[Link] Soni Ph.D., LLB.,[Link].

[Link] | +919825463766 |drpreraksoni@[Link]

[Link].
The New Labour Codes 2025: A Comprehensive HR Leadership Guide
for Salary Structuring, Compliance, and Workforce Governance

“Prepared Exclusively for the HR Community”

Introduction: HR as the Guardian of India’s New Social Security Era
On 21 November 2025, the Government of India formally brought into effect one of the largest
labour reforms in the nation’s history by enforcing four consolidated labour statutes through
gazette notifications issued by the Ministry of Labour & Employment. These include:

 The Code on Wages, 2019

 The Industrial Relations Code, 2020
 The Code on Social Security, 2020
 The Occupational Safety, Health and Working Conditions Code, 2020

These codes were made effective through key notifications such as:

 S.O. 5319(E) – enforcing the Code on Social Security, 2020

 S.O. 5322(E) – enforcing the Code on Wages, 2019 and other codes

Collectively, they replace and consolidate 29 earlier central labour laws—some dating back
to the pre-independence era—into a unified and modern legal framework designed to enhance
worker welfare, fair wages, employment protection, social security, safety, and compliance
efficiency.

Why HR Stands at the Centre of This Reform

This shift is not merely a legal amendment; it is a transformation in how employment

relationships are governed. With these codes now in force, Human Resource departments

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become the custodians of social security and compliance. HR is no longer just a recruitment
or people-management function. It is now legally and strategically responsible for:

 Redesigning salary structures in line with the 50% Basic rule

 Formalizing and updating all employment contracts and appointment letters
 Providing universal access to PF, gratuity, and statutory welfare benefits
 Establishing policies for gig, contract, fixed-term and platform workers
 Educating employees and managing expectations and communication

🌍 A Global Alignment

These reforms align India’s employment ecosystem with global standards by shifting focus from
minimum compliance to employee protection, fairness, transparency, and financial
security, thereby elevating HR’s role to:

🛡️ Guardian of legal compliance

💰 Designer of compensation integrity
🤝 Custodian of employee welfare

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HR Responsibilities Under the New Labour Codes (Effective

21 Nov 2025)

Master List – HR Action Areas

A. Salary & Wage Structure

1. Implementation of 50% Basic + DA Rule

2. PF Contribution Restructuring & Benefit Communication
3. Gratuity Calculation for Fixed-Term Employees (after 1 year)
4. Impact on Bonus, Overtime, Leave Encashment & Allowances
5. Salary Slip Compliance & Statutory Deductions Disclosure

B. Hiring & Documentation

6. Mandatory Appointment Letters for every category of worker

7. Separate Contract Formats for:
o Fixed-term employees
o Contract workers
o Gig/platform workers
o Apprentices & trainees
8. Job Role Definitions, Working Hours, Exit & Notice Policies

C. Social Security & Employee Welfare

9. PF, Gratuity, ESI, Maternity Benefits, and Safety Compliance

10. Universal Minimum Wage & Equal Pay Governance
11. Coverage of Women in Night Shift – Safety Mandates
12. Benefits for Platform & Gig Workers (where applicable)

D. Attendance, Working Hours & Leave

13. Digital Muster Roll & Attendance Records

14. Paid Leave, Weekly Rest & Working Hours Compliance
15. Mandatory Overtime Recording & Payment Rules

E. Workplace Safety & Facilities

16. Working Conditions & Statutory Health/Safety Facilities

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17. Hygiene, Restrooms, Crèche, Canteen & Welfare Provisions
18. Women Employee Welfare & Security Requirements

F. Employee Exit, Retrenchment & Dispute Handling

19. Digital Record of Exit & Notice Enforcement

20. Reskilling Fund Contribution on Retrenchment (Industrial Relations Code)
21. Compensation Rights & Settlement Timelines

G. Compliance Governance & Reporting

22. Digital Maintenance of All Registers (Wages, Attendance, Employment)

23. Timely Wage Payment & Proof of Disbursement
24. Mandatory Display Notices & Employee Rights Disclosure
25. Internal HR Compliance Audits & Policy Upgradation

H. HR Communication & Training Responsibility

26. Employee Financial Literacy on PF/Gratuity

27. Manager Briefings to Ensure Policy Consistency
28. Policy Orientation for New Joinees
29. Awareness Programs for Contract/Gig Workers
30. Transparent Grievance Redressal Mechanism

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A. Salary & Wage Structure

1. Implementation of 50% Basic + DA Rule (The 50% Basic Salary Mandate)
Under the new Labour Codes (effective 21 Nov 2025), Basic Salary + Dearness Allowance
must be 50% or more of total CTC.

This changes how salaries are designed in India, and therefore HR must redesign compensation
across all roles.

Why this Matters for HR?

 HR can no longer keep Basic low to reduce PF or gratuity.

 Allowances can’t exceed 50% of CTC, or they must be restructured.
 All salary templates must be rewritten — even for existing employees.
 Salary inequality between workforce types will now be legally visible.

📊 Before vs After Salary Example (New Code Impact)

(Magazine Visual Box)

Component Before Code After Code

Total CTC ₹60,000 ₹60,000

Basic + DA ₹21,000 ₹30,000 (50%)

Allowances ₹32,000 🔻 ₹30,000

Employee PF (12%) ₹2,520 ⚠ ₹3,600

Employer PF (12%) ₹2,520 ₹3,600

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Component Before Code After Code

Employee Take-Home ₹49,960 🔻 ₹48,720

What This Means:

 Employers pay more toward PF & gratuity

 Employee take-home slightly decreases
 Retirement benefit grows substantially

🎯 Statutory Impact on Wage Components (Quick Analysis Box)

Component Impact Under New Codes

PF Contribution Must be calculated on revised Basic

Gratuity Higher due to bigger Basic

Bonus Eligibility Ceiling Linked to wages → more employees cover

Leave Encashment Higher due to Basic being larger

Overtime Payments Must be paid at double wages, calculated fairly

💼 HR Policy Suggestions

HR MUST UPDATE the following:

Policy Required Action

Salary Structure Policy Revise Basic:Allowances ratio

PF & Benefits Policy Clarify limits/voluntary PF for high earners

Gratuity Eligibility Include fixed-term clause

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Policy Required Action

Salary Slips Show statutory components transparently

CTC Templates Redesign for all levels of employees

👎Common HR Errors to Avoid (Magazine Warning Box)

❌ Wrong Practice 🚫 Result

Keeping Basic artificially low Illegal under new law

Using same salary template for all worker types Violates contract conditions

Hiding deductions without slip explanation Leads to disputes + litigation

Promising take-home without PF discussion Violates compliance + trust

🗣️ Employee Communication Sample (HR Script)

(For Townhalls / Emails / Offer Letter Briefing)

📢 “Your salary structure is being aligned with national labour reforms that strengthen your
lifetime security. Slight changes in take-home protect your PF and gratuity for your future —
your money grows tax-free and legally guaranteed.”

🎓 Mini Financial Literacy Box (To Educate Employees)

💡 PF is not a deduction. It’s savings you don’t spend.

It earns interest, gets tax benefits, and cannot be withdrawn by others.
It is your emergency backup + retirement pension.

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2: Provident Fund & Retirement Security

🎯 HR as a Financial Educator under the New Labour Codes

Why PF Becomes HR’s Responsibility Now

Under the new salary structure (Basic = 50% of CTC), PF amounts increase automatically.
Employees generally see this as a loss in take-home salary, unless HR educates them as a
financial partner, not a policy enforcer.

🌟 HR’s New Strategic Role:

✔ Explain the value of PF as government-protected wealth

✔ Convert employees’ perception from “deduction” to “investment”
✔ Provide real examples, savings projections & compounding benefits
✔ Ensure clarity in salary slips, CTC design & joining briefings

📊 PF Growth Comparison Chart

(Assuming 12% employer + 12% employee on revised Basic)

📌 PF Interest Approx.: 8% annual compounding

Example Employee:

 CTC: ₹6,00,000 per year

 Old Basic (35%): ₹17,500/month
 New Basic (50%): ₹25,000/month

💸 Monthly PF Contribution

Scenario Employee PF (12%) Employer PF (12%) Total PF

Before New Codes ₹2,100 ₹2,100 ₹4,200

After New Codes ₹3,000 ₹3,000 ₹6,000

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📈 PF Wealth Over 20 Years

Calculation Basis Total Wealth After 20 Years

Old PF (₹4,200/month) ₹24.5 Lakhs

New PF (₹6,000/month) ₹35.3 Lakhs

📌 Extra Lifetime Benefit ⚡ ₹10.8 Lakhs More

💡 HR MUST explain this during hiring, salary restructuring, induction & appraisal discussions.

👤 Realistic HR Case Examples

Case 1 — Employee Complains About Low Take-Home

Complaint:

“My salary reduced because PF increased. Who asked for PF? I need money now.”

HR Response (Approved Script):

“Your PF is your savings, not the company’s deduction. The same money returns to you with
interest, tax benefits and legal protection. In 20 years, your PF could earn you over ₹10 lakh
more just because of this reform. It’s your money growing for you.”

Case 2 — High Salary Employee Wants PF Removed

Employee: “I earn good salary. Why force PF on me? Can’t I opt out?”

HR Response:

“Once an employee is registered under PF, it becomes a lifelong statutory benefit unless the
company chooses a voluntary higher PF policy. For high-salary employees, we can either restrict
PF to the statutory limit (₹15,000 wage ceiling) or continue full PF. The company policy must be
applied uniformly and transparently.”

HR must maintain written policy to avoid legal disputes.

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Case 3 — Contract Employee Wants PF to Increase Take-Home

🌐 Fixed-term employee on 1-year contract

Employee:

“Why PF for a one-year contract? I don’t need it.”

HR Response:

“Under the new labour codes, every worker is eligible for statutory benefits — including PF and
even gratuity after one year. This protects you not only today, but also builds money for future
security. Your PF remains safe even if you change jobs.”

📌 HR must ensure PF portability explanation.

🧑💼 HR Communication Toolkit (Scripts + FAQs)

📌 Use during offer letter sign-off, induction, town-hall, salary restructure

🎤 Recommended HR Script

“Your PF is a government-guaranteed wealth plan with compounding returns and tax benefits. It
protects your long-term goals like education, emergency needs, housing, and retirement.
Increasing PF doesn’t reduce salary — it increases your financial future.”

Employee FAQs — HR Ready Answers

Employee Question HR Answer

PF ensures savings protected by law, accumulating +

Why is PF mandatory?
interest.

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Employee Question HR Answer

Only if never registered previously. Once registered, it

Can I opt out of PF?
continues.

Does PF reduce my net salary? Slightly now, but it increases retirement wealth.

Who contributes to my PF? Both employer and employee contribute equally.

What if I change jobs? PF is portable. It carries forward to your next job.

Yes, under illness, unemployment, marriage, education,

Can PF be withdrawn early?
housing, etc.

Will PF apply if I am on a 1-year

Yes. It is a legal social security right.
contract?

🧑 HR Leadership Tip

❗ Do not treat PF communication as a formality.

A well-explained benefit reduces attrition, increases trust, and prevents disputes.

Excellent. I will now prepare Chapter 3 in full magazine-style, combining both:

✔ Cost Tables + Gratuity Formula Examples

✔ HR Contract Clauses + Policy Drafts

3: Gratuity for Fixed-Term Employees (One-Year Eligibility)

🔐 How HR Must Rebuild Hiring, Contracts, and Budgets Under the New Labour
Codes

What Has Changed?

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Under the New Labour Codes (effective 21 Nov 2025), fixed-term employees become eligible
for gratuity after just 1 year, unlike the earlier requirement of 5 years for permanent
employees.

🏛 Previous Framework vs New Rule

Category Old Rule New Labour Code Rule

Permanent Employee Gratuity after 5 years Gratuity after 5 years

Fixed-Term Contract ❌ No gratuity Gratuity payable after 1 year

Trainee/Apprentice Case-based If fixed-term with wages → eligible

Takeaway for HR: Short-term hiring now carries long-term cost liability.

💰 How to Calculate Gratuity for 1-Year Contracts

Gratuity Formula (unchanged under new codes):

Gratuity = (Basic + DA) × 15/26 × No. of Years of Service

Example Calculation

🧑💻 Employee: Fixed-Term Website Developer (1 year contract)

Monthly Basic + DA (50% rule): ₹30,000

Gratuity = 30,000 × 15/26 × 1 = ₹17,307

👉 This must be budgeted at hiring stage.

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📊 Real HR Cost Impact Table (Fixed-Term Hiring)

Role Annual CTC Basic (50%) Gratuity After 1 Year

Sales Executive ₹3,00,000 ₹1,50,000 ₹8,654

Designer ₹4,20,000 ₹2,10,000 ₹12,125

Software Developer ₹6,00,000 ₹3,00,000 ₹17,307

HR Recruiter (FTC) ₹5,40,000 ₹2,70,000 ₹15,577

HR must add this to hiring cost sheets and ROI analysis.

🏗️ HR Budget Rule (New)

While planning contractual hiring, HR must calculate:

CTC + Statutory Benefit Cost (PF + Gratuity) + Training/Technology Cost

Failure to provision gratuity can result in:

 ❌ Incorrect CTC discussion with management

 ❌ Employee disputes at exit
 ❌ ARREAR liability during audit

👉 Budgeting must be legal + transparent.

📄 HR Contract Clauses for Fixed-Term Gratuity

Clause for Appointment Letter

“As a fixed-term employee, you shall be eligible for gratuity under the Payment of Gratuity
provisions of the Labour Codes 2025, upon completion of one year of continuous service,
calculated on the basis of your Basic Wages and Dearness Allowance.”

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Clause for CTC Statement

“The cost of statutory benefits, including Provident Fund and gratuity applicable on
completion of one year, shall form part of the employer’s obligation and shall be treated
separately from wages.”

Clause for Early Termination

“If employment terminates before completion of one year, no gratuity shall be payable.
However, if employment extends to one year or beyond, gratuity shall accrue in accordance
with law.”

Purpose: Protects employer legally without denying rights.

📝 Company Gratuity Policy Draft (For HR Manual)

Gratuity for Fixed-Term Employees

As per the Labour Codes 2025, gratuity shall be payable to a fixed-term employee who

completes a minimum period of one year of continuous service. The gratuity shall be

calculated as per statutory formula based on Basic Wages and Dearness Allowance.

Gratuity cost shall be provisioned in the HR budget and shall not be recovered or adjusted

from employee compensation. This benefit shall apply irrespective of contract tenure,

provided the employee completes one year of service under the fixed-term arrangement.

In case of consecutive fixed-term extensions, such service shall be treated as continuous and

eligible for cumulative gratuity entitlement.

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HR Mistakes to Avoid (Magazine Highlight Box)

❌ Mistake 🔐 Risk

Not provisioning gratuity for FTC employees Future financial liability

Same contract for permanent & fixed-term Legal violation

Not informing candidate during hiring Claim disputes at exit

Not updating manpower cost sheets CTC miscalculation

Outsourcing FTC hiring without compliance Joint liability to company

🧑 HR Strategy Insight

💡 Fixed-term hiring is beneficial ONLY when HR calculates full statutory compliance and
communicates transparently.
It works best for:
✔ Project roles
✔ Seasonal business peak

✔ Tech or creative contracts

✔ Maternity or role-replacement contracts

Chapter 4: Mandatory Appointment Letters & Workforce-Type Policies

🔐 Templates for 6 Worker Categories + HR Guidelines for Enforcement

Under the New Labour Codes (effective 21 Nov 2025), appointment letters are compulsory
for EVERY worker, regardless of tenure, type, or nature of work.

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📌 This includes:

 Permanent Employees
 Fixed-Term Contract Workers
 Contract (Outsourced) Employees
 Gig / Platform Workers
 Apprentices
 Interns / Trainees (Paid or Stipend)

HR must use tailored templates, as benefits differ per category.

TEMPLATE 1 — Permanent Employee Appointment Letter (Extract)

📎 Key Clauses to Include:

Nature of Role:
You are appointed as a Permanent Full-Time Employee with continuous employment until
separation as per policies.

Benefits Eligibility:
You shall be covered under statutory benefits including Provident Fund, Gratuity (after 5 years),
Paid Leave, Medical Benefits (as applicable), Bonus (if applicable), ESI (if applicable), and
Maternity Benefits.

Working Hours & Overtime:

Working hours shall follow statutory norms. Overtime, if applicable, will be paid at twice the
wage rate as per the Occupational Safety, Health & Working Conditions Code, 2020.

HR Note: Always attach a salary structure with Basic ≥ 50% of CTC.

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TEMPLATE 2 — Fixed-Term Contract Employee (1-Year Gratuity Clause Included)

Nature of Engagement:
You are appointed as a Fixed-Term Employee for a period of [12 months], and your tenure will
automatically end on the completion date unless extended in writing.

Gratuity Eligibility:
As per the Labour Codes 2025, you shall be eligible for gratuity on completion of one year of
continuous service.

Benefits:
You shall be eligible for statutory benefits including PF, ESI (as applicable), and Gratuity.
You will be entitled to leave benefits at par with permanent employees.

Termination:
The contract will automatically cease without notice on expiry. Early termination, if any, shall
follow statutory compensation norms.

HR Note: This is legally different from “contract workers hired through vendors”.

TEMPLATE 3 — Contract / Outsourced Worker (Vendor-Based)

Nature of Engagement:
The individual shall be employed by [Contractor Firm Name] and deployed to work at [Client
Company]. The individual shall remain an employee of the contractor.

Statutory Benefits:
PF, ESI, Gratuity (if applicable) and other statutory dues shall be payable by the contractor.

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Compliance Accountability:
The Contractor shall provide evidence of statutory contributions monthly. The Client reserves
the right to withhold payment if such compliance is not demonstrated.

HR Note: Dual liability exists → Company must demand proofs (PF/ESI).

TEMPLATE 4 — Gig / Platform Worker Engagement

Nature of Work:
You are engaged as a Gig/Platform Worker on assignment-based remuneration. This is not an
employment contract.

Payment Terms:
Remuneration shall be paid per task/assignment completed as per predefined rates.

Benefits:
You may be eligible for social security schemes under state or central government (as applicable
to gig/platform workers), but not for employer-provided benefits unless mutually agreed.

No Employer–Employee Relationship:
This engagement does not qualify you as a permanent or fixed-term employee of the company.

HR Note: This avoids claims for PF/gratuity later.

TEMPLATE 5 — Apprentice (Under Apprentices Act / Skill Development)

Purpose:
Engagement is strictly for training and skill development under the Apprenticeship norms.

Stipend:
A stipend will be paid as per norms, and no employer–employee benefits such as PF or gratuity
shall apply.

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No Guarantee of Employment:
Completion of apprenticeship does not guarantee permanent employment.

HR Note: If salary is paid like employee + duties like employees → they may be treated as
employees. Be careful.

TEMPLATE 6 — Intern / Trainee (Stipend or Academic Program)

Non-Employment Training:
This internship/traineeship is for learning and exposure, and does not constitute employment.

Stipend (If applicable):

Stipend may be paid for expenses and shall not be considered salary.

No Benefits:
PF, ESI, Gratuity and leave benefits shall not apply unless internship converts to employment.

HR Note: If interns receive wages, PF law can apply. Use word “stipend” only, not “salary.”

⚠ HR Compliance & Dispute Avoidance Rules

💡 Quick Table for HR Reference

Worker Type PF Gratuity Bonus Leave Termination Notice

Permanent Yes After 5 yrs Yes Yes Mandatory

Not needed at end of

Fixed-Term Yes After 1 yr Yes Yes
contract

Contract Contractor
Contractor Contractor Contractor Contractor
(Vendor) pays

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Worker Type PF Gratuity Bonus Leave Termination Notice

Gig Worker Not mandatory No No No None
Apprentice No (stipend) No No No None
Intern/Trainee No (stipend) No No No None

PF applies if stipend becomes wage (don’t mix terms!)

Fixed-term employees get equal benefits — except notice at contract expiry.

🧑 HR Strategy to Prevent Court Claims

Risk HR Prevention Method

FTC claims permanent benefits later Use expiry clauses + separate template

Contract worker sues company Maintain PF/ESI proof from vendor

Interns/trainees claim PF Use “stiped” contract + no job duties like worker

Gig worker demands employment Use work-for-fee contract + no fixed hours

Apprentices claim permanency Attach training syllabus + no measurable KPIs

5: Minimum Wages, Working Hours, Overtime & Mandatory Leave

HR Rules, Calculations, Registers & Legal Requirements Under New Labour Codes

The New Labour Codes ensure uniform wages, humane working hours, and transparent
leave systems. For HR, this chapter is not optional—it defines day-to-day operations and
payroll compliance.

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I. Minimum Wages: HR Must Apply Uniform Pay Standards

📌 Key Principle

▶ National Floor Wage + State Wage Categories → HR must comply with whichever is
higher.

💼 HR Responsibilities

HR Requirement Action

Categorize employees Skilled, Semi-skilled, Unskilled

Apply location rules If multiple states, follow state rules

Vendor/contract staffing HR must verify contractor wage compliance

Annual revision Update payroll annually after govt. notifications

Contract workers cannot be paid less than company employees for similar roles.

⏱ II. Working Hours & Weekly Rest (Mandatory)

🕒 Standard Rules

Category Working Hours

Daily Limit 8 hours

Weekly Limit 48 hours

Mandatory Break 🕧 Half-hour for every 5 hours

Weekly Off 🛑 At least 1 day (Sunday/not fixed)

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⚠ HR Compliance Warning

No forced overtime without written consent + wage register entry.

💸 III. Overtime: Calculation Rules & HR Example

📌 Legal Requirement

Overtime must be paid at TWICE the rate of wages.

📊 Example Calculation

👉 Employee Monthly Basic + DA = ₹20,000

👉 Daily Wage = ₹20,000 ÷ 26 = ₹769.23
👉 Hourly Wage = ₹769.23 ÷ 8 = ₹96.15

💰 OT per Hour Pay = 2 × ₹96.15 = ₹192.30

📌 If employee works 12 OT hours in a month:

12 × 192.30 = ₹2,307.60

📋 HR Format: Overtime Consent Clause

“The employee may perform overtime work only with prior written approval, and compensation
shall be paid at twice the wage rate as mandated by the Labour Codes 2025.”

📌 OT cannot be compensated with leave unless legally allowed + written consent.

🗂 IV. Leave Rules & Encashment Compliance

📌 Minimum Leave Entitlement

Leave Type Entitlement HR Rule

Earned/Privilege Leave 1 day for every 20 days worked Carry forward allowed

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Leave Type Entitlement HR Rule

Sick Leave 10–12 days As per state rules

Casual Leave 6–12 days Policy must specify

Maternity Leave 26 weeks Mandatory

Compensatory Leave For OT work Register entry mandatory

Leave encashment must be based on Basic + DA (50% rule increases value).

Leave Encashment Example

👉 Basic + DA = ₹25,000
👉 Daily Wage = 25,000 ÷ 26 = ₹961.54

If employee encashes 6 days leave:

6 × 961.54 = ₹5,769.24

📌 HR must add this to full & final settlement.

V. Workplace Welfare & Mandatory Facilities (HR MUST IMPLEMENT)

Facility Requirement

Drinking water Safe & accessible

Washrooms Separate for men & women

First Aid Box Trained staff

Creche Facility If 50+ women employees

Canteen Based on threshold of headcount

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Facility Requirement

Safety records Mandatory in case of hazardous processes

🛑 Failure = heavy penalties + closure risk + litigation.

👩💼 Special Rules for Women Employees & Night Shifts

Night shift allowed only if:

✔ Written consent

✔ Safe workplace access/exit

✔ Company-arranged transport
✔ GPS tracking for vehicles

✔ Presence of female security/care staff

✔ Functioning CCTV in area

✔ No assignment in isolated areas

Penalty risk if ANY condition missing.

📑 HR Registers: Mandatory (Preferably Digital)

Register Purpose

Attendance/Muster Roll Daily presence

Wage Register Salary & deductions

OT Register Double wage proof

Leave Register Accrual & encashment

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Register Purpose

Accident Register Workplace incidents

Inspector Visit Register Compliance proof

Digital registers + e-signatures best practice to avoid tampering disputes.

🧑 HR Strategic Note

The law is no longer about “salary only.” Compliance now includes dignity, safety, rest,
leave, and fairness. Workers are not human resources; they are human rights holders.

:::THANK YOU:::

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