The Four Labour Codes: What Delhi NCR Employers Must Do Before They Are Notified

The Central Government enacted four Labour Codes between 2019 and 2020, consolidating 29 existing Central labour laws into a rationalised framework. The Codes have received Presidential assent. Several States have finalised their rules. But the Codes have not yet come into force because full notification requires both Central and State rules to be in place simultaneously. Delhi and Haryana (covering the Delhi NCR corridor) are among the States that have circulated draft rules. National Capital Territory employers must treat the period before notification as a compliance preparation window, not a period of inaction. ## The Four Codes: What They Cover **1. Code on Wages 2019**: Consolidates the Minimum Wages Act 1948, Payment of Wages Act 1936, Payment of Bonus Act 1965, and Equal Remuneration Act 1976. All employees (without a wage ceiling for most provisions) are covered. Key changes: - Universal applicability of minimum wage — the concept of "scheduled employments" is replaced with a floor wage applicable to all - Uniform definition of "wages" — includes basic pay and dearness allowance but excludes most allowances. This definition, when applied, increases the base for provident fund, gratuity, and bonus calculations - Consolidated compliance — one register, one return, one inspector for wage law compliance **2. Code on Industrial Relations 2020**: Consolidates the Industrial Disputes Act 1947, Trade Unions Act 1926, and Industrial Employment (Standing Orders) Act 1946. Major changes: - Threshold for Chapter VB (prior government permission for retrenchment/closure) raised from 100 to 300 workers — establishments with fewer than 300 workers can retrench without government permission - "Fixed-term employment" formally recognised — fixed-term workers get proportionate benefits (gratuity, bonus) but can be discharged at the end of the term without triggering retrenchment provisions - Standing Orders threshold raised to 300 workers - Worker definition broadened to include supervisors earning up to ₹18,000/month **3. Code on Social Security 2020**: Consolidates eight statutes including the Employees' Provident Funds and Miscellaneous Provisions Act 1952, Employees' State Insurance Act 1948, Gratuity Act 1972, and others. Key changes: - Gig workers and platform workers brought within the social security framework — platform companies will contribute to a separate fund - Gratuity eligibility for fixed-term employees regardless of service period (no 5-year minimum) - Voluntary Provident Fund portability improvements - Extended ESIC coverage to more categories of establishments **4. Code on Occupational Safety, Health and Working Conditions 2020**: Consolidates 13 statutes. Key changes: - Applies to establishments with 10 or more workers - Working hour cap maintained at 48 per week but overtime rate increased - Annual health checks mandatory for workers above prescribed age - Inter-State migrant workers protections strengthened ## What Has Not Changed Several protections that employees have historically relied on are preserved or strengthened under the Codes: - Retrenchment compensation remains at 15 days' pay per year of service for establishments under 300 workers; the government permission requirement applies above 300 - The principle of natural justice in disciplinary proceedings is preserved - Anti-victimisation provisions for trade union activities - Maternity benefits under the Maternity Benefit Act 1961 are not consolidated into the Codes — they remain operative separately ## The "Wages" Definition: The Compliance Landmine The unified definition of "wages" across the Codes is the provision that will most disrupt existing payroll structures. Currently, many employers structure compensation to maximise the non-wages component — HRA, special allowances, conveyance — to reduce the base for PF, ESI, and gratuity calculations. Under the Codes, the permissible allowance exclusions are capped: allowances cannot exceed 50% of total wages. If total remuneration is ₹1 lakh, at least ₹50,000 must fall within "wages" for the purpose of PF, ESI, and gratuity calculation. For Delhi NCR employers with mid-to-senior salaried workforces where allowance structuring is common, this change will: - Increase PF contribution bases - Increase gratuity liability - Increase bonus bases (where applicable) The cost impact is material. Actuarial estimates for large Delhi NCR employers suggest a 5–15% increase in employment costs post-notification, depending on existing salary structures. ## Fixed-Term Employment: A Genuine Flexibility Tool The formal recognition of fixed-term employment under the IR Code is a significant employer-friendly provision. A fixed-term employee: - Is entitled to the same working hours, wages, and statutory benefits as a permanent employee - Is entitled to proportionate gratuity (no 5-year threshold) - Can be discharged at the end of the term without retrenchment procedures - Cannot be automatically converted to permanent status This makes fixed-term contracts genuinely usable for seasonal or project-based hiring without the compliance risk that plagued the prior framework where "fixed-term" arrangements were frequently challenged as disguised permanent employment. ## Steps Delhi NCR Employers Should Take Now **Audit current salary structures**: Map all components against the Codes' "wages" definition. Identify the increase in PF, gratuity, and bonus liability under the new structure. **Review headcount thresholds**: Are you above or below 300 workers? If you are currently near the 100-worker threshold under the existing IDA (subject to Chapter VB), the threshold increase to 300 under the IR Code may alter your compliance obligations materially. **Review Standing Orders**: If your Standing Orders are currently applicable (100+ workers), review and update them. The new threshold is 300 workers — if you are between 100 and 299, you will lose the protection of certified Standing Orders when the Codes are notified, unless you voluntarily maintain them. **Update employment contracts**: Introduce fixed-term contract templates where appropriate. Ensure employment contracts reference the Codes' definitions and comply with the new wage structuring requirements. **Train HR and compliance teams**: The unified inspection regime and digital compliance portal under the Codes require changes to record-keeping and return-filing processes. **Monitor State notification status**: Delhi's rules will determine the final compliance obligations. Engage with industry associations tracking the notification status and ensure you are on the notification list for State rules releases. ## The Interim Position: Old Laws Still Apply Until the Codes are formally notified, the existing 29 statutes remain in force. Non-compliance with existing statutes — failure to pay minimum wages, PF defaults, ESI non-registration — continues to attract penalties under the current regime. The pre-notification period is not a compliance holiday. It is a preparation period. Corpus Juris Legal's Employment & Labour practice advises Delhi NCR employers — from IT companies in Cyber City to manufacturing units in NOIDA Special Economic Zone — on both current compliance and Labour Code preparedness. If you need a compliance audit under the existing regime or a readiness assessment for the incoming Codes, our employment law team is equipped to deliver both.