 "Centre notifies revised draft rules for labour codes, seeks responses")
The Ministry of Labour and Employment on Wednesday notified the revised draft rules for the four new labour codes, providing clarity on certain provisions such as gratuity payments and retrenchment of workers.
The four new codes were implemented on November 21, followed by consultations with stakeholders before pre-publishing the draft rules on December 31. The government has called upon stakeholders concerned for any objections and suggestions for a period of 30 to 45 days, which will be considered while finalising the rules, according to the notifications published on the labour ministry’s website.
After this period of consultations, the government will notify the finalised rules to fulfil the labour ministry’s target of making the provisions of the codes fully effective from April 1, 2026.
The draft rules provide clarification on certain issues raised by industry stakeholders in previous consultations, including calculation of gratuity payments. Experts say that the draft rules will help clear doubts, which employers have been waiting for.
“The Code on Social Security rules specify that gratuity will be calculated on ‘wages’ last drawn, excluding components such as annual performance-linked pay, medical reimbursements, stock options, and meal vouchers. This clarification will help organisations estimate their gratuity liability more effectively,” said Puneet Gupta, Partner at EY India.
Business Standard previously reported that companies are worried about a potential rise in compliance costs under the new codes, and have sought clarifications from the government on a definitional confusion over wages and gratuity.
“Compliance costs for organised employers will rise in the short term because of expanded reporting, registration of gig and platform workers, and higher social security linkage, but in my view this is more a compliance-reallocation than a net cost explosion, especially for companies that are already digitised,” said Keyur D Gandhi, managing partner at Gandhi Law Associates.
Since labour is a concurrent subject, the implementation of the laws after April 1, 2026 will depend on state governments and are likely to vary given lack of uniformity between infrastructure and state machinery.
“The real burden shifts decisively to states, which must now build IT systems, fund welfare boards, and enforce uniform standards despite differing administrative capacities, making uneven implementation almost inevitable,” added Gandhi.
The four new labour codes aim to consolidate 29 existing labour laws to make compliance and regulation easier. Lawyers and legal experts had previously been worried about overlaps of the new codes with these existing laws. After the notification of the draft rules, experts think that some of these issues have been resolved.
“Importantly, overlaps with legacy laws -- EPF, ESI, contract labour and state welfare statutes -- have been consciously clarified through express subsuming provisions, reducing litigation risk that plagued the 2019 drafts, though transitional disputes are unavoidable,” added Gandhi.
The draft rules have also provided an explanation for certain provisions, pertaining to gig workers. Formal recognition of people involved in gig work and expanding social security coverage to them has been one of the targets of the labour ministry.
“Two matters in the draft rules under the Social Security Code have major implications for gig workers : (i) constitution of the National Social Security Board for Gig Workers and Platform Workers; (ii) registration of all gig and platform workers on a Central Government platform. Rule 49 of the draft rules have provided a lot of clarity on the manner in which this registration would take place. There is also more clarity on how social security contributions will be collected from aggregators,” said Sowmya Kumar, partner at Cyril Amarchand Mangaldas.