The Labour Codes Came Into Force in November 2025. Is Your Offer Letter Updated?

What are the four Labour Codes and what did they replace?

The Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 together replaced twenty-nine central Acts. The consolidation was substantial rather than cosmetic: definitions changed, thresholds moved, and obligations that previously sat in separate statutes now sit together. The table shows where the best-known old Acts went.

Do I now have a right to an appointment letter?

Section 6(1)(f) of the Occupational Safety, Health and Working Conditions Code, 2020 requires an employer to issue a letter of appointment to every employee on joining, in the form prescribed by the appropriate Government. The Code applies to establishments that meet its thresholds, generally ten or more workers, with separate thresholds for factories and some other categories, so a very small business may fall outside it.

For a large part of the Indian workforce this was previously a matter of practice rather than obligation, and plenty of engagements ran on an offer letter and nothing further, or on nothing written at all. For employers it is the most immediate compliance item, because it applies across the workforce rather than to a category. For employees, the absence of a proper appointment letter is now a gap against a statutory requirement rather than untidy administration.

Fixed-term employees: gratuity after one year

The Industrial Relations Code, 2020 defines fixed-term employment in Section 2(o) and provides that a fixed-term employee is entitled to the same hours, wages, allowances and other benefits as a permanent worker doing the same or similar work, and becomes eligible for gratuity on rendering one year of service under the contract. Section 53 of the Code on Social Security, 2020 removes the five-year condition when a fixed-term engagement expires and provides for pro-rata payment. Commentators have noted that the two Codes are not perfectly aligned, so watch for State rules and guidance.

The practical consequence for contracts is specific. Templates drafted before the change often state that gratuity accrues after five years of continuous service under the Payment of Gratuity Act. Applied to a fixed-term employee, that statement no longer reflects the position. It is one of the clearest examples of a clause that is not merely outdated in style but wrong on its face.

For a sense of scale: gratuity is conventionally calculated at fifteen days' wages for each completed year, using last drawn monthly wages multiplied by 15 and divided by 26. A fixed-term employee whose wages are ₹52,000 a month and whose one-year contract expires would receive about ₹30,000 under that formula, where the old five-year reading would have given nothing.

The uniform wage definition

Section 2(y) of the Code on Wages, 2019 introduced a single definition of wages that the Codes use across labour law. Wages include basic pay, dearness allowance and retaining allowance, and exclude listed items such as house rent allowance, conveyance and overtime. The key rule is in the proviso: if the excluded payments exceed one-half of total remuneration, or such other percentage as the Central Government notifies, the excess is added back and treated as wages.

Indian CTC structures have historically used a small basic and a large allowance component, which reduced the base for gratuity and other calculations. Under the new definition, a structure where basic pay is, say, 25 per cent of remuneration and the rest is excluded allowances will usually see part of those allowances counted as wages for statutory purposes. How that plays out for provident fund, where many employers contribute on a capped wage, depends on the scheme and the employer's practice, so check the numbers for your own structure.

A simple illustration: Meera's monthly remuneration is ₹1,00,000, of which basic pay is ₹30,000 and ₹70,000 is paid as allowances the Code excludes. Half of her remuneration is ₹50,000, so the excluded portion is ₹20,000 over the limit. That ₹20,000 is added back, and her wages for statutory purposes become ₹50,000 rather than ₹30,000. Real structures are messier, because some allowances may not fall within the exclusions at all, but the direction is clear.

Other changes your offer letter may get wrong

• Final dues: Section 17(2) of the Code on Wages, 2019 requires wages to be paid within two working days of removal, dismissal, retrenchment or resignation. A clause promising full and final settlement in 45 or 60 days deserves a second look.
• Leave: the OSH Code sets entitlement to annual leave with wages after 180 days of work in a calendar year for covered workers, down from 240 days under the Factories Act.
• Women at night: the OSH Code allows women to work night shifts with their consent, subject to safety conditions the appropriate Government prescribes.
• Equal pay: the Code on Wages prohibits discrimination on the ground of gender in wages for the same or similar work.
• Gig and platform workers: the Code on Social Security, 2020 recognises them as separate categories, which matters if your business engages delivery partners or drivers through an app.

Where do the rules stand in 2026?

The Codes leave a great deal of detail to rules made by the Central Government and by each State. The Central Government published draft rules in December 2025 and notified final Central rules under the four Codes in May 2026. State rules vary: some States have notified final rules under all four Codes, some have notified rules under only some of them, and others are still at draft stage.

For anything regulated by a State, such as most shops, offices and private establishments, the prescribed forms and some thresholds depend on that State's rules. Transitional provisions have kept many existing rules and notifications operating to the extent they are consistent with the Codes until replaced. The honest position is that the Codes are settled law, while some of the detail still depends on where you work. Check your State's current notification rather than relying on a national template.

This matters most for forms, registers, thresholds and procedures, which are exactly the details offer letters and appointment letters tend to touch. A letter that is correct on the Codes themselves can still use a form that your State has since replaced, so the template review should be repeated whenever your State notifies final rules.

What is not covered by the Codes?

One point is frequently misunderstood. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, generally called the POSH Act, was not subsumed by the Codes and continues as a standalone statute. Workplaces with ten or more employees still need an Internal Committee and a policy.

The Rights of Persons with Disabilities Act, 2016 and the Apprentices Act, 1961 similarly stand on their own, as do State Shops and Establishments Acts in most States. Consolidation of twenty-nine central Acts does not mean everything is now in one place.

What should employers do first?

Start with an inventory rather than a redraft. List every type of engagement you use: permanent staff, fixed-term staff, interns, consultants, staff supplied through contractors and any gig or platform arrangements. For each, identify the template in use, the State where the work is done, and whether that State has final rules under the relevant Code.

Then fix the documents in order of risk. Issue appointment letters where none exist, correct gratuity wording for fixed-term staff, check salary structures against the wage definition, and align the full and final settlement process with the two-working-day timeline. Update payroll and provisioning at the same time, because a correct letter and an old payroll calculation will produce disputes. Employers preparing for funding or acquisition should expect investors to ask about all of this in diligence.

A ten-minute check on your own offer letter

• Search for the old Act names in the table above. Any hit means the template predates the Codes.
• If you are fixed-term, check whether the gratuity clause still says five years.
• Work out basic pay as a share of total fixed pay. If it is well under half, expect statutory calculations to use a higher base.
• Check the timeline promised for full and final settlement against the two-working-day rule.
• Confirm you will receive a letter of appointment, not only an offer letter.
• For employers, check which of your States have final rules and update one template per engagement type.