Indian Labour Codes – FAQs
Your Practical Guide to Wages, PF, ESI, Gratuity, Industrial Relations & Workplace Safety
Understand important labour law provisions through simple questions and answers.
MOLE FAQ REFERENCE: 25 SEPTEMBER 20261. Wages & Salary Structure
1. What is the definition of “wages” under the Labour Codes?
As explained in the MoLE FAQ, wages generally include all remuneration payable to an employee, including basic pay, dearness allowance and retaining allowance, if any, subject to the statutory definition and its exclusions.
Where allowances and benefits covered by the rule exceed 50% of total remuneration, the excess is added back to wages for statutory purposes. The exact treatment depends on the components and applicable statutory provisions.
2. What is the 50% rule for allowances?
Where the allowances and benefits covered by the statutory definition, excluding specified items such as gratuity and retrenchment compensation, exceed 50% of total remuneration, the excess is added back to wages.
Example: If total remuneration is ₹60,000 and the relevant allowance amount exceeds the applicable 50% threshold by ₹3,000, that excess ₹3,000 is added back to wages for statutory calculations, subject to the statutory definition.
3. Does the new definition of wages apply across all Four Labour Codes?
The MoLE FAQ states that the common definition of wages applies across all Four Labour Codes for relevant statutory calculations. The specific calculation and eligibility provisions of each Code must still be considered.
4. Are performance incentives and reimbursements included in wages?
The MoLE FAQ states that performance-based incentives, ESOPs, variable components and reimbursement-based payments are not part of wages in the context described in its clarification.
Actual treatment depends on the nature of the payment, the applicable statutory definition and the supporting facts. A recurring allowance should not automatically be treated as a reimbursement merely because of its payroll label.
5. Are minimum wages and wages the same?
No. Minimum wages are statutory minimum rates fixed by the appropriate government. “Wages” is a defined term under the Code on Wages and is used for relevant statutory calculations.
An employer must comply with the applicable minimum wage rate for the employee and employment concerned.
6. Are deductions from wages capped at 50%?
The MoLE FAQ explains that the Code on Wages limits the total deductions that may be made from wages to 50% of wages, subject to the provisions governing permitted deductions.
Employers should verify that every deduction is legally permitted, correctly authorised where required, and within the applicable limit.
7. When must wages be paid following resignation or dismissal?
The MoLE FAQ refers to Section 17(2) of the Code on Wages, 2019, which provides for payment of wages within two days in specified cases, including resignation, dismissal, removal and retrenchment.
The clarification concerns wages. It should not automatically be read as requiring every component of full-and-final settlement to be paid within the same period.
2. Social Security, PF, ESI & Gratuity
8. What is the ESI wage ceiling mentioned in the MoLE FAQ?
The MoLE compilation states that the currently notified ESI coverage wage ceiling is ₹21,000 per month, and that the applicable definition of wages under the Code on Social Security is relevant from 21 November 2025.
Employers should check the latest applicable notifications and coverage conditions before processing contributions.
9. Is gratuity payable to a fixed-term employee after one year?
According to the MoLE FAQ, a fixed-term employee is eligible for gratuity on rendering service under the contract for a period of one year from the start of the contract, subject to the applicable statutory conditions.
Fixed-term employment means employment directly under the employer for a specified period; contract labour engaged through a contractor is a distinct arrangement.
10. Is five years of continuous service always required for gratuity?
No. The MoLE FAQ identifies exceptions to the five-year requirement, including death, disablement and expiry of fixed-term employment, along with other events that may be notified by the Central Government.
Eligibility must be assessed against the relevant statutory provision and the employee's circumstances.
11. How is gratuity generally calculated?
The MoLE FAQ describes gratuity at the rate of 15 days' wages for every completed year of service, or part thereof exceeding six months, based on the last-drawn wage rate, subject to the applicable statutory formula and special rules.
Different provisions may apply to seasonal, piece-rated and fixed-term employees, as well as in cases of death or disablement. The applicable ceiling and wage components must also be checked.
12. Who is responsible for gratuity payment to contract labour?
The MoLE FAQ identifies the contractor as the employer responsible for paying gratuity to contract labour under Section 53 of the Code on Social Security, 2020, subject to the statutory eligibility requirements.
Employers and contractors should examine the actual engagement arrangement and applicable law before determining liability in a particular case.
13. Does registration on a social security portal guarantee benefits?
No. The MoLE FAQ explains that registration is an entry point for accessing social security schemes. Benefits depend on whether the relevant scheme is available through the designated portal and whether the individual satisfies the scheme-specific eligibility conditions.
3. Industrial Relations & Employment
14. Does the Industrial Relations Code ban strikes?
No. The MoLE FAQ states that the right to strike remains under the Industrial Relations Code, 2020, subject to the prescribed 14-day prior notice and other applicable statutory requirements.
Employees and trade unions should follow the relevant notice and dispute-resolution procedures.
15. Does the Industrial Relations Code abolish trade unions?
No. The MoLE FAQ states that trade union registration provisions are retained. The Code also provides for negotiating unions or negotiating councils, along with mechanisms such as Works Committees and Grievance Redressal Committees, as applicable.
16. Can employers retrench workers without following statutory procedures?
No. The MoLE FAQ describes provisions for notice and retrenchment compensation. It also states that prior government permission is required for retrenchment by establishments meeting the applicable threshold of 300 or more workers.
The applicable conditions, exceptions and procedures must be checked before taking action.
17. Are fixed-term employees entitled to employment benefits?
The MoLE FAQ states that fixed-term employees are eligible for benefits such as EPF, ESI, minimum wages and timely payment of wages, subject to applicable eligibility and statutory conditions.
The Code also provides for appointment letters and gratuity treatment for qualifying fixed-term employment.
4. Working Hours, Overtime, Leave & Safety
18. What are the standard working hours under the OSH & WC Code?
The MoLE FAQ describes the standard as 8 hours per day and 48 hours per week, with flexibility subject to applicable provisions, including worker consent where required and payment of overtime.
Actual schedules must comply with the applicable Central or State Rules and any relevant sector-specific requirements.
19. What is the overtime rate under the OSH & WC Code?
The MoLE FAQ states that a worker who works beyond eight hours on a day or 48 hours in a week, as applicable, is entitled to overtime at twice the normal rate of wages.
Daily or weekly calculations, applicable overtime limits, consent requirements and relevant Rules should be checked for the establishment concerned.
20. How many days of work are required for annual leave with wages?
The MoLE FAQ states that a worker should have worked for 180 or more days in a calendar year to qualify for annual leave with wages under the provisions discussed in the FAQ.
Eligibility and the calculation of leave must be assessed against the applicable Code, Rules and any more favourable entitlement available under applicable law.
21. How much earned leave can be carried forward?
The MoLE FAQ states that a worker may carry forward up to 30 days of leave to the succeeding calendar year. Leave applied for but refused by the employer may be carried forward without this limit, as described in the FAQ.
Where applicable State law provides a more favourable benefit, the FAQ explains that the employee may be entitled to that benefit.
22. Is there a maximum limit on leave encashment?
The MoLE FAQ states that the OSH & WC Code, 2020 does not prescribe a maximum limit for leave encashment in the context addressed. It also explains the treatment of leave exceeding 30 days that was applied for but not granted, and leave standing to a worker's credit at separation.
Employers should verify eligibility, the applicable State Rules and the specific circumstances before processing encashment.
23. Can women work night shifts under the OSH & WC Code?
The MoLE FAQ states that women may work in night shifts subject to adequate safety, transport and security arrangements. It also specifies that the woman's consent is mandatory for night work, in the context of the Code provisions discussed.
24. Are contract workers covered by workplace welfare provisions?
Yes. The MoLE FAQ states that contract workers are covered by the applicable welfare provisions and identifies the principal employer's responsibility for prescribed welfare facilities under the relevant OSH & WC Code provisions.
The exact duties depend on the applicable statutory provisions and establishment circumstances.
5. Other Important Labour Law FAQs
25. Do the Labour Codes cover only permanent employees?
No. The MoLE FAQ explains that the Code on Wages covers employees across employment categories, including full-time, part-time, temporary, casual and contractual workers, subject to the definitions and specific provisions of the applicable law.
26. Are employees in the unorganised sector covered by wage protections?
The MoLE FAQ states that the Code on Wages applies to employees in both the organised and unorganised sectors and provides for minimum wages and timely payment of wages, subject to the applicable statutory provisions.
27. Are transgender employees protected against wage discrimination?
The MoLE FAQ states that employers must not discriminate on the ground of gender, including transgender status, in wages, recruitment for the same work or work of a similar nature, or conditions of employment, as provided under the Code on Wages.
28. Are health and safety protections restricted to large establishments?
The MoLE FAQ explains that applicable health, safety and welfare provisions extend to establishments meeting the relevant statutory thresholds. It also clarifies that changes in certain factory or contract-labour licensing thresholds do not, by themselves, remove other applicable safety and welfare protections.
Always verify the threshold and provision applicable to the particular establishment.
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Primary source: Ministry of Labour & Employment, Government of India — Compilation of FAQs on Four Labour Codes & Central Rules (as on 25.09.2026).
Use the official Ministry website to locate the relevant notifications, Codes and Rules: labour.gov.in
This article is an educational summary of selected Ministry FAQs, not a reproduction of the complete 63-page document or a substitute for the applicable legislation. Verify current Central and State notifications, commencement provisions, eligibility conditions and establishment-specific requirements before taking compliance decisions.