For most of the last five years, the labour codes were a thing that was going to happen. Owners heard about them at industry meetings, filed the news away, and carried on. That was a reasonable way to treat a reform that kept slipping. It is no longer the right way to treat this one.
The four labour codes India had promised for years came into force on 21 November 2025, and the twenty-nine central labour laws they replace stand repealed [1]. On 8 May 2026 the government notified the final central rules under all four codes, which is the part that turns a code from a principle into a list of things a factory has to do [1].
This post is written for a factory of about a hundred people. Not the listed company with a compliance team, and not the ten-person unit that sits below most thresholds. A hundred-person manufacturer sits above almost every trigger in the new law and usually has no one whose job is to notice. What follows is what changes for that factory, and where the answer still depends on the state it operates in.
The Four Labour Codes India Enforced, and the 29 Central Laws They Replace
The four codes are the Code on Wages 2019, the Industrial Relations Code 2020, the Occupational Safety, Health and Working Conditions Code 2020, and the Code on Social Security 2020. Between them they fold twenty-nine older central laws into four, including the Minimum Wages Act, the Payment of Wages Act, the Factories Act, the Contract Labour Act, and the Industrial Employment (Standing Orders) Act [1].
The rules matter as much as the codes. The code sets the principle. The rules set the number, the form, and the deadline. The draft central rules went out for consultation on 30 December 2025, and the final version was notified on 8 May 2026 [1]. When people ask what the codes now require of them, the honest answer lives in the rules, not the codes.
The 50 Percent Wage Rule: How the New Wage Definition Cuts Take-Home and Raises PF
The single change with the widest reach is the new definition of wages, and it applies across all four codes.
Under the Code on Wages, the components that are excluded from wages, which is house rent allowance, conveyance, and the other special allowances, cannot together be more than half of an employee’s total remuneration. Where those excluded parts add up to more than half, the excess is added back and counted as wages [3].
Read against how Indian salary is usually structured, the effect is direct. Many pay packets were built with a small basic and a large stack of allowances, because that kept provident fund and gratuity costs down. The codes close that route. Basic plus dearness allowance now has to be at least half of the total, which lifts the base on which provident fund, gratuity, and bonus are calculated [3].
Two things follow for a hundred-person factory. Employer provident fund and gratuity liability goes up, because the base it is charged on is higher. And for some workers take-home pay falls even where the cost to the company does not change, because a larger share of the same salary now moves into retirement contributions. The Ministry of Labour and Employment has confirmed in its own guidance that gratuity is calculated on the new basis from 21 November 2025 [3].
The overtime base shifts for the same reason. Overtime is paid on the ordinary rate of wages, which is basic plus dearness allowance, and that figure is now higher, so the overtime rate rises with it [2][3]. On hours, the central rules cap a worker at forty-eight hours in a week and eight in a day, set overtime at twice the ordinary rate, and limit overtime to one hundred and forty-four hours in any quarter [2]. That quarterly figure is worth fixing in mind, because a good deal of commentary still quotes one hundred and twenty-five hours, which was the draft number. The final rules say one hundred and forty-four.
Labour Code Compliance for a 100-Person Factory: Committees, Letters and a Creche
Some of the new obligations are triggered by headcount, and a hundred-person factory crosses most of them.
Appointment Letters Are Now Mandatory for Every Worker
Every worker is entitled to an appointment letter in the prescribed format, and workers who were never issued one are to be given one [1]. This is not tied to a headcount threshold. It applies to the whole workforce, permanent and otherwise.
Grievance Redressal Committee: Mandatory at 20 Workers
The Industrial Relations Code requires an establishment with twenty or more workers to constitute a Grievance Redressal Committee, with equal representation of employer and workers, a maximum of ten members, and women represented at least in proportion to their share of the workforce [1][5]. A grievance has to be dealt with within thirty days, and a worker who is not satisfied, or whose grievance is not resolved in time, may take the matter to the conciliation officer within sixty days [5]. A hundred-person factory is well past this threshold.
Works Committee: Mandatory at 100 Workers
A separate body, the Works Committee, is mandatory for an establishment with one hundred or more workers, with up to twenty members and worker representation not lower than the employer’s [1]. A factory of about a hundred people sits right on this line, which makes it easy to miss. The Works Committee is not the same as the grievance committee, and one does not stand in for the other.
A Creche at 50 Employees under the OSH Central Rules 2026
An establishment with fifty or more employees has to provide and maintain a creche within one kilometre, for children under the age of six [1][4]. Fifty is a low bar, and most hundred-person factories are above it without having thought about it.
Annual Health Check-Ups Apply to Workers Aged 40 and Above
The final rules bring in a free annual health examination, and it is easy to overstate. It applies to workers aged forty and above, and to notified categories of establishment such as construction and dock work rather than to every factory automatically [4]. If your unit runs hazardous processes, examination duties may already sit on you under existing factory law, so this is worth checking against your own operations rather than assuming it does or does not apply.
Standing Orders Do Not Start Until 300 Workers
This is the one place where the common summary overstates the position for a factory this size. The requirement to adopt standing orders under the Industrial Relations Code is triggered at three hundred workers, measured on the average of the preceding twelve months, and the government has notified separate model standing orders for the mining, manufacturing, and services sectors [6]. Under the central rules, a hundred-person factory is below that threshold. The reason to know the number anyway is that standing-order thresholds have varied by state in the past, which leads to the last and most important point.
Labour Codes State Rules: Why Your Own State Decides What Applies Today
Labour is a concurrent subject, which means both the central government and the states legislate on it. The central rules notified on 8 May 2026 apply only where the central government is the appropriate government, and for most standalone factories it is not [7]. The operative rules for a typical state-based manufacturer are the ones the state notifies.
States are at very different stages. Several have still not finalised their own rules, and there is no single pan-India date on which every state-dependent provision switches on [4][7]. A number that is correct under the central rules can be different, or not yet in force, in a particular state. This is not a reason to wait. The wage definition, the appointment letter, and the committees are settled at the code level and are not going to soften. It is a reason to confirm the position in your own state before you write a central figure into your compliance calendar, especially for anything where the threshold or the deadline could vary.
Where to Start: A Labour Code Compliance Inventory
The first move is not a project. It is an inventory. Set what the codes now require against what the factory already does, line by line: the wage structure, the appointment letters, the grievance committee, the works committee, the creche, and the records that sit behind each one. Most factories find they are partway there already, with a real gap in two or three places rather than everywhere.
SVEGA Consulting helps small and mid-sized manufacturers and exporters run that inventory and close the gaps that a buyer audit or a labour inspection would find first. If the codes have moved from something you read about to something you now have to act on, that is the right place to begin. You can start a conversation at with us at svegaconsulting.com.
FAQs About the Four Labour Codes
When did the four labour codes come into force?
The four codes came into force on 21 November 2025, and the twenty-nine central labour laws they replace stand repealed from that date [1]. The final central rules under all four codes were notified on 8 May 2026, after a draft was issued for consultation on 30 December 2025 [1].
What is the 50 percent wage rule?
Under the Code on Wages, the parts of pay that are excluded from the definition of wages, such as house rent allowance, conveyance, and other special allowances, cannot together be more than half of total remuneration. Where they exceed half, the excess is treated as wages [3]. In practice this means basic plus dearness allowance has to be at least half of the total, which raises the base for provident fund, gratuity, and bonus [3].
Will the wage change reduce take-home pay?
It can. Where a salary was structured with a small basic and large allowances, the restructuring moves more of the same salary into provident fund and gratuity contributions. The cost to the company may be unchanged, but take-home can fall for some employees, and employer contribution liability rises [3].
Does a hundred-person factory need standing orders?
Under the central rules, the standing-orders requirement is triggered at three hundred workers, measured on the average of the preceding twelve months [6]. A hundred-person factory is below that central threshold. Because standing-order thresholds have varied by state, confirm the position in your own state before relying on the central figure [4][7].
What is the difference between a Grievance Redressal Committee and a Works Committee?
They are two separate bodies with different purposes. A Grievance Redressal Committee is required at twenty or more workers and deals with individual grievances, with a thirty-day resolution timeline [5]. A Works Committee is required at one hundred or more workers and exists to support cooperation between employer and workers, with up to twenty members [1]. A hundred-person factory needs both, and one does not satisfy the other.
Is the annual health check-up mandatory for our factory?
Not automatically. The final rules provide a free annual health examination for workers aged forty and above in notified categories of establishment, such as construction and dock work, rather than for every factory as a matter of course [4]. Factories running hazardous processes may already carry examination duties under existing factory law. Check the requirement against your own operations and your state’s position.
How much overtime is now allowed in a quarter?
The central rules cap overtime at one hundred and forty-four hours in any quarter, with normal hours limited to forty-eight in a week and eight in a day, and overtime paid at twice the ordinary rate [2]. The figure of one hundred and twenty-five hours that still appears in some commentary was the draft number and has been superseded by the final rules.
The central rules were notified in May 2026. Do they apply directly to us?
Only if the central government is the appropriate government for your establishment, which for most standalone factories it is not [7]. For a typical state-based factory the operative rules are the ones notified by the state, and states are at different stages, with several yet to finalise their rules [4][7]. Verify your state’s position before applying a central figure to your own compliance.
References
[1] KPMG in India, GMS Flash Alert 2026-127, “India: Government of India Notifies Final Rules on Four Labour Codes,” May 2026. Records the four codes notified with effect from 21 November 2025, the draft central rules of 30 December 2025, the final central rules of 8 May 2026, and the mandatory provisions including appointment letters, grievance committees, works committees, annual health check-ups, and creche facilities. Available at: https://kpmg.com/xx/en/our-insights/gms-flash-alert/2026/flash-alert-2026-127.html
[2] JSA, “Key Considerations of the Notified Central Rules under the Labour Codes,” May 2026. On the forty-eight hour week, eight hour day, overtime at twice the ordinary rate, and the cap of one hundred and forty-four overtime hours in any quarter under the OSH central rules. Available at: https://www.jsalaw.com/corporate/key-considerations-of-the-notified-central-rules-under-the-labour-codes/
[3] Ministry of Labour and Employment, Government of India, “Additional FAQs on Labour Codes (as on 16.03.2026).” On the fifty percent wage definition, the treatment of the excess as wages, and gratuity calculation on the new basis with effect from 21 November 2025. Available at: https://www.labour.gov.in/static/uploads/2026/03/a4ccf4c6d97c4f1f36a6d83f8c64213d.pdf
[4] BDO in India, “India Labour Codes 2026: Key Updates Under Wage, Social Security, Industrial Relations and OSH Codes,” May 2026. On the annual health examination for workers aged forty and above in notified establishments, the creche welfare facility, and the position that several states are yet to finalise their state rules. Available at: https://www.bdo.in/en-gb/insights/alerts-updates/alert-final-central-rules-notified-under-all-four-labour-codes
[5] SCC Online, “Industrial Relations (Central) Rules, 2026: How India’s New Industrial Relations Regime Is Changing,” May 2026. On the Grievance Redressal Committee at twenty or more workers, its composition and ten-member cap, the thirty-day resolution timeline, and escalation to the conciliation officer within sixty days. Available at: https://www.scconline.com/blog/post/2026/05/11/industrial-relations-central-rules-2026-explained/
[6] Mondaq, “Services Sector Employment Rules Take Shape: Model Standing Orders, 2026 Under the Industrial Relations Code, 2020,” May 2026. On the three hundred worker threshold for standing orders, measured over the preceding twelve months, and the sector-specific model standing orders for mining, manufacturing, and services. Available at: https://www.mondaq.com/india/employee-rights-labour-relations/1787144/services-sector-employment-rules-take-shape-model-standing-orders-2026-under-the-industrial-relations-code-2020
[7] DLA Piper, “Key Considerations of the Notified Central Rules under India’s Labour Codes,” May 2026. On the central rules applying only where the central government is the appropriate government, with applicability varying by sector and establishment. Available at: https://knowledge.dlapiper.com/dlapiperknowledge/globalemploymentlatestdevelopments/2026/Key-considerations-of-the-notified-Central-Rules-under-Indias-Labour-Codes
