Quick Answer
India is consolidating 44 central labour laws into 4 Labour Codes. The Codes are enacted but not fully in force states must notify their own rules before each Code applies. Until then, the original 44 laws continue to operate. Manufacturing companies must track and comply with both frameworks simultaneously.
India’s 44 central labour laws are being consolidated into 4 Labour Codes the most significant labour law reform the country has seen in decades. The Codes are enacted. But they are not fully operational. Each state must notify its own rules before a Code takes effect in that jurisdiction. Until that happens, the original 44 laws remain in force. For HR heads, plant managers, and compliance officers at manufacturing companies in Coimbatore, Chennai, Hyderabad, and beyond, the practical challenge is clear: you must comply with existing law while preparing for the transition.
This post explains each of the 4 Labour Codes, what has changed for manufacturers, and what you need to do right now. For a broader overview of the legal framework governing Indian manufacturing, see our Legal Guide for Manufacturing Companies in India.
Status of the 4 Labour Codes: What Applies Now (2026)?
The table below summarizes where each Code stands as of 2026.
Code | Enacted | State Rules Status | Current Position |
Code on Wages, 2019 | Yes | Most major states notified | Partially in force in some states |
Industrial Relations Code, 2020 | Yes | Many states notified | Transitional – check your state |
Social Security Code, 2020 | Yes | Several states notified | Partially operational |
OSH Code, 2020 | Yes | Fewer states notified | Factories Act still governs most states |
The key takeaway: do not assume that the Codes have replaced existing law in your state. Verify the notification status for each state where you operate before adjusting your compliance framework.
Code on Wages, 2019: Key Changes for Manufacturers
What is the Universal Minimum Wage under the Code on Wages?
The Code on Wages, 2019 introduces a universal minimum wage floor that applies to all workers in all sectors, regardless of whether they are covered by a scheduled employment or not. Under the previous framework, minimum wage protection applied only to scheduled employments listed by the government. The new floor eliminates that gap.
For manufacturing companies, this means every worker on the shop floor, in the warehouse, and in ancillary functions is covered. This includes contract workers engaged through third-party contractors. If your contractor does not pay the Code-mandated minimum, liability flows back to you as the principal employer.
How does the 50% basic pay rule affect CTC structures?
The 50% basic pay rule is one of the most operationally significant changes in the Code on Wages. It requires that the basic wage (including dearness allowance and retaining allowance) constitute at least 50% of a worker’s total remuneration. Employers can no longer structure CTC packages to keep the basic wage artificially low in order to reduce PF and gratuity contributions.
For manufacturing companies with large workforces, this rule increases the contribution base for Provident Fund and gratuity. Plants that currently pay a high proportion of CTC through allowances must audit and restructure their compensation architecture before the Code applies in their state. Altacit Global advises manufacturing clients in Tamil Nadu and Telangana on CTC restructuring exercises that comply with this requirement while remaining operationally sustainable.
What does the Code on Wages say about payment of wages?
The Code on Wages simplifies the payment of wages framework. It consolidates the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976 into a single statute. The wage period and payment timeline provisions are streamlined, and the definition of “wages” is standardized across the four Codes. Manufacturers benefit from a unified compliance standard rather than managing four separate statutes.
Industrial Relations Code, 2020: What Manufacturers Must Know
What is the new threshold for standing orders under the Industrial Relations Code?
Under the Industrial Employment (Standing Orders) Act, 1946, establishments with 100 or more workers were required to have certified standing orders. The Industrial Relations Code, 2020 raises this threshold to 300 workers. Manufacturing plants with between 100 and 299 workers will no longer be required to certify standing orders under the new Code. They will, however, need to follow a model standing order prescribed by the government.
This change reduces administrative burden for mid-sized manufacturers. Plants above 300 workers must continue to certify standing orders covering matters such as classification of workers, attendance, leave, suspension, and termination.
What are the new strike and lockout notice requirements?
The Industrial Relations Code introduces new notice requirements for strikes and lockouts. Workers in industrial establishments (not just public utility services) must give 14 days’ notice before going on strike. Strikes during the pendency of conciliation or arbitration proceedings remain prohibited. Manufacturers must update their HR protocols and standing orders to reflect these requirements.
When does retrenchment permission become mandatory under the IR Code?
This is a critical threshold change for manufacturers. Under the Industrial Disputes Act, 1947, establishments with 100 or more workers required government permission before carrying out retrenchment or closures. The Industrial Relations Code raises that threshold to 300 workers. Manufacturing plants with fewer than 300 workers will no longer need prior government approval for retrenchment, though compensation obligations remain in place.
For large-scale manufacturers in Coimbatore and Chennai with headcounts above 300, the existing prior-permission requirement continues under the new framework. Plan your workforce decisions accordingly.
What is the Negotiating Union concept introduced by the IR Code?
The Industrial Relations Code introduces the concept of a Negotiating Union and a Negotiating Council. Where a single union holds more than 51% membership of workers in an establishment, it is recognized as the sole Negotiating Union. Where no single union crosses that threshold, a Negotiating Council is formed with representatives from unions meeting the minimum membership criteria. This replaces the ambiguous recognition practices that previously operated in different states.
Manufacturers with unionized workforces should assess current union membership data and prepare for formalized recognition procedures once the Code is fully notified in their state.
Social Security Code, 2020: Impact on Manufacturers
How does the Social Security Code affect PF and ESI coverage?
The Code on Social Security, 2020 consolidates the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Employees’ State Insurance Act, 1948, and several other social security statutes into a single framework. Coverage is extended to include gig workers, platform workers, and unorganized sector workers, in addition to the existing factory workforce. This is a structural expansion of employer obligations.
For manufacturing companies, the threshold for EPF registration remains at 20 or more employees. The ESI threshold remains at 10 or more employees. However, the Code grants the central government flexibility to revise these thresholds. Plants using contract workers must ensure that contractors maintain EPF and ESI compliance. As the principal employer, you remain liable if they do not.
How is gratuity calculated under the Social Security Code?
The Social Security Code simplifies gratuity calculation and extends eligibility. Fixed Term Employees (discussed further below) are entitled to pro-rata gratuity even if they have not completed five years of service. This is a notable change for manufacturers who engage seasonal or fixed-term workers in textiles, food processing, and auto ancillaries. The standard eligibility threshold of five years of continuous service continues to apply to permanent employees.
What ESIC benefits apply to manufacturing workers?
The Employees’ State Insurance Corporation (ESIC) provides medical, maternity, disability, and dependent benefits to covered workers. Under the Social Security Code, the ESIC framework is retained and extended. Manufacturing workers in states with operational ESIC infrastructure continue to receive these benefits. Plants must ensure accurate monthly contribution filings, wage ceiling compliance, and on-site records for covered workers. Failure to file contributions on time attracts interest and damages under the Code.
Occupational Safety, Health and Working Conditions Code, 2020
When does the OSH Code replace the Factories Act?
The Occupational Safety, Health and Working Conditions Code, 2020 will replace the Factories Act, 1948 only when the relevant state notifies its rules under the Code. As of 2026, fewer states have notified OSH Code rules compared to the Wages Code. For most manufacturing facilities across India, the Factories Act continues to govern working conditions, safety inspections, factory registration, and occupier obligations.
Manufacturers must not assume the OSH Code is in force without verifying the notification status in each state where they operate. Running operations on the basis of unnotified rules creates compliance risk in the opposite direction.
Do working hours change under the OSH Code?
The OSH Code does not significantly alter working hours for most manufacturing workers. The standard limits remain: no more than 48 hours per week, with overtime permitted at twice the ordinary rate of wages. The Code clarifies provisions around weekly rest days, spread-over limits, and night shift protections for women workers (who are now explicitly permitted to work night shifts with certain safeguards). Manufacturers should review shift scheduling and overtime registers to confirm alignment.
What changes does the OSH Code introduce for contract labour?
The OSH Code introduces significant changes to the regulation of contract labour. Establishments using 50 or more contract workers are required to register as principal employers. Contractors employing 20 or more workers must hold a valid license. The code also requires manufacturers to ensure that contract workers receive the same facilities and amenities as permanent workers in canteens, rest rooms, and first aid.
The Contract Labour (Regulation and Abolition) Act, 1970 continues to apply in states that have not notified OSH Code rules. Manufacturers must continue to maintain principal employer registrations and verify contractor license status under the existing Act until the Code takes effect.
How does Fixed Term Employment change seasonal manufacturing?
Fixed Term Employment (FTE) is one of the most practically significant provisions in the 4 Labour Codes for manufacturing companies. The Industrial Relations Code formalizes FTE as a legal employment category, allowing manufacturers to hire workers for a defined period without the administrative complexity of the retrenchment process at the end of that term.
For seasonal manufacturers in textiles, food processing, and auto ancillaries, FTE solves a long-standing operational problem. Hiring seasonal workers under fixed-term contracts gives manufacturers flexibility during peak production periods while offering workers the full benefits of permanent employment, including ESI, EPF, and pro-rata gratuity, for the duration of the contract. The contract must be in writing, and the terms must clearly specify the fixed duration, nature of work, and end date.
Altacit Global advises clients on FTE contract drafting that is compliant with the Industrial Relations Code and protects manufacturers from misclassification disputes. Our offices in Coimbatore, Chennai, and Hyderabad serve manufacturers across the textile, auto ancillary, and food processing sectors who rely on seasonal workforce planning.
What Manufacturing Companies Should Do Now
The transition to the 4 Labour Codes requires structured action, not a wait-and-see approach. The steps below apply to manufacturing companies regardless of whether your state has fully notified all four Codes.
Step 1: Identify which Labour Codes are notified in your state. Check the notification status for each of the 4 Labour Codes in every state where you operate. Compliance requirements differ by state and by Code. This step determines which laws currently govern your operations.
Step 2: Review your CTC structure and assess the impact of the 50% basic pay rule. Audit the current ratio of basic wage to total CTC across your workforce. Where basic pay falls below 50%, model the impact on PF and gratuity contributions and initiate a restructuring exercise before the Code takes effect in your state.
Step 3: Audit your standing order requirement based on headcount. Determine whether your plant falls above or below the 300-worker threshold under the Industrial Relations Code. If you currently certify standing orders under the 100-worker threshold of the Industrial Employment (Standing Orders) Act, assess whether the transition will affect your obligations.
Step 4: Review seasonal contracts and implement Fixed Term Employment. If your plant engages seasonal workers in textiles, food processing, auto ancillaries, or any production-cycle-driven sector, switch to properly drafted FTE contracts under the Industrial Relations Code. This reduces retrenchment risk and aligns your workforce planning with the new legal framework.
Step 5: Verify that contract workers receive equal wages and benefits. Audit your contractor agreements to confirm that all contract workers receive wages and facilities consistent with the Code on Wages and the OSH Code. As the principal employer, you carry liability for contractor non-compliance.
Step 6: Register on the Shram Suvidha Portal. The central Labour Management portal (Shram Suvidha) provides a unified platform for employer registrations, returns, and compliance filings under multiple labour laws. Ensure your plant is registered and that statutory returns are filed on schedule. For a full list of filing deadlines, refer to our Environmental Clearance Guide for Manufacturing Companies.
Protecting Your Plant Starts with the Right Legal Partner
The transition to the 4 Labour Codes is not a one-time compliance exercise. It requires ongoing monitoring of state notifications, CTC restructuring, contract redrafting, and workforce planning adjustments that affect every layer of your manufacturing operation.
Altacit Global advises manufacturing companies on Labour Code compliance across all four Codes. We assist with CTC restructuring under the Code on Wages, Fixed Term Employment contracts under the Industrial Relations Code, and retrenchment planning under the revised IR Code thresholds. Our manufacturing law team operates from offices in Coimbatore, Chennai, and Hyderabad, and we work with factories across Tamil Nadu, Telangana, and adjoining states. Contact us at info@altacit.com to speak with a manufacturing labour law specialist.
Frequently Asked Questions: Labour Codes for Manufacturing Companies in India
Q1: Have the 4 Labour Codes replaced all existing labour laws in India?
No. The 4 Labour Codes are enacted by Parliament but are not yet in force across all states. Each state must notify its own rules under each Code before the Code takes effect in that jurisdiction. Until state rules are notified, the original 44 central labour laws, including the Factories Act, 1948 and the Industrial Disputes Act, 1947, continue to apply. Manufacturing companies must maintain compliance with both frameworks simultaneously.
Q2: What is Fixed Term Employment and how does it help manufacturers?
Fixed Term Employment (FTE) is a formal employment category introduced by the Industrial Relations Code, 2020. It allows manufacturers to hire workers for a defined contractual period, with the same statutory benefits as permanent employees (ESI, EPF, pro-rata gratuity), without triggering the retrenchment process at the end of the term. FTE is particularly beneficial for manufacturers in textiles, food processing, and auto ancillaries, where production volumes fluctuate seasonally and workforce flexibility is operationally critical.
Q3: Does the 50% basic pay rule apply to all manufacturing companies?
The 50% basic pay rule under the Code on Wages, 2019 applies in states where the Code has been notified. It requires that basic wages and dearness allowance together constitute at least 50% of total remuneration. Manufacturing companies operating in states that have notified the Code must audit and restructure CTC packages that fall below this threshold. Companies in states that have not yet notified the Code should begin restructuring planning now to avoid disruption when the Code comes into force.
Q4: At what headcount does retrenchment permission become mandatory under the Industrial Relations Code?
Under the Industrial Relations Code, 2020, manufacturing establishments with 300 or more workers require prior government permission before carrying out retrenchment, layoffs, or closure. This threshold is raised from 100 workers under the Industrial Disputes Act, 1947. Plants with fewer than 300 workers do not require prior permission for retrenchment under the Code, though statutory compensation obligations remain in place. The revised threshold applies only in states where the Industrial Relations Code has been notified.
