New Labour Codes 2026: The Wage Code & 50% Basic Salary Rule
India's four Labour Codes took effect on 21 November 2025. Here's what the new 50% wage rule means for your take-home pay, PF and gratuity — who's affected, what changes, and what is still being notified.
Check your new in-hand salary →Key Takeaways
- •Effective 21 November 2025 — four codes replace 29 older central labour laws. Detailed central and state rules are still being notified.
- •The 50% rule is the big change — your wages (Basic + DA) must be at least 50% of total pay. Low-Basic CTC structures get rebalanced upward.
- •Higher PF & gratuity, lower take-home for many — more of your CTC moves into retirement and exit benefits. It's deferred saving, not lost money.
- •Fixed-term staff get gratuity after 1 year — no 5-year wait for fixed-term contracts under the Social Security Code.
Effective Date
In force from 21 Nov 2025
Four Codes
Replace 29 central labour laws
Wage Floor
Basic + DA ≥ 50% of total pay
What Are the Four Labour Codes?
On 21 November 2025, the Ministry of Labour & Employment brought into force four Labour Codes that consolidate 29 existing central labour laws into a single, streamlined framework. It is the biggest overhaul of Indian labour regulation in decades.
- Code on Wages, 2019 — defines wages, minimum wages, payment timelines and bonus.
- Industrial Relations Code, 2020 — covers trade unions, standing orders, retrenchment and dispute resolution.
- Code on Social Security, 2020 — governs EPF, ESI, gratuity, maternity benefit and now gig/platform workers.
- Occupational Safety, Health & Working Conditions (OSH&WC) Code, 2020 — working hours, safety, leave and welfare.
India's four Labour Codes came into force on 21 November 2025, replacing 29 central labour laws. The most consequential change for salaried employees is the uniform definition of "wages", which requires Basic pay plus Dearness Allowance to be at least 50% of total remuneration — directly affecting Provident Fund, gratuity and take-home pay (Ministry of Labour & Employment).
The 50% Wage Rule Explained (the Change That Matters Most)
For years, employers kept Basic pay low (often 25–35% of CTC) and loaded the rest into allowances like HRA, LTA and special allowance. That reduced Provident Fund and gratuity liability — and boosted your take-home pay. The new codes end that.
Wages (Basic + DA + retaining allowance) must be ≥ 50% of total remuneration
If your excluded allowances exceed 50% of total pay, the excess is added back to "wages" for all statutory calculations. In practice this lifts most salary structures to a 50% Basic floor.
Worked Example: ₹1,00,000/month CTC
| Component | Old (30% Basic) | New (50% wage floor) |
|---|---|---|
| Basic + DA (wages) | ₹30,000 | ₹50,000 |
| Allowances (HRA, special, etc.) | ₹70,000 | ₹50,000 |
| Employee EPF (12% of wages) | ₹3,600 | ₹6,000 |
| Employer EPF (12% of wages) | ₹3,600 | ₹6,000 |
| Gratuity provision (≈4.81% of Basic) | Lower | Higher |
| Take-home (in-hand) | Higher | Slightly lower |
Illustrative. PF may be computed on actual wages or capped at the ₹15,000 statutory wage ceiling depending on your employer's practice.
Under the Code on Wages, Basic pay plus Dearness Allowance must be at least 50% of total remuneration. Where allowances exceed 50% of total pay, the excess is added back to wages. This raises the base for PF (12% of wages) and gratuity, increasing long-term savings while modestly reducing monthly take-home for employees who previously had a low Basic.
How the Codes Change Your Salary, PF and Gratuity
The headline worry — "will my salary drop?" — has a nuanced answer. Your CTC stays the same; what changes is the split between what you take home now and what is saved for later.
- Take-home pay: May fall for employees with a low Basic, because higher PF is deducted from a larger wage base.
- Provident Fund: Both employee and employer 12% contributions rise with the wage base — a bigger retirement corpus.
- Gratuity: Calculated on Basic + DA, so a higher Basic increases your eventual gratuity payout.
- Higher earners: Those who already had Basic at or above 50% of CTC see little or no change.
See the exact impact for your numbers with our in-hand salary calculator and EPF calculator.
Gratuity & Fixed-Term Employees
The Code on Social Security formally recognises fixed-term employment and grants fixed-term staff gratuity after just 1 year of continuous service — removing the 5-year barrier that still applies to permanent employees. Combined with the 50% wage floor (which raises the Basic on which gratuity is calculated), exit benefits improve for many workers.
For the full gratuity formula, eligibility and the ₹20 lakh tax-free cap, see our gratuity rules guide and gratuity calculator.
Working Hours, Overtime & Leave
- Overtime: Must be paid at twice the ordinary wage rate across sectors.
- Working hours & week: The OSH&WC Code allows flexible weekly scheduling (including a possible 4-day week) within daily-hour and weekly-cap limits set by rules.
- Annual leave: Eligibility for earned leave is reached after fewer qualifying days worked than under the old Factories Act (commonly cited as 180 days, down from 240) — confirm the figure notified by your state.
- Women in night shifts: Permitted with consent and mandated safety, transport and safeguards.
Exact daily-hour, weekly-cap and leave figures are set in central and state rules, several of which were still being notified in early 2026.
Wage Payment, Appointment Letters & Gig Workers
Timely payment of wages
- Daily-rated: at the end of the shift
- Weekly: last working day of the week
- Fortnightly: within 2 days of the fortnight ending
- Monthly: before the 7th of the following month
Mandatory appointment letters
Employers must issue formal appointment letters to all employees, including in the unorganised sector — improving transparency on pay, role and terms.
Gig & platform workers
For the first time, gig and platform workers get social security coverage. Aggregators may contribute to a welfare fund (commonly cited as 1–2% of annual turnover, capped at 5% of payments made to platform workers), funding life, disability and health benefits.
Are the Labour Codes Fully Implemented?
The codes were brought into force on 21 November 2025, but full operation depends on detailed central and state rules, several of which were still being notified in early 2026. Because labour sits on the Concurrent List of the Constitution, both the Centre and states issue rules — so specifics like professional tax, leave and working-hour limits can vary by state.
What to do now: Check your latest payslip for any change in Basic pay and PF deduction, and model your revised in-hand using the salary calculator. Ask HR whether your structure has been re-aligned to the 50% wage floor.
See Your New In-Hand Salary
Model the 50% Basic structure, new PF deduction and tax to see your revised monthly take-home.
Open Salary CalculatorFrequently Asked Questions
When did the new Labour Codes come into effect in India?
The four Labour Codes came into force across India on 21 November 2025 through notifications by the Ministry of Labour & Employment. They consolidate 29 existing central labour laws into four codes. However, several detailed central and state-level rules required for full implementation were still being finalised as of early 2026.
What are the four Labour Codes?
The four codes are: (1) the Code on Wages, 2019; (2) the Industrial Relations Code, 2020; (3) the Code on Social Security, 2020; and (4) the Occupational Safety, Health and Working Conditions (OSH&WC) Code, 2020. Together they replace 29 older central labour statutes.
What is the 50% rule under the new Wage Code?
Under the uniform definition of 'wages' in the Code on Wages, your wages (Basic pay + Dearness Allowance + retaining allowance) must be at least 50% of your total remuneration. If the excluded allowances (HRA, LTA, special allowance, etc.) exceed 50% of total pay, the excess is added back to 'wages' for statutory calculations like PF and gratuity.
Will the new Labour Codes reduce my take-home salary?
For employees whose Basic pay is currently below 50% of CTC, take-home pay may fall slightly. This is because a larger 'wages' base increases Provident Fund (PF) contributions and the gratuity provision. The money is not lost — it shifts into your retirement and exit benefits, increasing long-term savings.
How do the Labour Codes affect my EPF / PF contribution?
Because PF is calculated as 12% of wages (Basic + DA), and the new rule can raise your wage base to at least 50% of CTC, both your and your employer's PF contributions can increase. A higher PF contribution lowers in-hand pay but builds a larger retirement corpus.
Do fixed-term employees get gratuity under the new codes?
Yes. The Code on Social Security formally recognises fixed-term employment and entitles fixed-term employees to gratuity after just 1 year of continuous service, instead of the 5-year requirement that still applies to permanent employees.
What are the new rules on timely payment of wages?
The Code on Wages sets wage-period deadlines: daily-rated workers are paid at the end of the shift, weekly workers on the last working day of the week, fortnightly workers within 2 days of the fortnight ending, and monthly workers before the 7th of the following month.
Are appointment letters now mandatory?
Yes. The Labour Codes make it mandatory for employers to issue formal appointment letters to all employees, including those in the unorganised sector. This improves transparency on wages, designation and terms of employment.
What do the Labour Codes do for gig and platform workers?
The Code on Social Security extends social security coverage to gig and platform workers for the first time. Aggregators may be required to contribute towards a social security fund (commonly cited as 1–2% of annual turnover, capped at 5% of the amount paid to platform workers), funding benefits like life and disability cover and health insurance.
Can women work night shifts under the new codes?
Yes. The OSH&WC Code permits women to work night shifts (between 7 pm and 6 am) with their consent, provided the employer ensures safety, adequate safeguards and transport — replacing earlier blanket restrictions.
Are the Labour Codes fully implemented yet?
The codes were brought into force on 21 November 2025, but full implementation depends on detailed central and state rules, several of which were still being notified in early 2026. Because labour is on the Concurrent List, exact rules (such as professional tax, leave and working-hour specifics) can vary by state.
Related Calculators & Resources
Sources & References
- Ministry of Labour & Employment — Labour Codes — Government of India
- Four Labour Codes implemented effective 21 November 2025 — Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), OSH&WC Code (2020).
Disclaimer
This guide is for informational and educational purposes only and summarises India's four Labour Codes as brought into force on 21 November 2025. Several implementing rules continue to be notified and may vary by state. Figures here are illustrative — verify the current rules with your employer, HR, or the Ministry of Labour & Employment before acting. This website is not affiliated with or endorsed by the Government of India.