Understanding Statutory Compliance in India
Statutory compliance means paying workers the wages and benefits the law requires. Every company that runs a payroll in India must follow both central and state labour laws. Getting it wrong invites penalties, disputes, and back-dated demands, so this section explains the rules that apply and how the numbers are calculated.
The four Labour Codes
Section titled “The four Labour Codes”Since 21 November 2025, 29 central labour laws sit under four Codes:
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Code on Social Security, 2020
- Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020
The Codes are the legal framework. Labour is a concurrent subject under the Constitution, so the central government and each state government both frame rules. The central rules were notified in May 2026. Most states have notified their own rules; a few still have rules in draft. Where a state has not yet notified fresh rules, the earlier rules continue to apply during the transition, to the extent they do not contradict the Codes.
The single biggest change is the definition of wages. Under the Wage Code, most cash allowances count as wages, and basic wages must be at least 50% of total wages. This codifies the principle the Supreme Court set in the Vivekananda Vidyamandir case. The practical effect is a larger wage base, which raises the amount on which PF, ESI, gratuity, and bonus are calculated.
Two other changes matter for payroll:
- Fixed-term employment is now a recognised category under the Industrial Relations Code, with parity of wages and benefits for fixed-term staff.
- Gig and platform workers are defined for the first time under the Social Security Code, which creates a framework for their social security.
Laws the Codes cover
Section titled “Laws the Codes cover”The Codes consolidate the acts listed below. The table groups them by the area each Code governs.
| Social Security | Wages | Industrial Relations | Women’s benefits |
|---|---|---|---|
| Provident Fund (PF) | Payment of Wages | Industrial disputes | Equal remuneration |
| Labour Welfare Fund | Minimum Wages | Industrial employment | Maternity benefit |
| Employees’ State Insurance (ESI) | Bonus payment | Standing orders | |
| Payment of Gratuity | Equal remuneration | Trade unions | |
| Shops and establishments | |||
| Factories |
This section gives a brief, practical overview of each law, with the current rates and a worked example. Read the linked pages for the detail.