New Labour Codes for Employers: A 2026 Hiring Checklist
Employers who've made a job offer in the past year have been hiring under India's new labour codes, whether or not their paperwork has caught up. The four codes have been in force since 21 November 2025, and the central government notified the final rules on 8 May 2026. For most small and mid-sized businesses, the changes that matter sit in the hiring paperwork: appointment letters, salary structure, fixed-term contracts, and how fast you settle dues when someone leaves.
Most of what's been written about the codes is aimed at lawyers. This one is for whoever actually does the hiring in your company. That might be the founder, an HR manager, or the operations head who somehow ended up owning recruitment along with everything else.
Below is a plain checklist of what to look at before your next hire, plus the mistakes we're seeing most often.
This is a practical guide, not legal advice. Several rules also depend on what your state has notified, so have your CA or a labour-law adviser look over your final documents.
The New Labour Codes for Employers, in One Minute
The government folded 29 older central labour laws into four codes. Each one touches hiring in a slightly different way:
- Code on Wages, 2019: what counts as wages, minimum and floor wages, and paying people on time
- Industrial Relations Code, 2020: terms of employment, fixed-term employment and disputes
- Code on Social Security, 2020: PF, ESI, gratuity, maternity benefits and gig workers
- Occupational Safety, Health and Working Conditions Code, 2020: working hours, safety and night work
Key Dates Employers Need to Know Under the New Labour Codes
According to the Labour Ministry's FAQs on the codes, the four codes came into force on 21 November 2025. The final central rules were notified on 8 May 2026. States write their own rules for the establishments they regulate, and not every state has moved at the same speed. That's why a few obligations below come with a "check your state" note.
New Labour Codes for Employers: A 10-Point Hiring Checklist
Employers don't need to tackle every part of the new labour codes in one go. But each item below is worth checking before your next hire.
1. Issue an Appointment Letter to Every New Employee
This used to be good practice. Now it's a requirement. The final rules make appointment letters mandatory, and fixed-term staff should get theirs directly from you as the employer, not just from a contractor. Keep a signed copy on file for everyone. If some of your existing team never received one, it's sensible to fix that now.
2. Check Your Salary Structure Against the 50% Wages Rule
If allowances and benefits (leaving out gratuity and retrenchment compensation) make up more than half of someone's total pay, the excess is treated as wages. Low-basic, allowance-heavy structures are the ones affected. You don't have to change the CTC you offer, but you may have to change how it's split, and that can push up your PF and gratuity outgo. We've worked through the cost side of this in our guide to the cost of hiring an employee in India.
3. Update Your Offer Letter Template
Your offer letter should match the appointment letter that follows it: the same CTC breakdown, the same wage figure, the same key terms. If the offer still shows your old salary split and the appointment letter shows a new one, the candidate will notice. That's not a great way to start.
4. Fixed-Term Contracts: Equal Benefits and Gratuity After One Year
Fixed-term employees are entitled to the same benefits as permanent staff, including PF, ESI and minimum wages. They also become eligible for gratuity after one year of service instead of five, paid pro rata when the contract ends. If fixed-term hiring was part of how you kept costs down, put this into your budget.
5. Review Working Hours and Overtime Pay
The standard working week is 8 hours a day and 48 hours a week. Overtime has to be paid at no less than twice the normal rate of wages. If your sales or operations teams routinely stay late, check how those extra hours are recorded and paid.
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See Our Hiring Packages6. Pay Wages by the 7th of the Following Month
The Code on Wages says monthly wages should be paid before the 7th of the following month, with a wage slip issued on or before payment. People Matters reported in July 2026 that these provisions depend on central and state notifications, so check where your state stands. Paying by the 7th is a good habit either way.
7. Get Ready for a Two-Day Full and Final Settlement
Section 17(2) of the Code on Wages requires dues to be cleared within two working days of resignation, termination or retrenchment. Plenty of companies are used to taking a month or more. Line up your exit checklist, asset handover and payroll cut-off so you can actually meet that, and as with wage timelines, confirm whether your state's rules are already in force.
8. Put Night-Shift Consent and Safeguards in Writing
Women can now work in all types of establishments and on night shifts, but only with their consent, and only with proper safety, transport and security arrangements in place. If you're hiring for 24x7 roles, record the consent and the safeguards in writing rather than relying on a verbal OK.
9. Keep One Clean Set of Employee Records
Appointment letters, wage slips, attendance and overtime records, night-shift consent forms. When an inspector or an employee asks for something, you want to find it in minutes, not spend a week digging through email threads.
10. Review Contractor and Gig Arrangements
If you engage people through contractors or platforms, check who is responsible for what under the Code on Social Security. Aggregators, for instance, have to share details of their gig and platform workers with a central government portal. Don't assume your vendor has it covered. Ask them, and get the answer in writing.
Offer Letter vs Appointment Letter: What the New Labour Codes Require From Employers
People use the two terms as if they mean the same thing. Under the codes, they really don't.
| Offer letter | Appointment letter | |
|---|---|---|
| When it's issued | After selection, before the candidate joins | When the employee joins |
| What it does | Makes the offer and asks the candidate to accept | Formally records the terms of employment |
| Required under the codes? | Not specifically | Yes, mandatory under the final rules |
| Must line up with | The appointment letter's CTC and terms | Payroll, PF and gratuity calculations |
In practice, treat the offer letter as the promise and the appointment letter as the record. If the two don't match, the record is what counts, so it's worth getting both right from the same template.
What the New Labour Codes Mean for Employers Hiring Fixed-Term Staff
Under the new labour codes, fixed-term employment is fully recognised, and employers have to give fixed-term staff the same benefits as permanent employees. Gratuity kicks in after a year instead of five.
That means fixed-term contracts are no longer the cheap option some businesses treated them as. They're still useful, though. For project work, seasonal peaks or a role you're not sure will last, a fixed-term contract gives both sides a clear end date. Just cost it properly, with the benefits and gratuity included, before you decide.
Should You Still Use Fixed-Term Contracts?
If the work is genuinely time-bound, yes. If you're using rolling fixed-term contracts for what's really a permanent job, the savings have mostly gone, and you risk putting off good candidates who want stability. In that case a permanent hire is usually the cleaner choice.
Where Smaller Employers Should Start With the New Labour Codes
For smaller employers, ten items under the new labour codes can feel like a lot when you're also running the business. You don't have to do it all at once. Here's a sensible order.
This Week
Pull out your current offer letter and appointment letter templates. Read them side by side. Do the salary figures match? Does every new joiner actually get an appointment letter? This takes an hour, maybe two, and it fixes the most visible gap.
This Month
Sit down with your CA or payroll provider and run your salary structures against the 50% wages rule. Start with your most common roles, since that's where any change will add up. While you're at it, look at your fixed-term contracts and check that benefits and gratuity are budgeted.
This Quarter
Tighten the exit process so a full and final settlement can realistically be done in two working days. Set up a simple folder structure for employee records. And have one honest conversation with each staffing vendor about who handles compliance for the people they supply.
That's it. Three blocks of work, spread over a quarter. Most of it is admin, not a legal project.
Common Mistakes Employers Are Making With the New Labour Codes
A year after the new labour codes took effect, a few patterns keep showing up among employers:
- Updating the appointment letter but leaving the old offer letter template in use
- Assuming the 50% wages rule only matters for senior salaries, when it's really about how pay is structured at every level
- Treating fixed-term staff as if gratuity doesn't apply to them
- Keeping a 30 or 45-day full and final process because "that's how we've always done it"
- Relying on verbal consent for women working night shifts
- Assuming the staffing vendor or contractor has handled compliance for workers they supply
Where a Recruitment Partner Fits In
Under the new labour codes, compliance stays with employers. No recruitment partner can take that off your hands, and you should be wary of anyone who says they can.
What a good partner can do is keep the hiring side tidy while you sort out the paperwork: job posts with real locations and salary ranges, candidates screened against what the role actually needs, and offers that don't sit waiting for weeks. You can see how our recruitment process works, or simply post a job on iTroSys and run the hiring yourself.
New Labour Codes for Employers: Frequently Asked Questions
According to the Labour Ministry's FAQs, the four codes came into force on 21 November 2025. The central government notified the final rules on 8 May 2026, and states are notifying their own rules separately.
Yes. The final rules make appointment letters mandatory, and fixed-term employees should receive theirs directly from the employer.
Yes. Fixed-term employees become eligible for gratuity after one year of service instead of five, and it's paid on a pro-rata basis.
If allowances and benefits, other than gratuity and retrenchment compensation, are more than 50% of total remuneration, the excess is counted as wages. Salary structures with a low basic and high allowances may see their PF and gratuity costs go up.
Yes, the new labour codes apply to employers broadly. Some provisions only apply above certain headcount thresholds, and some depend on state rules, so check your exact position with your CA or a labour-law adviser.
Employers Hiring Under the New Labour Codes
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