New Labour Code 2025: What It Means for Your Business in 2026
The wage code, social security code, industrial relations code and OSH code are finally moving from government notifications to day-to-day impact. This page explains the key changes and how they affect salary structure, PF, ESI, gratuity and records for Indian startups and SMEs in 2026.
1. What Changed in the New Labour Codes?
The government has bundled 29 older laws into four labour codes. Most of the real-world impact for founders will show up in how you build salary structure, manage contracts, keep records, and run payroll in the 2025–2026 period.
Code on Wages – Everyday Salary Impact
- Minimum wage and payment rules cover almost all employees, not just “scheduled” jobs.
- At least 50 percent of total pay must be counted as wages for PF, gratuity and bonus calculations.
- Full and final settlement for exiting employees is expected within two working days.
Industrial Relations Code – Contracts & Grievances
- Fixed term employees are treated much closer to permanent staff, including gratuity on a pro-rata basis.
- Standing Orders are required only for larger establishments (300+ workers).
- Grievance Redressal Committee is expected for establishments with 20 or more workers.
Social Security Code – PF, ESI & Gratuity
- EPF can apply to all industries with 20+ employees, not just certain sectors.
- Gratuity is available for fixed term employees proportionate to service, not just five-year tenures.
- Commuting accidents between home and workplace are treated as employment injury.
OSH Code – Safety, Working Conditions & Records
- One digital form, one register and one return for many safety and establishment compliances.
- Wider definition of “worker” covers more roles, including some supervisory employees.
- Updated thresholds for rest rooms, canteens, crèche and sanitation facilities, with more emphasis on inclusive facilities.
2. What Does This Mean for Your Company in 2026?
As states roll out notifications and enforcement tightens from 2025 onwards, many SMEs will start feeling the impact in the 2026 financial year. Here are the questions founders and HR teams usually ask.
“Do I need to change salary structures?”
Yes, if a large part of pay is currently pushed into allowances. The wage code expects at least half of the CTC
to be treated as “wages”. That affects PF, gratuity and bonus calculations going into 2026.
“Will PF contributions go up for us?”
They may. When more of the salary moves into the wage component, the PF base grows. Even small adjustments in
2025 can change your actual PF outflow in 2026.
“Do we need to update employee records and registers?”
Yes. The shift to digital registers, single returns and updated formats means your team needs clean, consistent
data. Scattered spreadsheets and ad-hoc templates will be harder to manage as rules are enforced.
“Are fixed term employees treated differently now?”
Fixed term contracts now sit much closer to permanent roles. They can be eligible for benefits like gratuity on a
proportional basis. That changes how you think about short projects and contract hiring in 2026.
“Does overtime change from 2025 onwards?”
Overtime is expected to be paid at twice the regular rate. If your business relies on extra hours during peak
months, you will want a clean way to track hours and compute pay accurately.
3. How Offrd Helps You Stay Ready
Many of the new labour code requirements are document and record driven. Offrd focuses exactly on the pieces you need to keep tidy as 2025 changes flow into 2026 payroll and compliance.
What you can already do inside Offrd
- Create structured offer letters for India with clear CTC breakdowns and probation terms.
- Use salary structure helpers to keep wages and allowances in a balanced format that aligns better with the wage definition.
- Generate clean monthly payslips and payroll registers that are easy to share during audits. Try the payslip generator.
- Track attendance, overtime and work days in one place, so overtime calculations stay consistent.
- Store HR documents centrally – offer letters, joining letters, experience letters and more – using the supported HR documents in Offrd.
- Refer to guides like ESI & PF compliance for India when planning your 2026 payroll outflows.
Say an employee’s CTC is ₹30,000 per month. Under the new wage rules, at least ₹15,000 should be treated as wages. Offrd helps you break this down clearly in the offer letter and salary structure, so PF, gratuity and bonus calculations have a clear base.
A fixed term employee who works for 11 months can be eligible for gratuity on a pro-rata basis. Offrd keeps their letters, joining details and dates in one place so you are not searching through old emails when you need numbers.
4. Common Scenarios Founders Ask About
These are the kinds of situations that will show up on your desk in 2026 as the new codes take effect in day to day work.
You may need to gradually rebalance salary structure so that wages form at least half of the total. Offrd lets you rebuild structures and issue updated letters without recreating everything from scratch.
Fixed term and short-tenure employees are closer to permanent employees in how benefits are calculated. Planning for gratuity and social security will matter when you budget for 2026 projects.
With commuting accidents treated as employment injury, having clean records of working days, roles and coverage becomes important. Keeping HR data in one tool helps you respond quickly if there is an incident.
5. Download: New Labour Code 2025 → 2026 SME Checklist
A one-page reference you can share with your finance, HR and leadership teams with the main items to watch between the 2025 changes and your 2026 payroll planning.
6. Frequently Asked Questions
Is the new labour code fully implemented from 2025?
The four labour codes have been passed and notified, but implementation depends on central and state level notifications and rules. This is why many businesses are treating 2025 as a planning year and 2026 as the year where impact on payroll and records becomes more visible.
What are the biggest changes for small businesses?
The biggest changes for SMEs usually show up in three places: how salary is structured, how PF and gratuity are calculated, and how clean your employment records and registers are. Offrd focuses on these practical pieces rather than legal drafting.
Do we need a law firm or consultant to handle this?
You will still want professional advice for complex situations. For everyday documents, payroll registers and basic compliance tasks, many businesses simply need a clean way to create letters, payslips and records. Offrd is designed for this day-to-day layer.
Does this page replace legal advice?
No. This page is meant as a practical explainer for founders and HR managers. Labour codes can be interpreted differently depending on your industry, state and history. Always check with a legal or employment expert if you are unsure.
Is Offrd available in multiple languages?
Offrd is currently available only in English and is built specifically for Indian businesses.
Ready to get your HR paperwork 2026-ready?
Use Offrd to create offer letters, structure salaries, generate payslips and keep HR records tidy while you focus on running the business.