The Labour Code Reform
India's four Labour Codes — the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020 — represent the most comprehensive overhaul of labour law in decades. While the Central government has enacted the codes, state-level rules continue to be finalised, making it essential for employers to monitor developments in their specific state of operations.
Revised Definition of "Wages"
The Code on Wages, 2019 introduces a uniform definition of "wages" that applies across all four codes. Under this definition, allowances that cumulatively exceed 50% of total remuneration must be treated as part of wages. This directly affects the calculation of provident fund contributions, gratuity, and overtime pay — and for many employers will result in increased statutory liabilities.
Standing Orders and Industrial Relations
The Industrial Relations Code, 2020 raises the threshold for establishments required to have certified Standing Orders from 100 to 300 workers. It also introduces fixed-term employment as a statutory category, allowing employers to hire workers on a fixed-term basis with the same benefits as permanent employees but without the obligation of severance.
Social Security Extensions
The Code on Social Security, 2020 extends benefits — including provident fund, gratuity, and ESI — to gig and platform workers for the first time. Employers engaged with gig economy workers through apps or platforms need to assess their obligations carefully as state governments formulate rules under this code.
Prevention of Sexual Harassment (POSH)
The POSH Act, 2013 remains fully operative and continues to be actively enforced. All establishments with 10 or more employees must have a constituted Internal Complaints Committee (ICC), display a notice of the Act's provisions, and conduct annual awareness programmes. Failure to comply attracts fines and — on repeat violation — cancellation of licences.
Practical Steps for Employers
Employers should: audit current compensation structures against the new wages definition; review contracts for fixed-term employment compliance; verify ICC constitution and POSH compliance; and update HR policies to reflect the new codes' requirements. Satya Shastra's employment law team advises businesses of all sizes on compliance, contract drafting, and representation in employment disputes before labour courts and tribunals.