New Labour Codes: what changes for salaried employees

Last updated: 23 October 2026 · By the Asuraa Team

Quick answer: Since 21 November 2025, the four Labour Codes give salaried employees one wider definition of wages, mandatory appointment letters, gratuity after one year for fixed-term staff, salary before the 7th of the next month and wages within two working days of resignation, per the Ministry of Labour's PIB release and the Code on Wages. Permanent staff still need five years for gratuity.

Key takeaways

• The Code on Wages, Industrial Relations Code, Code on Social Security and OSH Code took effect on 21 November 2025 and replaced 29 central labour laws.
• Appointment letters are now mandatory for all workers, according to the Ministry of Labour's PIB release of 21 November 2025.
• Fixed-term employees qualify for gratuity after one year of service under the contract, while permanent employees normally still need five years.
• Section 17 of the Code on Wages requires monthly salary before the 7th of the following month and wages within two working days of resignation, removal or retrenchment.
• Under the OSH Code, workers can carry forward up to 30 days of leave and encash all leave on exit, but supervisors earning above Rs 18,000 a month are outside these leave provisions.

The four Labour Codes have been in force since 21 November 2025, and for a salaried employee the biggest changes are a single, wider definition of wages, mandatory appointment letters, gratuity after one year for fixed-term staff, salary by the 7th of the next month for everyone, and final dues within two working days of leaving.

The Ministry of Labour's PIB release of 21 November 2025 says the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions (OSH) Code, 2020 replace 29 central labour laws. The Ministry has since published two sets of FAQs, the original FAQs and additional FAQs dated 16 March 2026, which explain how the rules apply in practice.

This is general information, not legal advice. Your exact rights also depend on your contract, your employer's policies and your state's rules.

What changed for salaried employees? The before-and-after table

Here are the changes that matter most to someone in a first or second job, with the official source for each.

The sections below explain each change and what it means for your payslip and your exit.

How does the new definition of wages affect your salary?

The new definition decides the base for PF, gratuity and other benefits, so a salary with low basic pay and high allowances now has a bigger benefit base.

Under section 2(y) of the Code on Wages, wages include basic pay, dearness allowance and retaining allowance. Items like HRA, conveyance, employer PF contributions, overtime and commission are excluded, but if the excluded items add up to more than half of total remuneration, the excess is added back to wages. The FAQs say performance incentives, ESOPs, variable pay and reimbursements are not wages at all.

Will your in-hand salary drop? The Labour Ministry said in December 2025 that it does not, where PF is deducted on the Rs 15,000 statutory ceiling, and that PF on higher wages is voluntary, as reported by Outlook Money. We work through a full CTC example in our post on the 50% wages rule and take-home pay.

Is an appointment letter now compulsory?

Yes. The PIB release lists mandatory appointment letters for all workers as one of the main changes, so that every worker has written proof of employment, and the final OSH rules include a prescribed format for it.

An offer letter and an appointment letter are not the same document. The offer is a proposal; the appointment letter confirms your role, pay and terms once you join. Our guide on offer letter vs appointment letter explains the difference, and if you are still at the offer stage, use our checklist of what to check in an offer letter.

What changed for gratuity?

Gratuity rules changed in two ways: fixed-term employees now qualify after one year, and the wider wage definition can raise the base on which gratuity is calculated.

According to the March 2026 FAQs, a fixed-term employee becomes eligible after one year of service under the contract, counted from the contract's start date; an 11-month contract does not qualify. Permanent employees still need five years of continuous service in the normal case. The original FAQs say gratuity is 15 days' wages for every completed year (or part above six months), based on the last wages drawn, up to Rs 20 lakh as currently notified, and that the five-year condition does not apply on death, disablement or expiry of a fixed-term contract. The revised wage definition applies to gratuity prospectively from 21 November 2025. Our guide to PF and gratuity for freshers covers the basics.

How quickly must your employer pay salary and final dues?

Monthly salary must be paid before the 7th day of the following month, and wages due when you resign, are removed or are retrenched must be paid within two working days, under section 17 of the Code on Wages.

The PIB backgrounder on the Code on Wages notes that these timing rules earlier applied only to employees earning up to Rs 24,000 a month and now cover everyone. The PIB release separately says IT and ITES employers must release salaries by the 7th of every month. If you are planning an exit, read our guides on the notice period in India and writing a resignation letter so the last working day is clear in writing, because the two-day clock depends on it.

What changed for leave and working hours?

Leave rules under the OSH Code now allow carry-forward of up to 30 days and full encashment on exit, but they apply to "workers", which does not cover every salaried employee.

The March 2026 FAQs say:

• A worker can carry forward up to 30 days of leave to the next calendar year. Leave that was applied for and refused can be carried forward without a limit.
• No maximum encashment limit is set, and on separation a worker can encash all leave to their credit.
• Supervisors are covered by the leave provisions only if their wage does not exceed Rs 18,000 a month.
• Where a state law is more favourable than the OSH Code, the employee can take the state benefit.
• Normal hours are 8 a day; work beyond 8 hours a day or 48 hours a week is paid at twice the normal rate.

The PIB release adds that fixed-term employees get the same leave as permanent staff and that wages during leave are mandatory. For how leave works day to day, see our leave policy guide for freshers.

What do most guides on the new labour codes get wrong?

The most common mistake is saying "gratuity after one year" for everyone. The one-year rule is for fixed-term employees. A permanent employee still needs five years of continuous service, except in cases such as death or disablement, according to the Ministry's FAQs.

A second mistake is promising that all your dues arrive within two working days. Section 17(2) covers wages, and gratuity is specifically excluded from the definition of wages in section 2(y). Gratuity and PF have their own processes, so plan for them separately.

A third mistake is assuming the OSH Code's leave rules apply to every office job. They apply to workers; a supervisor earning above Rs 18,000 a month is outside them, per the March 2026 FAQs. In that case your company policy and any more favourable state law are what count.

What should you do now as an employee?

Use this checklist to make sure the changes reach you:

1. Ask for your appointment letter if you joined without one, and keep a signed copy.
2. Compare a payslip from before 21 November 2025 with a recent one to see whether basic pay or PF changed.
3. Check that salary arrives before the 7th of each month; if you work in IT or ITES, the PIB release specifically names the 7th.
4. If you are on a fixed-term contract, note the start date, because gratuity depends on completing one year.
5. Keep your wage slips; the Code on Wages requires your employer to give them.
6. When you resign, get your last working day in writing and track final wages against the two-working-day rule.

For everything from accepting an offer to your first week, our first job guide from offer to joining ties these pieces together.

Related guides

• Your First Job in India: From Offer Letter to Joining Day and Beyond

FAQ

When did the new labour codes come into force?

The four Labour Codes came into force on 21 November 2025, according to the Ministry of Labour and Employment's PIB release of that date. They 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, and together they replace 29 central labour laws.

Do I get gratuity after one year under the new labour codes?

Only if you are a fixed-term employee. The Ministry's March 2026 FAQs say a fixed-term employee becomes eligible after one year of service under the contract, counted from its start date, and an 11-month contract does not qualify. Permanent employees normally still need five years of continuous service, except on death or disablement.

How many days does an employer have to pay final settlement?

Section 17(2) of the Code on Wages, 2019 says wages due on resignation, removal, dismissal, retrenchment or closure must be paid within two working days. This covers wages. Gratuity is excluded from the definition of wages, and PF has its own withdrawal or transfer process, so those can follow a different timeline.

Is an appointment letter mandatory under the labour codes?

Yes. The Ministry of Labour's PIB release of 21 November 2025 lists mandatory appointment letters for all workers as a key change, so that every worker has written proof of employment. If you joined after that date without one, ask HR for it and keep a signed copy with your offer letter and payslips.

Will the new labour codes reduce my in-hand salary?

Not if PF is deducted on the statutory wage ceiling. The Labour Ministry clarified in December 2025 that take-home pay does not fall where PF is calculated on the Rs 15,000 ceiling, and that PF on higher wages is voluntary. In-hand pay can fall only if your employer moves PF to full wages within a fixed CTC.

Do the new leave rules apply to IT employees?

The OSH Code's leave rules apply to 'workers'. The Ministry's March 2026 FAQs say supervisors are covered only if their wage does not exceed Rs 18,000 a month, and a more favourable state law can be used instead. Many IT employees should therefore check their company policy and state rules, not just the Code.

Final thoughts

The Labour Codes give salaried employees clearer paperwork, a standard wage definition, faster salary and settlement timelines and better terms for fixed-term staff, while leaving take-home pay protected where PF stays on the ceiling. Know which rules apply to your role, keep your letters and payslips, and ask HR when something does not match. If you are weighing a new role, you can check how your resume fits the job description with the Asuraa resume reviewer.