Alert

Background
Post the implementation of the four Labour Codes, the Central Government, on 30^th December 2025, has published draft Central Rules under each of the four Labour Codes for public consultation. Stakeholders have been invited to submit objections and suggestions within 45 days (30 days for Industrial Relations Code).

These draft Rules are a major step toward operationalising the Labour Codes, which have been in force since 21 November 2025, and provide the first detailed guidance on how key provisions may be administered in practice.

Key Highlights of the  Draft Rules

• 90 days with one aggregator in a year, or
• ​120 days across multiple aggregators within the last fiscal year.

This is the first time eligibility criteria are being clearly spelled out, potentially shaping coverage for gig and platform workforce segments. 

• Joint Secretary, Ministry of Labour & Employment (‘MoLE’) empowered to determine an activity as a core activity – which shall be relevant for entities employing contract labour for core activities as the same is prohibited under OSHWC Code¹;
• Minimum annual increments of atleast 2% for employees of the contractor – for them to be excluded from the definition of ‘Contract Labour’
• Allow common licenses for contractors operating across multiple States through Shram Suvidha Portal
• Remove earlier proposals requiring advance payment of wages by the principal employer to the contractor

 ‘Wages’ under the labour codes will include all remuneration paid to an employee, including salaries and allowances.  Further, if the excluded components exceed 50% of total remuneration, the excess will be added to ‘Wages’.

For the purposes of calculation of Gratuity, following components shall not form part of ‘Wages’ (within the overall capping of 50%):

• Reimbursement of medical expenses;
• Stock option benefit or cash equivalent of stock award;
• Crèche allowance;
• Telephone and internet reimbursement; and
• Value of meal vouchers.

Under the draft Industrial Relations Rules, worker(s) retrenched will be entitled to a worker reskilling fund amounting to 15 days’ last drawn wages. Employer to transfer this amount within 10 days of such retrenchment, in an account to be maintained by the prescribed labour commissioner. Further, within 45 days of separation, this amount will be transferred to the account of retrenched worker(s) to be utilized towards re-skilling.

Overtime entitlement for workers is triggered for work exceeding 48 hours in a week, without a separate daily working overtime hour threshold. However, for a daily wager, the limit for eligibility of overtime shall be beyond 8 hours in a day.

Employers must issue appointment letters to all employees within 3 months of the rules coming into force.

The draft rules also outline welfare measures such as:

• mandatory annual health check-ups for employee aged above 40 years within 120 days from the commencement of the calendar year;
• Equal opportunity for women in different shifts, shift after 7 pm or before 6 am to be allowed after consent
• Provision of creche facility in the establishment and if not provided, then payment of creche allowance, which shall not be less than INR 500 per month per child. 

The draft Industrial Relations Rules introduce provisions for:

• Grievance redressal committees for establishments with 20 or more workers
• Separate grievance mechanisms for contract labour, strengthening internal dispute resolution infrastructure.

8. Safety Committee

Provisions are also introduced for:

• Setting up a Safety Committee for every establishment employing 500 or more workers
• Committee shall consist of equal number of members (upto a maximum of 20) representing the employer and the workers.

Draft rules specify:

• Unified annual returns
• Multiple mandatory registers (wages, attendance, women employees, overtime etc.)
• Record retention for five years
• Requirement for records to be maintained in prescribed languages (English and Hindi or language understood by majority of persons employed)

This level of detail was absent in earlier equation-level drafts and represents a move toward harmonised record-keeping expectations. 

BDO India Comments:
The draft rules provide first detailed insights into how the Labour Codes will operate in practice. While some ambiguities remain, organisations that proactively prepare will be better placed to manage compliance, cost and transition risks.

A practical compliance roadmap should include:

• Assessment of the Financial and tax impact impact on employee cost and books of accounts of an organisation specifically due to of new definition of ‘wages’, new provisions for Gratuity & Leave Encashment, additional benefits prescribed such as overtime, medical checkup and crèche allowance etc.
• Contract Workers hiring model, specifically for conducting core business activities. Also, financial impact assessment for additional compliance obligations prescribed for principal employer.
• Alignment of HR policies & procedure in line with procedural aspects provided in labour codes such as working hours, leave entitlement, payroll procedure, F&F settlement, night shifts etc.  
• Updating the forms & formats for documentation and related records
• SOPs for Grievance redressal
• State specific change monitoring
• Accounting impact arising on account of the changes required under the new labour law.

The commencement of the Labour Codes signals a shift toward a more structured, formal and compliance-driven labour ecosystem. While the new framework introduces opportunities for simplification and increased workforce participation, organisations will need to prepare for changes to wage structures, HR systems, social security provisioning, and compliance governance.