The Four Labour Codes: A Structural Overview
The Parliament of India enacted four Labour Codes that consolidate and replace twenty-nine pre-existing central labour laws: the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020, and the Occupational Safety, Health and Working Conditions Code 2020. All four Codes came into force on 21 November 2025. On that date the laws they consolidate — including the Industrial Disputes Act 1947, the Payment of Wages Act 1936, the Employees' Provident Funds and Miscellaneous Provisions Act 1952, and the Employees' State Insurance Act 1948 — were repealed and subsumed. Central and State rules under the Codes are still being finalised; in the interim, transitional provisions keep rules, schemes and notifications framed under the earlier laws operative to the extent consistent with the Codes, and liabilities incurred under the repealed Acts survive. The treatment below states the position under the Codes and refers to the earlier Acts where they still matter — for past periods, pending proceedings, and the rules that continue during the transition.
Code on Wages 2019
The Code on Wages 2019 consolidates the Minimum Wages Act 1948, the Payment of Wages Act 1936, the Payment of Bonus Act 1965, and the Equal Remuneration Act 1976. The Code introduces a universal minimum wage applicable to all employees and workers regardless of the sector or the wage threshold. Under the repealed Payment of Wages Act, the obligation to pay wages within the prescribed period applied only to employees whose monthly wages did not exceed a threshold; the Code removes this ceiling. Employers in Delhi NCR should note that the Government of NCT of Delhi revises minimum wage rates periodically, and compliance requires tracking the revised rates as notified in the Delhi Gazette.
Code on Social Security 2020
The Code on Social Security 2020 consolidates nine social security laws including the EPF Act 1952 and the ESI Act 1948. The Code extends social security coverage to gig workers and platform workers — a significant expansion with substantial implications for technology platforms operating in Delhi NCR. The provident fund framework carried into the Code from the EPF Act requires establishments with twenty or more employees to register and contribute to the Employees' Provident Fund at the rate of twelve percent of wages (with a matching employer contribution). The ESI framework, also now within the Code, requires establishments with ten or more employees to register with ESIC and contribute at the prescribed rates for employees earning up to the specified monthly wage ceiling (currently twenty-one thousand rupees per month).
ESIC and PF Compliance for Delhi NCR Employers
Every establishment in Delhi that employs ten or more persons and is covered by the ESI provisions (formerly the ESI Act 1948, now the Code on Social Security 2020) must register with the Employees' State Insurance Corporation (ESIC) within fifteen days of becoming covered. The employer's contribution rate is currently 3.25 percent of wages, and the employee's contribution rate is 0.75 percent of wages. Employees earning more than twenty-one thousand rupees per month (thirty thousand rupees for persons with disabilities) are exempt from ESI contributions. The employer must maintain attendance registers, wage registers, and inspection books in the prescribed form, and must file half-yearly ESIC returns.
PF registration is mandatory for establishments employing twenty or more persons. The employer must remit the combined employer and employee contribution (twelve percent each) to the Provident Fund by the fifteenth day of the following month. The contribution is calculated on basic wages, dearness allowance, and retaining allowance — the definition of "basic wages" has been the subject of extensive litigation, with the Supreme Court in Surya Roshni v. Employees Provident Fund Organisation holding that allowances that are universally, necessarily, and ordinarily paid to all employees must be included in basic wages for PF computation. Employers whose CTC structures rely heavily on allowances to reduce the PF contribution base should urgently review their structures in light of this jurisprudence. Under the Code on Social Security, contributions are computed on "wages" as defined in the Codes — basic pay, dearness allowance and retaining allowance, with excluded allowances above fifty percent of total remuneration added back — which narrows the room for allowance-heavy structures further.
Standing Orders and Industrial Relations
The Industrial Relations Code 2020, which replaced the Industrial Employment (Standing Orders) Act 1946 on 21 November 2025, requires industrial establishments employing three hundred or more workers to have standing orders specifying the conditions of employment — classification of workers, working hours and leave, disciplinary procedure, and termination — either by adopting the model standing orders or by having their own certified. The threshold under the 1946 Act was one hundred workmen (lower in certain States), and standing orders certified under it remain relevant for past periods and for employers who choose to keep them. Certified standing orders govern the employer-worker relationship for covered workers. Delhi employers must submit standing orders for certification before the Assistant Labour Commissioner (Central) for establishments covered by central legislation, or the relevant state authority.
The Industrial Relations Code 2020 now governs disputes between employers and workers — including disputes relating to termination, retrenchment, wages, and conditions of service — in place of the Industrial Disputes Act 1947, which continues to govern disputes arising before 21 November 2025. Establishments employing three hundred or more workers require prior government permission before effecting lay-off, retrenchment or closure. Under the repealed Act this requirement (popularly known as the "Chapter VB" requirement) applied from one hundred workmen; the higher threshold is one of the most significant changes the Code makes to workforce management in mid-sized establishments.
Retrenchment, Termination, and VRS
Retrenchment — defined in the Industrial Relations Code in substantially the terms of section 2(oo) of the repealed Industrial Disputes Act 1947 — means the termination by the employer of the service of a worker for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action. It is therefore a much broader concept than redundancy — a workman who is dismissed for misconduct is not retrenched, but a workman whose services are terminated because the employer no longer requires their role is retrenched. The consequences of retrenchment include: payment of retrenchment compensation at the rate of fifteen days' average pay for each completed year of continuous service; notice of one month (or wages in lieu); a contribution of fifteen days' last-drawn wages to the worker re-skilling fund under the Code; and prior permission of the government for establishments with three hundred or more workers.
Voluntary Retirement Schemes (VRS) offer an alternative to compulsory retrenchment. A properly structured VRS can reduce the risk of industrial disputes arising from workforce restructuring, provided the scheme is genuinely voluntary and the terms (severance quantum, benefits continuation) are commercially reasonable and non-discriminatory. The tax treatment of VRS receipts under section 10(10C) of the Income Tax Act 1961 (for tax years from 2026-27, the corresponding provision of the Income-tax Act, 2025) provides an exemption up to five lakh rupees, which affects the design of the financial incentive for employees to accept VRS.
POSH Act Compliance for Delhi NCR Employers
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 (POSH Act) applies to every employer, irrespective of the number of employees. Every employer with ten or more employees must constitute an Internal Committee (IC) at each branch or office. The IC must have at least four members: a Presiding Officer (who must be a senior female employee); not fewer than two employees from the workforce (preferably committed to the cause of women); and one external member from an NGO or association committed to the cause of women or a person familiar with issues relating to sexual harassment. At least half of the IC members must be women.
The IC must be reconstituted every three years. The Presiding Officer and members must receive periodic training on the POSH Act, IC procedures, and trauma-informed approaches to complaint handling. Failure to constitute an IC, or failure to initiate proceedings within the prescribed timelines, exposes the employer to penalties under section 26 of the POSH Act — a fine of up to fifty thousand rupees for a first offence and cancellation of the license or registration of the establishment for repeated contraventions. For Delhi NCR employers, the District Officer having oversight of POSH compliance at the district level may also conduct inspections and issue notices.
Complaint Procedure and Inquiry Timeline
Upon receipt of a written complaint from an aggrieved woman alleging sexual harassment, the IC must complete its inquiry within ninety days. The inquiry must provide the respondent with a fair opportunity to be heard, and the findings must be based on the evidence on record. The IC's inquiry report, with recommendations, is submitted to the employer, who must act on the recommendations within sixty days. The IC may also recommend conciliation (other than in cases involving sexual assault), and may recommend interim relief to the aggrieved woman during the pendency of the inquiry, including transfer or grant of leave.
Payment of Gratuity and Bonus
The gratuity provisions of the Payment of Gratuity Act 1972, now carried into the Code on Social Security 2020, apply to every establishment in which ten or more employees are or were employed on any day in the preceding twelve months. An employee who has rendered continuous service of five or more years is entitled to gratuity upon: superannuation; retirement or resignation; death; or disablement due to accident or disease. Fixed-term employees qualify for pro-rata gratuity after one year of service under their contract. The rate of gratuity is fifteen days' wages for each completed year of service, computed on the last drawn basic salary plus dearness allowance. The maximum gratuity payable is twenty lakh rupees. An employer who fails to pay gratuity within thirty days of its becoming payable is liable to pay simple interest at the prescribed rate for the delay period. Delhi NCR employers should note that the controlling authority for gratuity disputes is the Regional Labour Commissioner (Central) for centrally covered establishments.
The bonus provisions of the Payment of Bonus Act 1965, now in the Code on Wages 2019, apply to every establishment in which twenty or more persons are employed. Every employee drawing a salary or wage not exceeding twenty-one thousand rupees per month is entitled to an annual bonus. The minimum bonus is eight and one-third percent of wages (or one hundred rupees, whichever is higher) and the maximum bonus payable is twenty percent of wages. The bonus must be paid within eight months of the close of the accounting year.
- Constitute an Internal Committee (IC) under the POSH Act at every branch or office — ensure the IC is reconstituted every three years and trained annually
- Draft and publish a POSH policy that is accessible to all employees, contractors, and visitors, and conduct annual awareness programmes
- Register under ESIC within fifteen days of crossing the ten-employee threshold — failure to register is a daily contravention
- Register for provident fund (now under the Code on Social Security) within one month of crossing the twenty-employee threshold
- Review the CTC structure's treatment of allowances in light of the Supreme Court's ruling on PF computation — avoid salary structures designed to artificially reduce PF contributions
- Adopt or certify standing orders once the workforce reaches three hundred workers under the Industrial Relations Code — they are the primary legal reference for discipline and termination procedures
- Follow the prescribed procedure for retrenchment including advance notice, retrenchment compensation, the re-skilling fund contribution, and (for establishments with three hundred or more workers) prior government permission
- Pay gratuity within thirty days of the gratuity becoming payable — delayed payment triggers interest liability
- File annual ESIC returns and monthly PF challan on time — late filings attract damages (formerly under section 14B of the EPF Act, now under the Code on Social Security)
- Monitor notifications from the Government of Delhi and the Central Government on minimum wage revisions and update payroll immediately upon each revision
- Document all separations — whether resignation, termination for cause, or retrenchment — with proper notices, full and final settlement computations, and no-dues confirmations