Labour Codes 2025: What Changes for Attendance, Salary Structure and Payroll

The Four Codes and the 21 November 2025 Switch

Four codes replace 29 central labour laws: 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. They were passed by Parliament between 2019 and 2020 but sat unimplemented for five years while the Centre and states drafted rules. The central government brought all four into force on 21 November 2025.

Implementation is not a single switch. The Codes are in force, but final central rules and many state rules are still being notified, and the older Acts continue to operate for matters not yet covered by rules. In practice, an HR team in September 2026 is working under the Codes for the definitions and thresholds the Codes fix directly, while still following, for example, the Factories Act daily-hours benchmark until the appropriate government notifies daily limits under the OSH Code. Anyone who tells you 'the old Acts are gone' or 'nothing has changed' is wrong in both directions.

The practical approach is to treat the Codes as your target architecture and track two things: which provisions are self-executing (definitions, contribution logic, overtime rate) and which depend on rules you must watch for from your state labour department. This article works through the changes that hit attendance and payroll first.

• Code on Wages, IR Code, Code on Social Security and OSH Code came into effect on 21 November 2025
• Final central and state rules are still being notified; old Acts fill the gaps
• Definitions and rates in the Codes apply now; hour limits and forms depend on rules
• Track your state labour department's notifications, not just central ones

The Uniform 'Wages' Definition and the 50% Rule

The biggest payroll change is one definition. All four Codes use the same meaning of 'wages': basic pay, dearness allowance and retaining allowance, with specific exclusions such as HRA, conveyance, overtime, bonus, commission and employer PF contribution. Then comes the clause that reshapes CTC design: if the excluded components add up to more than 50% of total remuneration, the excess is added back and treated as wages. In effect, wages can never be less than half of total pay.

Take a housekeeping supervisor on ₹40,000 gross: basic ₹15,000, HRA ₹12,000, special allowance ₹13,000. Excluded components are ₹25,000, which is 62.5% of the total. The excess over 50% is ₹5,000, so wages for the Codes become ₹20,000, not ₹15,000. PF at 12% is now computed on ₹20,000, giving ₹2,400 instead of ₹1,800 for both employee and employer. Gratuity, which uses the same wage base, rises in step: at ten years of service the formula gives ₹20,000 × 15/26 × 10 = ₹1,15,385 against ₹86,538 on the old basic.

The employee's take-home falls because their PF deduction rises, while the employer's cost rises through the matching contribution and higher gratuity provision. Companies that kept basic artificially low to minimise PF have the most to restructure. Note also the 17 September 2026 EPF wage ceiling increase to ₹25,000, which compounds the effect for employees whose wages now land between ₹15,000 and ₹25,000. Read the wages definition and the 50% rule and the Code on Wages glossary entries for the definitional text, and salary structure components in India for how to redesign the structure.

• Wages = basic + DA + retaining allowance, with excluded allowances capped at 50% of total pay
• Excess above 50% is added back, raising the base for PF, gratuity and other wage-linked dues
• Expect higher PF deductions (lower take-home) and higher employer cost on low-basic structures
• The new ₹25,000 EPF ceiling from 17 September 2026 amplifies the effect

Working Hours, Overtime at Double Rate and Consent

The OSH Code sets the weekly cap at 48 hours and leaves daily hours to be notified by the appropriate government, within a range that allows a longer day (up to 12 hours including intervals) compressed into fewer working days. Until your state notifies its daily limit under the Code, the Factories Act benchmark of 9 hours a day with a 10.5-hour spread-over remains the safe operating rule for factories, and your state's Shops and Establishments Act for offices, shops and service sites.

Overtime is now uniformly payable at not less than twice the ordinary rate of wages, and, importantly, the Codes require the worker's consent for overtime. That has an attendance consequence: a punch record showing 11 hours on site is no longer enough. You need evidence that the extra hours were agreed, not simply that the person was present. Agencies that roster guards on 12-hour posts should treat the 4 hours beyond a notified 8-hour day as consented overtime with a record of that consent, unless their state has notified a 12-hour day under the Code.

Compute the hourly rate the way inspectors expect: monthly wages ÷ 26 ÷ 8, then double it for overtime hours. A guard on ₹18,000 monthly wages has a daily rate of ₹692.31 and an hourly rate of ₹86.54; each overtime hour is ₹173.08. See overtime calculation formula under Indian labour law for edge cases like weekly-off work, and working hours as per labour law in India for the hour limits by establishment type.

• 48-hour week is the cap; daily limits (8–12 hours) await state notification under the OSH Code
• Overtime at not less than 2x ordinary wages, with the worker's consent
• Keep a consent record alongside the attendance record for every overtime hour
• Hourly rate for OT = monthly wages ÷ 26 ÷ 8, then doubled

Registers, Returns and Records Go Electronic

The Codes are built around a single registration, a single licence and a consolidated set of registers and returns, maintained electronically where rules allow. The intent is to replace the dozens of state-specific forms (muster roll, wage register, overtime register, fines register, damage-or-loss register, advances register) with a smaller set of common electronic registers and a single annual return under each Code.

For attendance and payroll this means the record you keep must be capable of producing those registers on demand. A paper register at the gate and an Excel salary sheet in the office cannot be reconciled into a single electronic return without manual re-keying, which is where inspection findings come from. The register data model also changes slightly: wage registers must show the wage-code definition of wages separately from other earnings, so the 50% computation has to be visible in the record, not just applied silently in the PF calculation.

Digital attendance systems already produce most of this. In Attend Mitra, daily attendance from GPS, face or kiosk check-ins rolls into a muster roll view and a monthly salary register export, with overtime hours and approvals kept as separate columns with an audit trail. That gives you the electronic register in the shape the Codes anticipate, while the formal forms are finalised by your state.

• Expect consolidated electronic registers and single returns per Code as rules are notified
• Attendance, overtime, wages and deductions must reconcile in one dataset
• Show Code-defined 'wages' separately from other earnings in the wage register
• Keep approval and edit trails; electronic records are only as strong as their audit log

Fixed-Term Employees, Gratuity and Mandatory Appointment Letters

The IR Code and the Code on Social Security formally recognise fixed-term employment. A fixed-term employee is entitled to the same wages, hours, allowances and statutory benefits as a permanent employee doing the same work, and, as provided in the Code on Social Security, becomes eligible for gratuity on a pro-rata basis at the end of a fixed-term contract of one year, without the five-year continuous-service requirement that otherwise applies under the Payment of Gratuity Act. Rules on the exact computation are still being finalised, so provision for it now and confirm the mechanics when your state notifies its rules.

This changes the economics of project-based hiring in construction, events and staffing. An eleven-month contract renewed indefinitely to avoid benefits is exactly what the provision is aimed at. If you rely on fixed-term staff, build gratuity accrual into the cost of each contract and keep exact start and end dates in the employee master, because eligibility now turns on the contract term rather than a five-year threshold.

The Code on Wages also makes a written appointment letter mandatory for every employee, in the form to be prescribed by rules. Many SMEs, especially security agencies and facility management firms, have historically onboarded guards and housekeepers with a form and an ID card but no letter. That gap must close. Store the letter against the employee record so it can be produced at inspection.

• Fixed-term employees get parity in wages and benefits with permanent staff
• Pro-rata gratuity after one year of fixed-term service, per the Code on Social Security; watch state rules for computation
• Track precise contract start and end dates; eligibility follows the term
• Issue and file a written appointment letter for every employee, including contract and site staff

Women on Night Shifts: Consent and Safeguards

The OSH Code permits women to work before 6 a.m. and after 7 p.m. in all establishments, subject to their consent and to safety conditions prescribed by the appropriate government. This replaces a patchwork of state exemptions that hospitals, BPOs and IT/ITeS units used to operate under. The conditions typically cover transport to and from the workplace, adequate lighting and security at the site, minimum numbers of women on a shift and a complaints mechanism.

For rostering this means two things. Consent must be recorded before a woman is placed on a night roster, not assumed from a job description. And the roster itself should be able to show that the safeguards were in place: a transport log, a supervisor on duty and, where the state requires it, a minimum group size. Rostering a single female guard alone at a night post without transport is an inspection finding waiting to happen.

• Night work by women is allowed with consent and state-prescribed safeguards under the OSH Code
• Record consent in writing before rostering; make it revocable
• Provide transport, lighting, security and grievance channels as your state specifies
• Keep the roster and safeguards evidence together for inspection

What HR Must Do Now: A Working List

Start with the CTC audit. List every employee whose basic plus DA is under 50% of total remuneration, compute the add-back, and model the change in PF, gratuity provision and take-home. Decide whether to restructure by raising basic, folding allowances, or leaving structures alone and absorbing the cost. Communicate the take-home change to employees before the first affected payslip, because a silent drop in net pay generates the most grievances.

Then update attendance rules. Overtime needs a consent flag, not just a threshold. Shifts longer than the notified daily limit need to be reviewed. Break rules and weekly-off patterns should be tested against 48 hours a week. Move any remaining paper registers into a system that can produce electronic registers, and tag each employee with a contract type and dates so fixed-term gratuity can be provisioned. Finally, assign someone to read your state labour department notifications monthly; the daily hours, forms and return dates that matter most to operations are coming from there, not from Delhi.

• Audit CTC structures against the 50% rule and model PF, gratuity and take-home changes
• Add overtime consent to attendance and shift approval workflows
• Test rosters for the 48-hour weekly cap and your state's daily limit once notified
• Issue appointment letters, record women's night-shift consent and tag fixed-term contracts
• Replace paper registers with an electronic record that produces the consolidated forms