Labour · Compliance
New Labour Code Effective Date (India, 2026)
After years of being passed but not notified, India's four labour codes came into force together, consolidating a long list of older central labour laws into one modern framework. For small employers the practical questions are simple: from when do the codes apply, and what changes for provident fund, ESI and gratuity. This guide gives the effective date, the big-picture changes, and a short to-do list.
- Effective date: the four labour codes came into force on 21 November 2025.
- The four codes: Wages; Industrial Relations; Social Security; Occupational Safety, Health and Working Conditions.
- PF and ESI: continue under the Code on Social Security; EPFO and ESIC machinery remains.
- Wage definition: a broader, more uniform definition can change PF, gratuity and contribution bases.
- Gratuity: broadly last drawn wages multiplied by 15/26 for each completed year; confirm eligibility and ceiling.
- State rules: detailed rules are notified separately and some points depend on state rules.
01The effective date
The four labour codes came into force on 21 November 2025. From that date, the codes, as they are brought into operation, replace the older central labour laws they subsume.
Two caveats are worth keeping in mind. First, labour is a subject on which both the centre and the states make rules, so the detailed rules under each code are notified separately, and some operational points depend on state rules being in place. Second, transitional provisions apply, so arrangements that were valid under the old laws are generally recognised during the switch. Treat the 21 November 2025 date as the start of the framework, and confirm the specific rule you need against the current notification.
02The four codes and what they replace
The four codes consolidate a large number of earlier laws into four subject areas.
| Labour code | Broadly covers |
|---|---|
| Code on Wages | Minimum wages, payment of wages, bonus and equal remuneration |
| Industrial Relations Code | Trade unions, conditions of employment, standing orders and industrial disputes |
| Code on Social Security | Provident fund, ESI, gratuity, maternity benefit and gig and platform workers |
| Occupational Safety, Health and Working Conditions Code | Factory and workplace safety, working hours and conditions |
For example, the Industrial Relations Code governs industrial disputes in place of the older Industrial Disputes Act, and the Code on Wages governs the timing of wage payment and full and final settlement. The Code on Social Security is the one that touches provident fund, ESI and gratuity directly.
03What changes for PF and ESI
Provident fund and ESI continue, now under the Code on Social Security rather than their separate old Acts. The familiar machinery, EPFO for provident fund and ESIC for ESI, remains, and registration, monthly contributions and returns continue.
A key theme across the codes is a broader, more uniform definition of "wages", which can change how much counts towards PF and other contributions. Because the exact definition and any contribution changes depend on the notified rules, confirm the current position before you re-run your payroll calculations.
For the related PF filing deadline, see the PF return due date, and to update an employee's contact details, see EPF mobile number registration online.
04Gratuity under the new codes
Gratuity is now dealt with under the Code on Social Security. The familiar way of working it out continues broadly as before: for employees covered by the standard formula, gratuity is calculated as last drawn wages multiplied by 15/26 for each completed year of service (15 days of wages for every year, counting 26 working days in a month).
So for a worked example, an employee with a last drawn monthly wage of Rs 52,000 and 10 completed years would be looking at 52,000 multiplied by 15/26 multiplied by 10. The eligibility period, the treatment of fixed-term employees, and the ceiling on the amount depend on the notified rules, so confirm them for your situation. The broader wage definition under the codes can also change the "wages" figure that feeds the formula.
05What employers should do now
A short, practical checklist for a small employer:
- Review your salary structure against the broader wage definition, since it can change PF, gratuity and other contribution bases.
- Check your registrations under EPFO and ESIC are current and that monthly contributions and returns are up to date.
- Update employment letters and standing orders where the codes require it.
- Watch for your state rules, since several operational points depend on them.
- Keep records clean, as the codes continue the emphasis on registers and returns.
06How Claw Tax helps
Claw Tax and Accounts is an online tax, GST and accounting service for India that connects you with a verified chartered accountant at a fixed, published price, with a Claw reviewer checking every filing before it is submitted.
Routine PF and ESI registration and monthly filing can be done yourself on the EPFO and ESIC portals, and many small employers manage it. The labour-code transition is where it gets harder, because it touches your salary structure, contribution bases and records at once, and the rules are still settling.
Through Claw Tax and Accounts PF and ESI support, a verified chartered accountant can review your payroll against the current rules, handle your PF and ESI filings, and a Claw reviewer checks the work, at a fixed published price with reminders. Where the task is genuinely simple, we will say so.
This is general information, not legal or tax advice; a qualified professional should handle your specifics.
07Frequently asked questions
What is the effective date of the new labour codes?
The four labour codes came into force on 21 November 2025. From that date the codes, as brought into operation, replace the older central labour laws they consolidate, subject to transitional provisions and the state rules notified under each code.
What are the four labour codes?
They are the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code. Together they consolidate a long list of earlier central labour laws into four subject areas.
Do PF and ESI continue under the new codes?
Yes. Provident fund and ESI continue, now under the Code on Social Security instead of their separate old Acts, with EPFO and ESIC continuing to administer them. Registration, monthly contributions and returns go on, though the broader wage definition can change the contribution base.
How is gratuity calculated under the new codes?
For employees on the standard formula, gratuity is broadly last drawn wages multiplied by 15/26 for each completed year of service, that is 15 days of wages per year counting a 26 day month. The eligibility period, fixed-term treatment and ceiling depend on the notified rules, and the wider wage definition can change the base figure.
What should a small employer do about the new labour codes?
Review your salary structure against the broader wage definition, check that your EPFO and ESIC registrations and filings are current, update employment letters and standing orders where required, and watch for your state rules, since several operational points depend on them.
Are the detailed rules under the codes fully in place?
Not uniformly. Labour is a subject for both the centre and the states, so detailed rules are notified separately and some operational points depend on state rules being in place. Confirm the specific rule you need against the current notification rather than assuming everything is settled.