In short: With India’s four Labour Codes operative from 21 November 2025, every employment agreement labour codes India employers issue must now include a formal written appointment letter covering designation, wages, and social security details. The 50% wage rule under the Wage Code is also live, requiring immediate pay-structure review.
Key points
- All four Labour Codes — the Wage Code, IR Code, SS Code, and OSH Code — came into force on 21 November 2025, repealing 29 central labour laws.
- Central Rules under all four Codes were notified on 8 May 2026, making the appointment-letter obligation fully operative across establishments covered by central rules.
- The OSH Code and its 2026 Rules require every employer to issue a written appointment letter to every employee specifying employee details, designation, category, wages, and social security entitlements.
- The 50% wage rule under the Code on Wages is legally active: if excluded allowances and contributions exceed 50% of total remuneration, the excess is deemed wages, affecting PF, gratuity, and bonus calculations.
- State-level rules are uneven — over 30 states and UTs have notified rules for at least one Code as of mid-2026, but a single pan-India commencement date for all states is still awaited.
- Some provisions that require further subordinate notifications — such as specific wage ceilings, threshold figures, and sector exemptions — remain inoperative until those notifications are issued.
What changed on 21 November 2025?
India’s labour law landscape underwent its most significant overhaul in decades when the Government of India notified all four Labour Codes on 21 November 2025. A corrigendum issued on 19 December 2025 brought the Codes fully into force.
This single commencement date repealed 29 central statutes, including the Factories Act, the Payment of Wages Act, the Industrial Disputes Act, and several others that had governed Indian workplaces for decades. If your employment agreements still reference the old laws, they need to be updated immediately.
The four Codes are the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020, and the Occupational Safety, Health and Working Conditions Code 2020.
Are appointment letters now legally mandatory for all employees?
Yes — and this is one of the most consequential changes for small businesses and informal-sector employers. The OSH Code expressly requires every establishment to issue a letter of appointment to every employee. This is not discretionary.
The content and format of the letter is to be prescribed by the appropriate government. With the Central Rules notified on 8 May 2026, employers covered by central rules now have a prescribed framework to follow.
Historically, a large number of establishments — particularly in manufacturing, construction, and domestic services — operated without any formal written documentation for workers. The OSH Code and its rules close that gap for the first time as a matter of statute.
What must the appointment letter contain?
Under the OSH Code and the 2026 Central Rules, an appointment letter must at minimum specify the following details:
- Details of the employee (name, identity particulars)
- Designation
- Category of employment
- Wage details
- Social security details
Beyond these statutory minimums, a well-drafted employment agreement should also cover job responsibilities, working hours, leave policy, and termination conditions — both to comply with the broader spirit of the Codes and to protect the employer in any dispute.
For a plain-language guide on what each of these terms means in practice and how they interact with your HR documentation, see the Law for You guides on The Courtroom, which cover employment rights in accessible language.
What is the 50% wage rule and how does it affect your offer letters?
This is the provision causing the most restructuring work for payroll and HR teams right now. Under the Code on Wages, the definition of “wages” includes basic pay, dearness allowance, and retaining allowance.
The Code introduces a proviso: if allowances and contributions that are excluded from the definition of wages exceed 50% of the total remuneration (or such other percentage as notified by the Central Government), the excess amount is deemed to be wages.
In plain terms: you cannot park more than half of an employee’s total pay in allowances or employer contributions to reduce the “wages” base and thereby lower your PF, gratuity, and bonus liabilities. If you do, the excess automatically gets reclassified as wages for statutory-deduction purposes.
Most large firms have already restructured their pay components in response. SMEs and startups that rely on high-allowance, low-basic structures in their offer letters need to audit and revise them now. Employment contracts that specify pay breakdowns must reflect a compliant structure.
Old law vs. new law: a quick comparison for HR teams
| Area | Position under old laws (pre-21 Nov 2025) | Position under Labour Codes (from 21 Nov 2025) |
|---|---|---|
| Appointment letter obligation | Required under some state shops-and-establishments acts; no uniform central mandate for all sectors | Mandatory for all employees under the OSH Code and 2026 Central Rules |
| Minimum content of appointment letter | Varied by state; no uniform minimum content prescribed centrally | Designation, category, employee details, wages, social security — prescribed by the appropriate government |
| Wage definition and allowance cap | No statutory cap on the proportion of pay held as allowances | Allowances/contributions exceeding 50% of total pay are deemed wages under the Code on Wages |
| Governing statute for wage payment | Payment of Wages Act 1936 (now repealed) | Code on Wages, 2019 |
| Governing statute for industrial disputes | Industrial Disputes Act 1947 (now repealed) | Industrial Relations Code, 2020 |
| Social security framework | Separate EPF, ESI, Gratuity, and Maternity Benefit Acts | Consolidated under the Code on Social Security, 2020 |
What about state rules — does this apply to your business right now?
Labour is a Concurrent List subject under the Constitution, so both the Centre and states legislate on it. The Central Rules were notified on 8 May 2026 and bind establishments under central jurisdiction.
For state-governed establishments, compliance depends on whether your state has notified its own rules. As of mid-2026, over 30 states and Union Territories have notified rules under at least one of the four Codes. However, a single, unified pan-India commencement date across all states is still awaited.
This means your compliance obligations may vary depending on where your establishment is located and which Code is relevant to your sector. Check your state labour department’s notifications before assuming the Central Rules apply to you automatically.
Which provisions are not yet operative?
Not every provision of the four Codes is immediately enforceable. Provisions that do not require further rule-making are operative. Provisions that explicitly require a subsequent notification — such as specific wage ceilings, threshold figures, sector-specific exemptions, and certain procedural frameworks — remain inoperative until those notifications are issued by the appropriate government.
This means you should not assume a provision is live simply because the Code is in force. Check whether the specific provision is self-executing or requires a further notification before building compliance around it.
What should founders and HR managers do right now?
First, audit every template offer letter and employment agreement your organisation uses. Remove references to repealed statutes. Ensure the minimum mandatory content under the OSH Code is present.
Second, review your pay structure against the 50% wage rule. If allowances and excluded contributions together exceed half of total remuneration, the excess is deemed wages — restructure before your next payroll cycle if you have not done so already.
Third, check whether your state has notified rules under the relevant Code for your sector, since the compliance trigger for state-governed establishments depends on state notifications, not just the Central Rules.
Fourth, ensure your contracts cover termination conditions, leave policy, working hours, and grievance mechanisms — even where the Codes do not prescribe exact language, these reduce litigation risk substantially.
Frequently asked questions
Is it compulsory to issue a written offer letter to every employee under the new Labour Codes?
Yes. The OSH Code requires every establishment to issue a letter of appointment to every employee. The 2026 Central Rules make this obligation explicit and prescribe minimum content. Establishments that previously operated without formal written documentation are now in breach if they do not comply.
How does the 50% wage rule affect PF and gratuity calculations in my employment contracts?
Under the Code on Wages, if excluded allowances and employer contributions together exceed 50% of an employee’s total remuneration, the excess is automatically reclassified as wages. Since PF, gratuity, and bonus are calculated on wages, a higher wages figure increases your statutory contribution liability. Employment contracts with high-allowance structures will need to be restructured to reflect the revised pay breakdown.
My state has not yet notified rules under all four Codes — do the Central Rules still apply to my business?
It depends on whether your establishment falls under central or state jurisdiction. Establishments under central jurisdiction are bound by the Central Rules notified on 8 May 2026. For state-governed establishments, the applicable rules are those notified by your state government. As of mid-2026, over 30 states have notified rules under at least one Code, but coverage is uneven. Check your state labour department’s notifications for the specific Codes relevant to your sector.
Primary sources
- India Code (indiacode.nic.in) — full text of the Code on Wages 2019, Industrial Relations Code 2020, Code on Social Security 2020, and Occupational Safety, Health and Working Conditions Code 2020, along with notified rules
- Ministry of Labour and Employment (labour.gov.in) — official notifications, Central Rules, and circulars relating to all four Labour Codes
- Supreme Court of India (sci.gov.in) — for judgments on constitutional validity and interpretation of the Labour Codes
- Press Information Bureau (pib.gov.in) — official government press releases on the commencement and rules notifications
Written by Editorial Team, The Courtroom · Reviewed by Advocate (name withheld pending confirmation) · Published 2026-07-14 · Last verified 2026-07-14
This article is for general information only and is not legal advice. Laws change; verify against the primary sources cited and consult a qualified advocate for your situation.
