computation against the regime each employee has actually elected, deposit by the seventh of the following month, quarterly statements, and the annual salary certificate, under the correct Act for the period concerned.
Structuring and advisory
Compensation structures that survive the fifty per cent rule, cost modelling before a structure changes rather than after, policy design for allowances and benefits, and advice on cross-border postings and secondments.
Registers, records and audit support
The registers and records the Codes and their rules require, retained for the prescribed period, and produced when an inspector, an auditor or a buyer's diligence team asks for them.
Data handling
Payroll is the most sensitive personal data most employers hold. The Digital Personal Data Protection Rules 2025 phase in over eighteen months, and the obligations that bite hardest on an employer are the later ones. We build to them now rather than retrofit.
Send an enquiry
Tell us roughly where you are: payroll running in-house that you want reviewed against the Codes, a first Indian payroll for an overseas group, a multi-state process that has become hard to defend, or a specific question about a secondment. A partner replies within one business day.
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.