Employment Law Guide for Delhi NCR Employers (2026)

The Four Labour Codes: A Structural Overview

The Parliament of India has enacted four Labour Codes that consolidate and replace twenty-nine pre-existing central labour laws. The Codes are: the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020, and the Code on Occupational Safety, Health and Working Conditions 2020. While the Codes have been enacted, their commencement is subject to the publication of Rules by both the Central Government and the respective State Governments — a precondition that, as of March 2026, has not been uniformly satisfied across all States. The existing central laws — 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 — therefore remain operative in parallel. Delhi NCR employers must monitor both the existing law and the anticipated transition to the Codes. The treatment below addresses obligations under both the existing framework and the prospective Code-based framework.

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 existing Payment of Wages Act, the obligation to pay wages within the prescribed period applies to employees whose monthly wages do not exceed a threshold; the Code removes this ceiling. Employers in Delhi NCR should note that the Government of NCT of Delhi revises the minimum wage rates for scheduled employments 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 proposes to extend social security coverage to gig workers and platform workers — a significant expansion with potentially substantial implications for technology platforms operating in Delhi NCR. Under the existing EPF Act, establishments with twenty or more employees are required to register and contribute to the Employees' Provident Fund at the rate of twelve percent of basic wages (with a matching employer contribution). Under the existing ESI Act, establishments with ten or more employees (in the case of factories) must register under the ESIC scheme and contribute at the prescribed rates if any employee earns below a specified monthly wage threshold (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 under the ESI Act 1948 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.

Standing Orders and Industrial Relations

The Industrial Employment (Standing Orders) Act 1946 requires establishments employing one hundred or more workmen (the threshold may be lower in certain States) to formulate standing orders specifying the conditions of employment — categories of workmen, classification of employment, leave rules, disciplinary procedures, and termination provisions — and to have them certified by the certifying officer. Standing orders, once certified, have the force of law and govern the employer-employee relationship for covered workmen. 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 Disputes Act 1947 governs disputes between employers and workmen — including disputes relating to termination, retrenchment, wages, and conditions of service. The IDA distinguishes between different categories of establishments by workforce size, with establishments employing one hundred or more workmen in a calendar year requiring prior government permission before effecting retrenchment or closure. This requirement for government permission (popularly known as the "Chapter VB" requirement) is one of the most significant constraints on workforce management in large establishments and is frequently the subject of legal challenge.

Retrenchment, Termination, and VRS

Retrenchment under section 2(oo) of the Industrial Disputes Act 1947 means the termination by the employer of the service of a workman 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' wages for each completed year of continuous service; notice of one month (or wages in lieu); and prior permission of the government for establishments with one hundred or more workmen.

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 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 Payment of Gratuity Act 1972 applies 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. 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 Payment of Bonus Act 1965 applies 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 under the Act 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 under the EPF Act 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
• Certify standing orders if the workforce exceeds one hundred workmen — the certified standing orders are the primary legal reference for discipline and termination procedures
• Follow the prescribed procedure for retrenchment including advance notice, retrenchment compensation, and (for establishments with one hundred or more workmen) 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 under section 14B of the EPF Act
• 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