New Labour Codes: a plain-English compliance checklist for Indian SMBs

If you run a small or mid-sized business in India, the new labour codes compliance checklist below is the part that actually matters to you. Not the politics, not the headlines. What you have to do, by when, to stay clean. This post is built to stay useful as the rules settle, so treat it as an evergreen checklist rather than a news bulletin.

One thing to clear up first, because it trips up most owners: “this only applies to big companies” is wrong. The appointment-letter and wage-definition rules are not gated by company size or salary. They apply to you.

Key takeaways

• Appointment letters are now mandatory for every worker — permanent, fixed-term, contract, and gig — with no company-size or salary threshold.
• Basic plus DA must be at least 50% of total remuneration under the new wage definition.
• Reconcile PF, ESI, and gratuity on the new, higher base — the contribution rates have not changed, only the base.
• Single registration and single return are rolling out state by state through the Shram Suvidha portal.
• The final Central Rules were notified on 8 May 2026 (per the Ministry of Labour and Employment); State Rules are still being finalised, so re-check your state.

The four labour codes, in one paragraph

The four codes consolidate 29 earlier central labour laws into one cleaner stack. The Code on Wages 2019 governs wages, bonus and the wage definition. The Industrial Relations Code 2020 covers employment terms, standing orders and disputes. The Code on Social Security 2020 covers PF, ESI, gratuity and now gig and platform work. The OSH and Working Conditions Code 2020 covers safety, working hours and conditions. On the labour codes effective date, the major provisions of all four came into force on 21 November 2025, and the final Central Rules were notified on 8 May 2026 (per the Ministry of Labour and Employment) and took effect that day. As of June 2026 those Central Rules are final and notified, not draft. They apply where the Central Government is the appropriate government (banking, insurance, telecom, mines, railways, major ports, central PSUs and the like); many State Rules are still being finalised, so state-level applicability varies.

Appointment letters are now mandatory for everyone

This is the single most important thing for an SMB. Appointment letters are mandatory for all employees in India with no minimum company size and no salary threshold. That covers every worker type: permanent, fixed-term, contract, and gig or platform workers.

• No threshold, no exemption. Five employees or five hundred, ₹12,000 a month or ₹2 lakh, every worker gets a written letter. The no-threshold point is solid for appointment letters specifically.
• A prescribed format applies. The notified Central Rules set out the particulars a compliant letter must carry: designation, category of skill, wages, and social-security entitlements, among others.
• Existing staff need one too. Workers already with you who never got a letter are to be issued one within the timeline prescribed under the rules. Do not assume long-tenure staff are covered by default.

Field and non-desk teams are the hardest hit. A delivery rider, a beat sales rep, a security guard, a gym trainer on shifts. They are often hired informally, paid partly in allowances, and spread across sites. Issuing and tracking a proper letter for each of them, on paper, is where SMBs fall behind.

The new wage definition and what it does to payroll

This is the labour code payroll change with the longest tail. Under the Code on Wages, statutory wages (basic + DA + retaining allowance) must be at least 50% of total remuneration. Put the other way: if your excluded allowances exceed 50% of total pay, the excess is deemed to be wages.

• Allowance-heavy structures need restructuring. Many SMBs keep basic low and pile on allowances to reduce statutory cost. Under the 50% rule that no longer holds, so excess allowance gets pulled back into wages.
• It raises the base for several heads. A higher basic-plus-DA lifts the base used for gratuity, ESI and bonus, and tends to lift the PF base too.
• PF rates have not changed. EPF stays at 12% employee and 12% employer on PF wages; what changes is the base, not the rate. So expect contributions to rise over time as structures reset, rather than take-home dropping overnight. EPFO still computes on the EPF Act’s “basic wages,” so the immediate bite lands hardest on gratuity, ESI and bonus.

We covered the take-home side of this in detail in the new wage code and your team’s take-home pay.

Single registration, single return

The codes are moving toward one all-India registration with a single Labour Identification Number, a single licence, and consolidated returns through the Shram Suvidha portal, replacing the older law-by-law filings. This is rolling out state by state and depends on each state connecting to the central portal, so it is not uniformly live everywhere yet.

• Keep digital records. Wage registers, attendance, and appointment letters in a clean, retrievable digital form, not loose registers.
• Where SMBs slip. Stale registrations under old laws, attendance that does not match the wage register, and missing letters for contract staff.
• Plan once, file once. As single return goes live in your state, the win is one consolidated filing instead of many.

On penalties, do not fixate on a single figure. The general framework: a first wage-related contravention can attract a fine up to ₹50,000; a repeat offence within five years can mean imprisonment up to three months and/or a fine up to ₹1,00,000. The codes lean toward higher fines over jail and allow compounding. Confirm the live framework on labour.gov.in.

Your SMB compliance checklist

• Issue appointment letters to every worker type, in the prescribed format, including existing staff.
• Restructure pay so basic + DA is at least 50% of total remuneration.
• Reconcile PF, ESI and gratuity on the new, higher base.
• Clean up registrations and records and prepare for single registration and single return as your state goes live.
• Plan for refreshes. State Rules are still settling, so re-check status periodically rather than assuming today’s position is final.

How Field HRMS keeps you compliant

This is exactly the churn Field HRMS is built for: digital appointment letters in the prescribed format, attendance and wage records for non-desk teams, and payroll that handles PF, ESI and PT on the correct base, without re-keying across a register, a spreadsheet and a portal. It is the same idea behind everything we build, software that does the compliance grunt-work so your team does not.

If you manage a field or shift workforce and want to get the letters and the wage base right, join the waitlist or tell us your headcount and we will walk you through the migration.

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Verified as of June 2026. Labour-code rules, penalty amounts and PF treatment can change, and State Rules are still being finalised, so confirm the current rules, the single-registration status for your state, and your wage-and-PF treatment on labour.gov.in before acting, and check with your CA where relevant.