Ministry of Labour & Employment released frequently asked questions (‘FAQs’) on March 16, 2026.  

Code on Wages, 2019

The Code on Wages, 2019, (“Wage Code”) introduces specific rules for calculating wages, notably the requirement that certain components added together must not exceed 50% (fifty percent) of the total remuneration. Overtime allowance is explicitly included in this 50% (fifty percent) wage calculation rule, and if such allowances exceed this threshold, the excess amount is added back to the wage calculation. To arrive at this fifty percent limit, only statutory components like the employer’s provident fund, pension contributions, and statutory bonuses are included as part of the remuneration. Conversely, other benefits such as gratuity, employees’ state insurance, and various retirement benefits are excluded from this specific calculation. Furthermore, annual performance-based incentives are not considered part of wages for computation purposes under the labour codes.

Regarding employee protections, the Wage Code includes provisions for the timely payment of wages that apply to all employees, including white-collar staff. Eligibility for overtime wages extends to any employee, including workers, whose minimum rate of wages is fixed under the Wage Code, which can include supervisory and managerial staff under certain conditions. The revised definition of wages established by the Wage Code became effective on September 21, 2025, and this new definition is also the basis for gratuity calculations from that date forward.

Code on Social Security, 2020

Code on Social Security, 2020, (“SS Code”) specifies that fixed term employment (“FTE”) specifically covers employees who are directly engaged by an employer. Under these provisions, an FTE is eligible for gratuity if they render service under their contract for a minimum period of one year from the start of the contract. For other instances involving contract labour, the responsibility to pay gratuity rests with the contractor as the employer, and it is payable upon the rendering of 5 (five) years of continuous service at a rate of 15 (fifteen) days of wages for each completed year based on the last drawn wages. Generally, the calculation of gratuity under the SS Code applies to all payments made to an employee that are not excluded under the specific clauses of Section 2 (88), and the revised calculation methods became applicable starting from the implementation date of November 21, 2025.

For services rendered both before and after the implementation of the new laws, an employee will be paid gratuity based on the rate of wages last drawn at the time of their retirement, resignation, superannuation, or death, provided this occurs on or after November 21, 2025. The definition of wages used for these social security benefits also accounts for ‘remuneration in kind,’ which includes benefits provided under the terms of employment such as food coupons, ration items, and mobile recharges. Regarding employees’ state insurance coverage, the current notified wage limit of INR 21,000/- (Rupees Twenty-One Thousand) per month remains applicable, governed by the definition of wages under the SS Code on social security as of the November 2025 implementation date.

Industrial Relations Code 2020

Under the Industrial Relations Code, 2020, (“IR Code”) the eligibility of a fixed-term employee (“FTE”) for gratuity is strictly tied to the duration of their service rendered under the contract. A fixed-term employee becomes eligible for gratuity specifically if they have provided service under their contract for a minimum period of one year from the start of that contract. Consequently, an employee engaged on a fixed-term basis for a shorter duration, such as 11 (eleven) months, would not meet this one-year requirement upon the expiry of their contract. Furthermore, the same eligibility rule applies to situations where a fixed-term employee exits their position before completing the full tenure originally specified in their contract; they must have completed at least one year of service to be entitled to gratuity payments under the IR Code.

The Occupational Safety, Health and Working Conditions Code, 2020

The Occupational Safety, Health and Working Conditions Code, 2020, (“OSH&WC Code”) establishes specific leave and welfare provisions that primarily apply to workers, including sales promotion employees and working journalists, as well as supervisors with monthly wages not exceeding INR 18,000/- (Rupees Eighteen Thousand). Under these regulations, a worker is generally permitted to carry forward up to 30 (thirty) days of leave to the succeeding calendar year. However, if a worker applies for leave and the same is refused, that refused leave can be carried forward without any prescribed limit. While there is no overall maximum limit for leave encashment stated in the OSH&WC Code, leave exceeding 30 (thirty) days that was applied for but not granted can be encashed at the end of the calendar year, and all credited leave is eligible for encashment at the time of separation from service.

Regarding workplace facilities and hours, the OSH&WC Code mandates that creche facilities must be provided to employees regardless of the gender composition of the workforce. Standard working hours are fixed at 8 (eight) hours per day or 48 (forty-eight) per week, and any work performed beyond these limits entitles the worker to overtime wages at twice the normal rate, payable at the end of each wage period. This entitlement to overtime for hours exceeding eight in a day remains applicable even if an appropriate government prescribes a maximum daily working limit of up to 12 (twelve) hours.