India’s New Labour Codes Set for April 1 Implementation

The Government of India is reportedly finalizing preparations to implement the four long-awaited Labour Codes—covering Wages, Social Security, Industrial Relations, and Occupational Safety—starting April 1, 2026.

This landmark transition aims to consolidate 29 existing central labour laws into a streamlined legal framework, marking the most significant overhaul of India’s employment regulations since independence.

Labour Codes: The “Take-Home Pay” and Wage Restructuring

The most critical change lies in the new definition of “wages.”

The codes mandate that basic pay must constitute at least 50% of an employee’s total remuneration.

For many private-sector employees whose salary structures are currently heavy on allowances, this will necessitate a restructuring.

While this move will increase the statutory contributions to the Provident Fund (PF) and Gratuity—thereby boosting long-term retirement benefits—it is expected to result in a reduction in monthly take-home salaries.

Working Hours and Operational Flexibility

The new framework introduces flexibility in working hours, potentially allowing for a four-day work week.

However, the total weekly limit remains capped at 48 hours, meaning employees on a four-day schedule would work 12-hour shifts.

Additionally, the codes standardize leave policies, allowing employees to carry forward unused leaves and making them eligible for leave encashment after just 180 days of service, down from the current one-year requirement.

Labour Codes: Social Security and Gig Workers

For the first time, the legal framework expands social security benefits to the “informal” sector, specifically targeting gig and platform workers.

Companies in the e-commerce and delivery space will be required to contribute to a social security fund.

This ensures that millions of non-traditional workers gain access to health and disability insurance.

Corporate Impact and Compliance

Industry experts suggest that the April 1 rollout is timed to align with the new financial year. This alignment gives HR departments a clear window for compliance.

However, the transition presents a massive accounting challenge.

Companies must re-evaluate their balance sheets to account for increased gratuity liabilities and “Past Service Costs.”

These changes are mandated by the ICAI and recent accounting clarifications.

Note: We are also on WhatsApp, LinkedIn, and YouTube to get the latest news updates. Subscribe to our Channels. WhatsApp– Click Here, YouTube – Click Here, and LinkedIn– Click Here.