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India's new Labour Code framework brings together major rules covering wages, industrial relations, social security, and occupational safety and working conditions.
The framework consists of four Labour Codes:
Code on Wages, 2019
Industrial Relations Code, 2020
Code on Social Security, 2020
Occupational Safety, Health, and Working Conditions Code, 2020
For HR and payroll teams, the changes can affect wage calculations, statutory benefits, employment records, social security, and workplace compliance.
The Ministry of Labour & Employment publishes the applicable Labour Codes, Central Rules, notifications, and FAQs. Employers should verify current requirements against the latest official rules rather than relying on older interpretations.
This guide explains what the four Labour Codes cover, how they affect HR and payroll processes, and what Indian employers should review.
What Are the Four Labour Codes in India?
India has four Labour Codes covering wages, industrial relations, social security, and occupational safety and working conditions.
The four Codes are:
Code on Wages, 2019
covers wages, payment of wages, minimum wages and related matters.
Industrial Relations Code, 2020
covers industrial relations, trade unions and related employment matters.
Code on Social Security, 2020
covers social security provisions including areas such as provident fund, insurance, gratuity and other benefits.
Occupational Safety, Health and Working Conditions Code, 2020
covers workplace safety, health and working conditions.
For employers, the Labour Codes can affect payroll calculations, employee benefits, HR records, employment processes and statutory compliance.
Key Takeaways
India has four Labour Codes covering major areas of employment law.
The Code on Wages affects wage-related requirements and payroll processes.
The Code on Social Security covers several employee social-security benefits.
HR teams need to review employee records, wage structures and statutory processes.
Payroll systems may need configuration changes where applicable.
Employers should monitor official rules, notifications and FAQs.
Labour Code requirements can depend on the applicable Code, Rules and employee/employer circumstances.
Businesses should avoid treating older summaries as a substitute for current official requirements.
Four Labour Codes in India: At a Glance
Labour Code
Main Focus
What HR Should Review
Code on Wages, 2019
Wages, payment of wages and minimum wages
Salary structure, wage calculations and payroll processes
Industrial Relations Code, 2020
Industrial relations and trade unions
Employment processes, standing orders and workforce relations
Code on Social Security, 2020
Social security and employee benefits
PF, insurance, gratuity and related records
OSH & WC Code, 2020
Occupational safety and working conditions
Workplace policies, records and working-condition requirements
What Changed: Overview of the Labour Code Reform
On 21 November 2025, the four Labour Codes came into effect, consolidating major areas of India's labour and employment framework.
The four Labour Codes are:
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Code on Social Security, 2020
- Occupational Safety, Health and Working Conditions Code, 2020
The framework brings together provisions covering wages, industrial relations, social security, and occupational safety and working conditions.
Employers should review the applicable Labour Codes, Central Rules, notifications and FAQs when assessing the impact on their HR and payroll processes.
Definition of Wages and Minimum Wage Requirements
The Code on Wages establishes a common definition of wages for the purposes covered by the Code. The treatment of specified allowances can affect the wage amount used for relevant statutory calculations.
If specified allowances exceed the applicable threshold under the definition of wages, the excess amount may be included in wages for relevant calculations.
The Code on Wages also contains provisions relating to minimum wages and payment of wages. Employers should apply the applicable minimum wage and wage-payment requirements based on the relevant rules and government notifications.
Important: The wage definition should not be interpreted as a blanket requirement that every employee's basic salary must equal 50% of CTC.
What This Means for Employers & HR Teams — Challenges & Risks
Salary Structure Overhaul & Payroll Compliance
The revised definition of “wages” under the Labour Code framework can affect how certain statutory benefits and contributions are calculated.
If specified allowances exceed the applicable threshold under the definition of wages, the excess amount may be included in wages for relevant statutory calculations. This can affect payroll calculations and employee benefit computations.
This does not mean that every employee's basic salary must simply be fixed at 50% of CTC. Employers should review salary structures and payroll calculations based on the applicable Labour Code, Rules and current government guidance.
HR and payroll teams should review:
Salary components and allowances
Statutory contribution calculations
Gratuity calculations
Payslip and salary-breakup formats
Payroll software configuration
Employee communication about applicable changes
For a detailed explanation of the Labour Codes' impact on salary, PF, ESI and gratuity, read our India Labour Codes 2026: Impact on Salary, PF, ESI & Gratuity Explained guide.
How Do Labour Codes Affect HRMS and Payroll Systems?
The Labour Codes can require businesses to review how their HRMS and payroll systems handle wages, statutory benefits, attendance, overtime, employee records and compliance reporting.
HR and payroll teams should check whether their system can support:
- Updated wage and salary-component calculations
- Statutory contribution and benefit calculations
- Attendance, working hours, and overtime tracking
- Employee and employment records
- Payroll reports and compliance documentation
- Configuration changes when applicable rules are updated
Automation can reduce manual calculations and help maintain consistent payroll records, but software does not replace the employer's responsibility to verify the applicable law, rules and government notifications.
For businesses reviewing payroll automation, see our Payroll Automation Software India guide.
How Do the Labour Codes Affect Employer Costs?
The Labour Codes can affect employer costs by changing how wages, statutory contributions, gratuity, and other employee benefits are calculated under the applicable rules.
The potential cost impact depends on factors such as:
- Employee salary structure and applicable wage components
- Statutory contribution calculations
- Gratuity eligibility and calculations
- Employee category, including fixed-term or contract employment where applicable
- Applicable social security benefits and requirements
For HR and finance teams, the key priority is to review current payroll calculations and identify whether any statutory contribution or employee-benefit calculations need to be updated.
A structured HRMS and payroll system can help businesses maintain consistent employee records, automate applicable calculations and generate payroll reports for review.
Recommended Action Plan for Businesses & HR Using ZFour HRMS
If you are using or planning to use an HRMS such as ZFour, businesses should review their HR and payroll processes against the applicable Labour Codes and Rules.
Practical Labour Code Readiness Checklist
Review salary structures and wage components — check how applicable wage definitions affect payroll and statutory calculations.
Review HRMS and payroll configuration — ensure applicable wage, statutory benefit and payroll calculations are correctly configured.
Maintain compliance documentation — keep relevant wage, attendance, employment and statutory records organized.
Review payslip and salary-breakup formats — ensure employees can clearly understand applicable salary components and deductions.
Train HR and payroll teams — make sure relevant staff understand applicable Labour Code requirements and internal processes.
Communicate applicable changes to employees — explain changes to salary components, benefits or payroll processes where relevant.
Use HRMS reporting and analytics — monitor payroll data, employee records, workforce categories and compliance-related information.
ZFour HRMS can help businesses centralize HR and payroll processes, reduce manual work and maintain organized employee and payroll records. However, employers should verify applicable legal requirements against the latest government rules and notifications.
Benefits & Opportunities — Why This Reform Can Be Positive
The Labour Code framework is intended to simplify and consolidate employment-related legislation while strengthening protections and improving compliance processes.
For businesses and employees, potential benefits include:
- Simplified compliance: Consolidating multiple labour laws into four codes can make the overall framework easier to understand and manage.
- Clearer wage and employment requirements: Standardized definitions and rules can help employers structure payroll and employment processes more consistently.
- Broader social security coverage: The Code on Social Security provides a framework covering different categories of workers and social-security benefits.
- Improved digital compliance: Online registration, records, and reporting can help reduce administrative work where applicable.
- Better workforce management: Clearer requirements can help HR teams review policies, payroll processes, and employee records systematically.
The practical impact will depend on the applicable code, rules, notifications, and the circumstances of the employer and employees.
Key Labour Code Provisions Employers Should Know
Four Labour Codes: The framework consolidates major central labour laws into the Code on Wages, Industrial Relations Code, Code on Social Security, and Occupational Safety, Health and Working Conditions Code.
Definition of wages: The Code on Wages provides a common definition of wages. Where specified allowances exceed the applicable 50% threshold, the excess is added to wages for relevant calculations.
Timely payment of wages: The Code on Wages contains provisions governing payment of wages, including requirements applicable when an employee leaves employment.
Social-security coverage: The Code on Social Security provides a framework for social-security benefits covering different categories of workers, including provisions relating to unorganised, gig and platform workers.
Occupational safety and working conditions: The OSH & WC Code provides a consolidated framework covering workplace safety, health and working conditions.
Simplified compliance framework: The government's employer handbook highlights consolidation of registrations, returns, forms and registers under the Codes, including a move toward a single electronic return.
Digital compliance: The Labour Code framework includes provisions and processes supporting technology-based registration, records, and compliance management.
Updated rules and FAQs: Employers should check the latest Central Rules, notifications, and FAQs because the Ministry has published 2026 rules and additional FAQs for the Labour Codes.
Conclusion
The four Labour Codes represent a significant change to India's employment compliance framework, with implications for wages, social security, industrial relations, and workplace conditions.
For HR and payroll teams, the priority should be to understand the applicable requirements, review existing processes, update HRMS and payroll configurations where necessary, and maintain accurate employee records.
Businesses should also monitor the latest Central Rules, notifications, and FAQs issued by the Ministry of Labour & Employment because implementation requirements can evolve.
For broader payroll-specific requirements, refer to our Payroll Compliance in India 2026 guide.
Ready to review your HR and payroll processes?
Farheen Ahmed
HR Tech Content Strategist at ZFour Technology Private Limited
Research-driven content on HRMS, payroll, attendance management, employee management, and modern HR technology for Indian businesses.
