India Releases Labor Code Draft Rules; Stakeholder Feedback Begins Dec. 31, 2025

The central government has released pre-published draft rules for all four labor codes and invited public comments and objections over a 45-day consultation period. The four codes, covering wages, industrial relations, social security, and occupational safety, consolidate and replace 29 existing central labor laws, marking a major overhaul of India’s labor regulatory framework.

Consultation timeline and implementation outlook

The Union Ministry of Labor and Employment has pre-published the draft rules for each of the four labor codes on December 30, 2025. They are available on the official website of Ministry of Labor and Employment; click here: www.labour.gov.in/en

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Interested stakeholders may submit their feedback, queries, and suggestions to the Ministry of Labor and Employment on the Draft Code on Wages (Central) Rules, 2025; Draft Code on Social Security (Central) Rules, 2025; and Draft Occupational Safety, Health, and Working Conditions Code (Central) Rules, 2025, from December 31, 2025, to February 14, 2026. For the Draft Industrial Relations Code (Central) Rules, 2025, the consultation period will run from December 31, 2025, to January 30, 2026.

Any person may submit objections or suggestions by email or at the designated postal address. Contributors must follow the prescribed format, providing their details, identifying the relevant chapter or rule proposed for amendment, setting out the revised provision, and explaining the reasons for the proposed change.

After the consultation period closes, the central government will examine stakeholder submissions and notify the final rules. According to the Union Ministry of Labor and Employment, the labor codes could become operational roughly three months after the draft rules are published, tentatively by April 1, 2026. However, implementation timelines are expected to differ across states, as each state must complete its own rulemaking and notification process before enforcement.

Draft rules: Operationalizing the Labor Codes

The draft rules provide the operational details— specifying how employers, workers, and authorities must comply with the codes in practice. Publishing draft rules and inviting public feedback is a legal prerequisite before the codes can be enforced.

Why draft rules are issued

Before the labor codes can be implemented, the central government as well as the respective state governments must publish draft rules and invite comments from stakeholders, including employers, employees, trade unions, and industry bodies. The consultation period typically lasts 45 days. After reviewing the feedback received, the government finalizes and notifies the rules.

What does it cover

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The draft rules clarify practical compliance requirements, including:

1. Calculation and payment of minimum wages, overtime, and permissible deductions
2. Formats for registration, licensing, returns, and appointment letters
3. Procedures for inspections, audits, and digital filings
4. Conditions governing fixed-term employment, retrenchment, and dispute resolution
5. Eligibility, contributions, and benefit mechanisms under social security schemes
6. Workplace safety standards, health check-ups, and welfare facilities.

When do the rules take effect

Draft rules have no legal force until they are finalised and officially notified. Once notified by the central government, and subsequently by the states, the labor codes become operational in the relevant jurisdictions.

Overview of the four Labor Codes

Code of Wages, 2019

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The Code of Wages establishes minimum wages as a statutory entitlement for all workers, including those in the unorganized sector. It introduces a national floor wage to be fixed by the central government, below which states cannot set minimum wages. The code also mandates timely payment of wages, regulates permissible deductions, and requires overtime to be paid at no less than twice the normal wage rate.

Industrial Relations Code, 2020

The Industrial Relations Code introduces fixed-term employment while ensuring parity of benefits with permanent employees. It provides for a re-skilling fund to support retrenched workers, formalizes the recognition of trade unions, and permits work-from-home arrangements in the service sector by mutual agreement. The code also seeks to speed up dispute resolution and reduce administrative burdens through electronic records and digital filings.

Code on Social Security, 2020

The Social Security Code significantly expands coverage by bringing unorganized workers, gig workers, platform workers, and aggregators within the statutory framework. It provides for the establishment of a social security fund for these categories and standardizes the definition of wages to improve benefit calculations. Other provisions include gratuity eligibility for fixed-term employees after one year of service and the recognition of certain commuting accidents as employment-related for compensation purposes.

Occupational Safety, Health and Working Conditions Code, 2020

The OSH Code prescribes uniform safety, health, and welfare standards for establishments, with enhanced requirements for hazardous occupations. It expands protections for interstate migrant workers, mandates appointment letters, and requires annual health check-ups for employees. Coverage is extended to working journalists and media professionals, while multiple existing bodies are consolidated into a single national advisory board to set safety and working-condition standards.

Next steps for employers in India

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Once the rules are finalized and notified, employers will need to reassess payroll structures, employment contracts, HR policies, and compliance systems to ensure alignment with the new framework. While the central process may conclude within a few months, the actual rollout will depend on how quickly individual states notify and enforce their respective rules.

Frequently asked questions (FAQs) on Labor Code draft rules

1. Which rules apply during the transition to the new labor codes?

Until the final rules under the labor codes are notified, existing rules will continue to apply to the extent they are consistent with the provisions of the codes. This continuity is governed by Section 6 of the General Clauses Act, 1897.

2. What does “wages” mean under the labor codes?

“Wages” include all remuneration payable to an employee, whether by way of salary, allowances, or otherwise. Core components include basic pay, dearness allowance, and retaining allowance, if any. Where allowances (other than gratuity and retrenchment compensation) exceed 50 percent of total remuneration, the excess portion is added back to wages for statutory purposes.

3. Which components are excluded from wages?

Performance-linked incentives, ESOPs, variable pay components, and reimbursement-based payments are excluded from the definition of wages.

4. Does this definition apply uniformly across all labor laws?

Yes. A single definition of wages applies across all four labor codes and is used consistently for statutory calculations.

5. What is the 50 percent rule for allowances?

If allowances and benefits (excluding gratuity and retrenchment compensation) exceed 50 percent of total remuneration, the excess amount is added back to wages. Statutory compliances are calculated on this adjusted wage figure.

6. Is leave encashment treated as an allowance?

No. Leave encashment is expressly excluded from the definition of allowances under the Code of Wages, 2019.

Illustration of the allowance rule

Where total monthly remuneration is INR 76,000 (US$845.78) and allowances exceed the permissible 50 percent threshold by INR 2,000 (US$22.25), this excess amount is added back to wages. Statutory contributions and benefits are then calculated on the revised wage figure of INR 22,000 (244.83).

7. Is gratuity applicable prospectively or retrospectively?

Gratuity applies prospectively from November 21, 2025, the date on which the relevant provisions come into force.

8. How should gratuity be treated for companies following a December year-end?

Gratuity remains applicable from November 21, 2025. Employers may create provisions in accordance with applicable accounting standards.

9. When does gratuity become payable?

Gratuity is payable upon termination, superannuation, resignation, death or disablement, expiry of a fixed-term employment contract, or any other event notified by the Central Government.

10. Are there exceptions to the five-year service requirement?

Yes. The five-year requirement does not apply in cases of death, disablement, expiry of fixed-term employment, or other notified events. Where the beneficiary is a minor, the gratuity amount must be deposited with a competent authority for investment until majority.

11. How is gratuity calculated?

Gratuity is calculated at 15 days’ wages for each completed year of service or part thereof exceeding six months, based on last drawn wages. Special rules apply to piece-rated, seasonal, fixed-term, and disabled employees. The maximum gratuity payable is currently capped at INR 2 million (US$22,257.5).

12. Do better gratuity terms under existing agreements continue?

Yes. The code does not override an employee’s right to receive more favorable gratuity benefits under any award, agreement, or contract.

13. How are core and non-core activities treated for contract labor?

The OSH Code clearly defines core and non-core activities. Contract labor may be engaged in core activities where such work is ordinarily outsourced, intermittent, or involves a sudden increase in workload requiring time-bound completion.

14. Is journey allowance payable to interstate migrant workers?

Employers must provide interstate migrant workers with a to-and-fro journey allowance once every year from the worker’s native place to the place of employment.

15. How will ESI coverage be governed until final rules are notified?

The notified definition of wages under the labor codes will govern ESI coverage during the interim period, pending finalization of detailed rules.

(US$1 = INR 89.84)

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