Labour Code Compliance When Your State Hasn't Notified Rules — What Every Indian Employer Must Know in 2026

Go to an HR department in India and ask, 'Has your company complied with the new labour codes?' and you’ll get one of two responses. You'll hear a confident 'yes' from those that have done the work. Or you'll get a quiet and uncertain, 'We're waiting for our state to release its rules.'

It's that second response that makes compliance consultants and labour lawyers anxious. This is because the codes and the rules are two very different things. One of them is a procedure while the other is a law. The law will come into effect on November 21, 2025 regardless of whether your state is ready.

This guide, prepared by the expert team at Praans Consultech, explains exactly what you must comply with today, what you may keep from the old framework, and the reasons for your state's delay are among the most expensive compliance oversights in 2026.

The Ground Reality: Where India Stands on Labour Code Implementation

The Codes Are in Force, Rules Are a Mixed Picture

A Landmark Day for Central Government Establishments : 8 May 2026

For Everyone Else — State Rules Are Still Awaited

The Date That Defines Your Compliance Position

The Most Important Distinction Your HR Team Needs to Understand

What You Must Comply With Right Now

What Continues on the Old Framework — And Why That's Not a Free Pass

A Practical 7-Step Compliance Roadmap for Indian Employers

10 Quick-Answer FAQs — Compliance Without State Rules

The Bottom Line — The Fog Is Not a Safe Harbour

How Praans Consultech Can Help Employers Navigate Labour Code Compliance in 2026

The Ground Reality — Where India Stands on Labour Code Implementation

The Codes Are in Force. The Rules Are a Mixed Picture.

India's four Labour Codes took legal effect on November 21, 2025:

Code on Wages, 2019 – Act No. 29 of 2019
Industrial Relations Code, 2020 – Act No. 35 of 2020
Code on Social Security, 2020 – Act No 36 of 2020
OSHW Code, 2020 – Act No 37 of 2020

The Labour Codes consolidate 29 older central labour laws, which no longer exist. The codes are now in effect.

A Landmark Day for Central Government Establishments : 8 May 2026

On May 8, 2026, the Ministry of Labour and Employment took an important step forward. The Central Government officially published the last of the rules under the Wages, Social Security, OSHW, and Industrial Relations Labour Codes.

The four Labour Codes have been implemented by the Central Government and have fully operational rules and procedures for establishments where the Central Government is the appropriate government.

If your business is in one or more of the following industries, you may say goodbye to the transitional uncertainty, as you are in fully operational code territory:

i) Banking and Insurance

ii) Telecommunications

iii) Mines and Oilfields

iv) Air Transport Services

v) Railways including Metro Rail and Major Ports

vi) Central Public Sector Undertakings (CPSUs)

For these establishments, your workforce compliance toolkit (including structures for wages and appointment letters, and inspection routines) is now operational.

For Everyone Else — State Rules Are Still Awaited

In reality, the remaining private sector employers (IT, manufacturing, retail, construction, etc) still have the State Government as the appropriate Government. Here, each of the four Labour Codes still requires separate rules to be made by every state government for proper implementation.

For instance, states like Karnataka, Maharashtra, Haryana, Gujarat, Madhya Pradesh, and Rajasthan have each framed rules for all four Codes. Most states are either in the drafting, feedback, or have yet to start the process.

This is the compliance grey area where most employers in India are. The four Codes are law. Frameworks are partially in place. In your State, what you are required to do and how to do it, is far from simple.

3: The Date That Defines Your Compliance Position

21 November 2025 became the date on which the codes became law in all the jurisdictions of the country. From this date, all employers, whether in the Centre or the States, became bound by the substantive obligations of all four codes. 8 May 2026 marked the date on which the Central Government completed the puzzle for its own establishments by publishing the final set of operational guidelines.

For employers in the States, the compliance clock has been ticking since November 2025. The operational guidelines for your State may be pending but this does not suspend your obligations under the statute.

The Most Important Distinction Your HR Team Needs to Understand

Substantive Obligations vs. Procedural Requirements — They Are Not the Same

This is the distinction that most compliance manuals either overlook or briefly explain. Not every provision of a Labour Code requires state rules to become operational. They are divided into two categories.

Substantive provisions are the rights and duties that are written in the law. They come into existence as soon as the code is operational. A court will enforce them, irrespective of whether your State has framed rules or not. Procedural provisions are the administrative mechanics, forms, timelines for filing, formats for registers, and the like that, in all likelihood, do require notified rules to be adhered to.

Knowing which is which defines your actual risk exposure right now.

What You Must Comply With Right Now — Code by Code, Section by Section

1. The 50% Wage Rule

It is mandatory for employers in all Indian states (including non-implementing states) to ensure the basic wage and dearness allowance together do not exceed 50% of the total gross remuneration. If the salary structure contains omissions that exceed the limit, the excess will be considered as wages for statutory calculations.

This isn't a new proposition. This has been part of the definition of “wages” under Section 2(y) of the Code on Wages, 2019 (Act No. 29 of 2019) and was applicable from November 21, 2025. If your payroll system has a basic pay of 25-30% of CTC, you’re already in violation of the law and bearing the penalties for it in silence.

2. Gratuity for Fixed-Term Employees

The provision was that under the old Payment of Gratuity Act; to claim gratuity, an employee had to render a minimum of five years of continuous service. The provision under the new Code on Social Security for fixed-term workers makes this provision of gratuity applicable after 1 year of their employment.

This right is given under Section 53, along with Section 2(34) of the Code on Social Security, 2020 (Act No. 36 of 2020). No state law is required to make it actionable. An employee on a fixed-term contract since November 2025 can approach a labour court today and claim gratuity even when the state’s Social Security rules are still in the pipeline.

3. Equal Wages and Benefits for Fixed-Term Workers

All fixed-term employees who perform the same job as permanent employees must be given the same pay, EPF, ESI, leave, and other legal benefits.

If a company employs fixed-term staff with the same duties as permanent employees, and the fixed-term staff are paid lower than the permanent staff, it is both illegal and unfair.

This obligation is on the company under Section 2 (O) of the Industrial Relations Code, 2020 (Act No. 35 of 2020). It will apply from the date of hiring with or without state rules.

4. Mandatory Appointment Letters for Every Worker

From an IT company to a factory, from a retail shop to a construction site, all employers have to provide all employees formal appointment letters on joining. The letters have to state the job title, salary, benefits, and any other provisions of the employment. The letters have to be provided on joining and cannot be postponed as a result of pending state rules.

Referring to Section 6 of the Occupational Safety, Health and Working Conditions Code, 2020 (Act No. 37 of 2020), if an employee reports to work for the first time without receiving an appointment letter, the law is being violated.

5. Overtime at Double the Regular Rate

Every employee is entitled to double of the normal wages as overtime if employee work beyond the normal working hours under Section 14 of the Code on Wages, 2019 (Act No. 29 of 2019). Employers who continue to pay overtime at 1.5 times or at a fixed rate, are clearly in violation.

6. Wage Settlement Within Two Working Days

The employer is required to pay wage dues to an employee exiting the employment relationship (whether by resignation, dismissal, retrenchment, or removal) within 2 working days from the date of the employment separation. This provision of the Code on Wages, 2019 (Act No. 29 of 2019), is a significant improvement over the long-standing practice (in many organizations) of clearing dues during the next pay cycle, which could involve a delay of 30 to 45 days.

This provision is in Section 17(2) of the Code on Wages, 2019 (Act No. 29 of 2019), and applies to all employers in all states, irrespective of whether that state has framed rules under the Wage Code or not.

7. Leave Entitlements and Encashment — A Major Change Most Employers Are Missing

The new labour codes have modified leave rules, and many employers are still trying to fully understand these changes. Previously, leave rules were mainly defined by the respective State Shops and Establishments Acts and the previous version of the Factories Act.

Now, for factories and establishments impacted by the OSHW Code, new leave rules apply, and many of them have already come into effect even before state-level rules are finalized. For offices, shops, and service businesses, the State Shops Act continues to apply alongside the new code.

If the State Shops Act gives better leave benefits, those higher benefits will still apply. Employers cannot reduce existing leave just because the new code has come in. In simple terms, workers will always get the better of the two benefits available under law

What Continues on the Old Framework — And Why That's Not a Free Pass

In areas where state regulations are truly lacking, the Ministry of Labour and Employment, in its press release dated November 2025, stated that during the transition period, all current laws, schemes, notifications, and standards would continue. There is some protection, and it is useful to see what it precisely protects.

State Shops and Establishments Acts were not repealed by the four codes. They continue to govern leave entitlements, working hours, establishment registration, and employee conditions in commercial setups. If your state has a Shops Act and every state, does it remain fully enforceable alongside the new codes.

Sector-specific obligations like BOCW (Building and Other Construction Workers) welfare board contributions under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 continue until replaced by OSHW Code state rules. Construction employers must keep paying welfare fund contributions, the new code does not automatically absorb this.

Employers are unlikely to be penalised for continuing previous structures in good faith where procedural ambiguity exists due to absent rules. The operative words are "good faith." Using the procedural gap as a reason to avoid restructuring wages or withholding fixed-term gratuity is not good faith, it is risk-taking with legal and financial consequences.

A Practical 7-Step Compliance Roadmap for Indian Employers

You do not need to wait for every state rule to be notified before you act. Here is what to do right now.

Step 1 — Audit every salary structure immediately. Check that all employees should not have exclusions more than 50% of the total remuneration as defined in Section 2(y) of the Code on Wages, 2019. If yes, make adjustments prior to the next payroll.

Step 2 — Map all fixed-term and contract engagements. Identify fixed-term contract employees in effect since November 2025. Gratuity accrual under Section 53 of the Code on Social Security, 2020 starts from the date of implementation of the code, i.e 21st Nov’2025.

Step 3 — Issue appointment letters to every worker. Check that all workers have appointment letters and review them. If they have improper letters, they must be issued immediately, as mandated by Section 6 of the OSHW Code, 2020.

Step 4 — Verify equal pay and benefits for fixed-term staff. Review the total remuneration for fixed-term employees. If any fixed term employee is getting pay less than the same as permanent employees for the same job , revise pay prior to the next payroll under Section 47 of the Industrial Relations Code, 2020.

Step 5 — Continue existing PF, ESI, and bonus filings using current forms. Wait for the state rules. Till the time follow the old provisions.

Step 6 — Keep your Shops and Establishments Act registration current. Review the renewal dates and check for compliance in employee count thresholds and leave policies. This act remains enforceable along with the codes.

Step 7 — Track state notifications actively. Assign a person or a compliance partner to monitor the Ministry of Labour portal (labour.gov.in) and your state gazette. State rules can be notified without significant advance notice, and the window to align can be short.

Compliance that waits for the perfect moment never happens. Praans Consultech helps businesses across India build state-specific compliance roadmaps , so you know precisely what applies to you, not just what applies generally. Get in touch with our team →

10 Quick-Answer FAQs — Compliance Without State Rules

FAQ 1: My state hasn't notified rules. Am I still legally bound to comply?

Yes. Substantive obligations under the codes, wage structure, fixed-term gratuity, appointment letters, apply from 21 November 2025, regardless of state rule status. (Code on Wages, 2019 — Act No. 29 of 2019)

FAQ 2: Can an employee sue me if my state's rules are still pending?

Yes. A right granted by a central statute is enforceable in court whether or not state rules exist. (Industrial Relations Code, 2020 — Act No. 35 of 2020; Code on Social Security, 2020 — Act No. 36 of 2020)

FAQ 3: Are old laws like the Payment of Wages Act and the Factories Act still in effect?

The central versions are repealed. However, procedural frameworks still continue during the transition. State Shops and Establishments Acts are fully in force and were not repealed by the codes.

FAQ 4: What if my Shops Act and a new code provision conflict?

Central law prevails. Where the Shops Act covers areas not addressed by the codes, it applies alongside without conflict.

FAQ 5: My state has rules under two codes but not the other two. How do I manage?

Apply old procedural forms and registers for the two codes where state rules are absent, while following the substantive obligations of all four codes. (Code on Social Security, 2020 — Act No. 36 of 2020; OSHW Code, 2020 — Act No. 37 of 2020)

FAQ 6: Is it safe to wait before changing payroll structures?

No. Waiting creates retroactive liability for PF, gratuity, and wage arrears calculated from November 2025 , not from the day your state eventually notifies rules. (Code on Wages, 2019 — Section 2(y), Act No. 29 of 2019)

FAQ 7: Does the 50% wage rule apply in the absence of state wage regulations?

Yes. It is in the statute itself. It applies nationwide from 21 November 2025. (Code on Wages, 2019 — Section 2(y), Act No. 29 of 2019)

FAQ 8: Should I continue BOCW contributions during this transition?

Yes. The contribution of the welfare fund as mandated under BOCW obligations continues as it is since OSHW Code state rules have not been formally replaced with BOCW rules. (BOCW Act, 1996 — Continues under savings clause))

FAQ 9: Is the obligation of MSMEs and Start-ups the same?

Yes. Coverage is based on employee count and establishment type, not revenue or company age. Establishments with 10 or more workers fall under the OSHW Code. (OSHW Code, 2020 — Section 2(l), Act No. 37 of 2020)

FAQ 10: How do I monitor when my state notifies its rules?

Track labour.gov.in and your state's official gazette. A compliance consultant can alert you in real time ,state notifications often arrive with very little public notice.

The Bottom Line — The Fog Is Not a Safe Harbour

The absence of state rules does not create a compliance gap you can shelter in. It creates a fog and businesses that mistake that fog for safety discover, usually at inspection or litigation, that the substantive law was enforceable all along.

The four Labour Codes draw a clear line: follow the rights and duties the statute creates, use the old procedures until the new ones are notified. That's the rule. Not "wait for everything to be notified before you do anything."

The companies that come out of this transition cleanly are already restructuring wages, issuing appointment letters, building gratuity provisions, and keeping their records in order. They are not waiting for a state government circular to tell them when compliance begins.

The expert team at Praans Consultech specialises in labour law compliance across all Indian states — from payroll restructuring under the Code on Wages to PF, ESI, and POSH compliance. We help businesses understand exactly what applies to them, in their state, for their specific establishment and we help them act on it before it becomes a problem. If you are navigating the transition to the new Labour Codes and need clear, practical guidance, speak to our team today.

Praans Consultech | Labour Law & HR Compliance Experts | India www.praansconsultech.com

Labour Code Compliance When Your State Hasn't Notified Rules — What Every Indian Employer Must Know in 2026

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