Practical guidance on implementing the recent Labour Code notifications

Labour, HR & Safeguarding
1

I work in HR for an international not-for-profit research organisation operating in India. We currently have offices in New Delhi, Odisha and Maharashtra, with most of our workforce engaged on fixed-term employment contracts.

We have been reviewing the recent Labour Code notifications and the corresponding Central Rules to understand what actions employers should now be taking. While the legislation provides the legal framework, we are looking for practical guidance on how organisations are approaching implementation.

Our objective is to ensure that we remain fully compliant while also planning appropriately for any financial and administrative implications.

I would appreciate your guidance on the following:

  1. What changes should employers prioritise at this stage? For example, should we already be reviewing HR policies, employment contracts, payroll practices, statutory records, or other compliance processes?
  2. From an employer’s perspective, what employee-related costs should now be reviewed or budgeted for? In particular, should gratuity provisioning be revisited, and are there any other financial implications that organisations should be planning for?
  3. How should these changes be applied to employees who are already in service? For example, if an employee joined before the relevant provisions became applicable, should gratuity or other employee benefit liabilities be considered only from the effective date, or should previous service also be taken into account?
  4. Are there any specific implications or compliance considerations for organisations where the majority of employees are engaged on fixed-term employment contracts?

If your organisation has already started implementing these changes, I would greatly appreciate hearing about the practical steps you have taken.

Thank you in advance for your guidance.

2

Thanks for your query. Our response below:

1. What changes should employers prioritise at this stage? For example, should we already be reviewing HR policies, employment contracts, payroll practices, statutory records, or other compliance processes?

Your priority:

  1. Check whether existing comp structure is aligned with the definition of Wage in Code on Wages

  2. Revise comp structure balancing inclusions and exlcusions

  3. Ascertain incremental costs if likely on SS benefits and take home for staff

  4. Check and ensure HR engagement for manpower is aligned with the labour codes

    Fresh registrations as maybe required

  5. Mandatory applicability of wage slip, appointment letter, attendance register etc and other OSH facilities

Once you have done all this, get them into your HR policy and procedures

2. From an employer’s perspective, what employee-related costs should now be reviewed or budgeted for? In particular, should gratuity provisioning be revisited, and are there any other financial implications that organisations should be planning for?

Two, incremental SS benefits based on definition of Wage and retroactive liability for gratuity and EL based on the definition for periods prior to 21.11.2025.

3. How should these changes be applied to employees who are already in service? For example, if an employee joined before the relevant provisions became applicable, should gratuity or other employee benefit liabilities be considered only from the effective date, or should previous service also be taken into account?

Retroactive liability prior to 21.11.2025 if applicable needs to be computed and funded. Please note gratuity is now payable on last drawn wages and so also EL. FTEs engaged who have completed one year as on 21.11.2025 or thereafter will be eligible for gratuity. Further the comp of regular and FTEs has to be at par which may cast additional liability.

4. Are there any specific implications or compliance considerations for organisations where the majority of employees are engaged on fixed-term employment contracts?

In case of FTEs, the comp and benefit has to be at par with regular/permanent employee and they will be eligible for all SS benefits including gratuity on continuous service of 1 year.

CS Sharad Bhargava