What do the new Labour Codes change for employees — salary, PF, gratuity and exit payments?

The government brought all four Labour Codes into force on 21 November 2025. 'In force' is not the same as 'fully operational': the Codes depend on rules made by the Centre and by each state. Reports indicate the central rules were finalised in May 2026, while state rules are still being notified through 2026 at different speeds. Until your state's rules and your employer's updated payroll catch up, some day-to-day mechanics (registers, forms, procedures) may look the same as before.

Quick comparison of what matters most to an employee:

Topic	Earlier practice	Under the Labour Codes
Wage base for PF and gratuity	Often only a low 'basic' component	Excluded allowances are capped at 50% of total remuneration; any excess is added back to wages
Gratuity, fixed-term employees	5 years of service	1 year of service, paid pro-rata
Gratuity, permanent employees	5 years of continuous service	Still 5 years (with the usual exceptions such as death or disablement)
Full and final settlement on exit	Company policy, often 30 to 45 days	Due within 2 working days of leaving
Monthly salary timing	Varied by industry and state	Monthly wages to reach you before the 7th of the next month

Under Section 2(y) of the Code on Wages, 'wages' means basic pay, dearness allowance and retaining allowance. Certain components are excluded: house rent allowance, conveyance, overtime, commission, statutory bonus, the employer's PF contribution and gratuity. The key safeguard: if these excluded components together exceed 50% of your total remuneration, the excess is added back and treated as wages.

It is a floor, not a requirement that 'basic' equals 50% of CTC. Example: total remuneration ₹1,00,000 a month, of which excluded allowances are ₹60,000. The excess over 50% (₹10,000) is added back, so wages for statutory purposes are ₹50,000.

Why it matters to you:

• PF contributions and gratuity are calculated on wages, so a higher wage base means a bigger PF balance and a bigger gratuity at exit.
• If your employer keeps the same CTC, a higher PF base can mean lower monthly take-home even though your retirement benefits go up.
• Employers handle this differently, so compare your payslip before and after the change instead of assuming.

Gratuity is now governed by the Code on Social Security, 2020, which subsumes the Payment of Gratuity Act, 1972.

• Permanent employees: still 5 years of continuous service, with 15 days' wages for each completed year. Because the wage base can rise under the 50% rule, the amount can rise too.
• Fixed-term employees: eligible after 1 year, calculated pro-rata. This is the biggest practical win for contract and project-based staff.
• The ₹20 lakh tax-exempt ceiling under the Income Tax Act is a separate matter and has not changed because of the Codes.

For the formula, forfeiture rules and how to claim, see our gratuity guide.

When you resign, are removed, dismissed or retrenched, the Code on Wages requires wages due to be paid within two working days of your exit. In practice many employers still follow older policies of 30 to 45 days, so you may need to push.

If your dues are delayed:
1. Get the dates on record: your last working day, the date you asked for the settlement, and what is outstanding (salary, leave encashment, bonus, gratuity).
2. Send a written demand by email to HR and your manager citing the Code on Wages and the two-working-day requirement.
3. Escalate to the labour authority in your area (the Codes use the term 'Inspector-cum-Facilitator') if the employer does not pay.
4. Keep payslips, appointment letter and the relieving communication safe.

See our guides on unpaid salary remedies and unpaid salary and wrongful termination.

• Wage definition: does your PF contribution now run on a higher base than before?
• Fixed-term contract? Confirm it states the gratuity entitlement after 1 year.
• Settlement clause: if your contract promises payment 'within 45 days of exit', the statutory two-working-day requirement still applies.
• State rules: your state may still be finalising its rules, so check your state labour department's notifications.

Sources and commentary disagree on some implementation details, and rules are still evolving. Treat this page as an overview and confirm specifics with your HR team or a labour lawyer for high-value claims.