Industrial Relations Code, 2026: A Complete Overview for Employers & HR Professionals

Introduction

The Industrial Relations Code, 2026 is a landmark reform introduced by the Government of India to consolidate and modernize laws relating to trade unions, employment conditions, and industrial disputes. It replaces and merges key legislations such as the Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act into a single framework.

This Code aims to bring simplicity, transparency, and efficiency in managing industrial relations while balancing the interests of employers and workers.

Key Objectives of the Code

Simplify multiple labour laws into a single unified legislation
Promote ease of doing business
Ensure fair dispute resolution mechanisms
Strengthen trade unions and collective bargaining
Enhance industrial harmony and productivity

Applicability of the Code

The Code applies to all industrial establishments across India, with specific provisions based on employee strength:

Provision	Applicability
Works Committee	100+ workers
Grievance Redressal Committee	20+ workers
Standing Orders	300+ workers

Trade Union Provisions

Registration Criteria

Minimum 7 members required
At least 10% of workers or 100 workers (whichever is less) must be members

Key Highlights

Recognition of Negotiating Union/Council
A union with 51% support becomes the sole negotiating union
If no union meets the threshold, a negotiating council is formed

Benefits

Legal recognition
Protection from civil and criminal liability in certain cases
Structured collective bargaining process

Grievance Redressal Mechanism

Every establishment with 20 or more workers must form a Grievance Redressal Committee (GRC).

Features:

Equal representation of employer and employees
Maximum 10 members
Must include adequate representation of women
Resolution timeline: 30 days

If unresolved, the matter can be escalated to:
Conciliation Officer
Industrial Tribunal

Works Committee

Applicable to establishments with 100 or more workers, this committee:

Promotes employer-employee harmony
Addresses day-to-day workplace concerns
Prevents disputes at an early stage

Standing Orders

Applicable to establishments with 300 or more workers.

Key Requirements:

Employers must define service conditions in writing
Must cover:
- Work hours
- Leave policies
- Misconduct rules
- Disciplinary procedures

Timeline:

Draft standing orders must be submitted within 6 months

Industrial Dispute Resolution Mechanism

The Code provides a structured approach:

Step-by-Step Process:

Grievance Redressal Committee
Conciliation Officer
Industrial Tribunal
National Industrial Tribunal (for national importance cases)

Arbitration

Disputes can be voluntarily referred to arbitration
Binding award ensures quicker resolution

Industrial Relations Code 2026 (FAQ)
1	Is a fixed-term employee engaged for 11 months eligible for gratuity upon contract expiry? Is gratuity payable where a fixed-term employee exits before completion of the contracted tenure?	Fixed Term Employee (FTE) will be eligible for gratuity if he/she renders service under the contract for a period of one year (from start of contract).

Conclusion: Industrial Relations Code – A Progressive Step Forward by Pragnaa

The Industrial Relations Code marks a significant evolution in India’s labour law framework, aiming to strike a balanced approach between employer flexibility and employee protection. By consolidating existing laws and introducing clarity in areas such as dispute resolution, union recognition, and retrenchment norms, the Code creates a more structured and transparent industrial environment.

From Pragnaa’s perspective, this reform is not just about compliance—it is about building sustainable industrial harmony. Organizations must view the Code as an opportunity to strengthen workplace relationships, improve communication mechanisms, and adopt fair labour practices. Proactive implementation, supported by strong internal policies and awareness, will be key to unlocking its full potential.

As businesses navigate this transition, the focus should remain on compliance readiness, employee engagement, and risk mitigation. With the right approach, the Industrial Relations Code can serve as a foundation for long-term growth, productivity, and a resilient workforce ecosystem.At Pragnaa, we believe that aligning with evolving labour laws is essential not only for legal adherence but also for fostering a future-ready and people-centric organization.

Code on Wages, 2019

The Code on Wages, 2019 is one of the four labour codes introduced by the Government of India to simplify and consolidate existing wage-related laws.

Definition:
The Code on Wages is a law that regulates wages, bonus payments, and equal remuneration for employees across all sectors, ensuring fair and timely payment to workers in both organized and unorganized sectors.

It applies to all employees and employers in India, without any wage ceiling (unlike earlier laws).

Objectives of the Code on Wages

Ensure uniform definition of wages
Provide timely payment of wages
Introduce minimum wages for all employees
Promote gender equality in wages
Simplify compliance for businesses

Acts Included in the Code on Wages

The Code on Wages, 2019 has merged and replaced the following four Acts:

The Payment of Wages Act, 1936
- Ensures timely payment of wages to employees
The Minimum Wages Act, 1948
- Fixes minimum wage rates for different employments
The Payment of Bonus Act, 1965
- Provides for bonus payments to eligible employees
The Equal Remuneration Act, 1976
- Ensures equal pay for equal work for men and women

Sl.No	Query	Reply
Code on Wages, 2019
1	a. Does overtime payment form part of the 50 percent wage calculation rule?	Overtime allowance payment forms a part of the 50 percent wage calculation.
	What constitutes “total remuneration” for applying the 50% wage floor?	Please refer to FAQ No-3 dated 30.12.2025 available on MoLE website. Weblink: de4758d5bfeffc456d7de97a801891b0.pdf
	1. Is actual gratuity paid included? 2. Is gratuity included where shown as part of CTC? 3. Are employer contributions to PF and other social security benefits included?	Only statutory components such as employer PF and pension contributions and statutory bonus are included for arriving at 50% of wages to form part of remuneration. Gratuity, ESI and other retirement benefits are not included.
	b. With reference to FAQ Question No. 7 of the MoLE FAQs under the Code on Wages, 2019, clarification is sought on: whether statutory components such as employer / employee PF contribution,statutory bonus,ESI,or other retirement benefits are included within “Other Allowances” or whether the illustration is based only on gross monthly salary excluding statutory contributions.	No. Statutory components such as employer share of PF/Pension contribution, are prescribed under Section 2(y)(c) of the Code on Wages and difference amount of back to the wages/remuneration in case it exceeds 50% of remuneration/wages (First proviso to the Section 2(y) of the Code on Wages).
2	Are there any specific legal provisions in place for the wage protection of white-collar employees?	The Code on Wages, 2019 has provisions for timely payment of wages. These provisions are applicable to all employees.
total of (a) to (i) of Section 2(y) of the Code will be added
Sl. No	Query	Reply
3	Can wages and minimum wages be treated as the same?	No, minimum wages are the statutory wages fixed by the appropriate government. An employer is legally prohibited from paying an employee less than the prescribed minimum wage. The Wages are defined in Section 2(y) of the Code on Wages, 2019 and can also be referred to in FAQ No- 2, 3 and 4 dated 30.12.2026 available on MoLE website. Weblink: 9fb60321f0028fc2fe08d3b3d8626dd7.pdf
4	Do annual performance- based incentives form a part of “wages” for computation under the Labour Codes?	No. Annual performance-based incentives do not form a part of “wages” for computation under the Labour Codes. Pl. refer to Sl. No. 3 of FAQs dated 30.12.2025 available on the MoLE website. Weblink: de4758d5bfeffc456d7de97a801891b0.pdf
5	Who is eligible for overtime wages—only workers or it is applicable for Employees also? If so does the entitlement also extend to supervisory and managerial staff?	Yes. Employee, including worker, whose minimum rate of wages is fixed under the Code on Wages, 2019 is eligible for overtime.
6	Is the revised definition of “wages” under the Code on Wages, 2019 applicable for gratuity calculation from the date of enforcement of the Code, i.e., 21.11. 2025?	Yes. Gratuity, based on revised definition of wages will be applicable w.e.f. 21.11.2025 i.e. date of implementation of the Codes.
7	From which date does the definition of “wages” under the Labour Codes come into effect?	The definition of “wages” has come into effect from 21.11.2025.
SI.NO	Query	Reply
8	Whether variable components of wages such as overtime (OT) allowance are included while calculating the “wages” under the Codes?	Yes. Overtime allowance payment forms a part of components Section 2(a) to 2(i). If such allowance, exceed 50 percent of remuneration then excess over 50 percent is added to the wage calculation.
9	What is the distinction between “minimum wages” and “wages” under the Labour Codes?	Minimum wages are fixed by the Appropriate Government for the employees, whereas wages are fixed as per Terms of Employment between employee and employer, employed in any establishment as per the definition of Wages as mentioned in Section 2(y) on the Code of Wages, 2019

Conclusion:

The Code on Wages, 2019 is a transformative reform that brings clarity, uniformity, and accountability to wage-related practices across India. By standardizing the definition of wages, enforcing the 50% rule, and extending coverage to all employees, it compels organizations to rethink and realign their salary structures while ensuring fair and timely compensation.

However, with these changes comes increased compliance responsibility. Businesses must carefully review payroll structures, statutory components, and documentation processes to avoid risks and ensure adherence to the law.

Pragnaa plays a crucial role in this transition by acting as a trusted compliance partner. With expertise in labour law advisory, payroll structuring, compliance audits, and end-to-end implementation support, Pragnaa helps organizations seamlessly align with the Code on Wages. From interpreting complex provisions to executing practical solutions, Pragnaa enables businesses to stay compliant while focusing on operational growth.

In a regulatory environment that is becoming more structured and scrutinized, partnering with experts like Pragnaa ensures not just compliance, but confidence and sustainability in workforce management.

Understanding the Code on Social Security, 2020:

A Comprehensive Guide for Employers & Professionals

India’s labour law landscape underwent a major transformation with the introduction of the Code on Social Security, 2020. This landmark legislation consolidates multiple social security laws into a single framework, aiming to extend protection to a wider workforce, including those in the unorganised and gig economy.

What is the Code on Social Security, 2020?

The Code on Social Security, 2020 is a unified law designed to amend and consolidate existing social security regulations. Its primary objective is to ensure income security, healthcare access, and welfare benefits for employees across sectors—organised, unorganised, gig, and platform workers.

Key Objectives of the Code

Extend social security coverage to all categories of workers
Simplify and rationalize compliance for employers
Promote universal registration of establishments
Enable digital administration of benefits and records
Strengthen governance through dedicated social security bodies

Acts included in the Code on Social Security:

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
Employees’ State Insurance Act, 1948
Employees’ Compensation Act, 1923
Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
Maternity Benefit Act, 1961
Payment of Gratuity Act, 1972
Cine Workers Welfare Fund Act, 1981
Building and Other Construction Workers Welfare Cess Act, 1996
Unorganised Workers’ Social Security Act, 2008

Conclusion:

Sl.No	Query	Reply
Code on Social Security, 2020 (FAQ)
1	Does fixed-term employment cover contract labour engaged through contractors, or only direct employees of the principal employer?	Fixed Term Employment covers employees directly engaged by the employer.
2	Whether Gratuity calculation will be applicable prospectively or retrospectively?	Gratuity calculation will be applicable w.e.f. 21.11.2025 i.e. date of implementation of the Codes. Please refer to Sl. No. 8 of FAQ dated 30.12.2025available on MoLE website. Weblink: de4758d5bfeffc456d7de97a801891b0
3	How will the ESI coverage be governed until the finalization of Rules?	With effect from 21.11.2025, the definition of wages under the CoSS, 2020 shall apply. At present, Rs 21,000 per month wages notified for ESI coverage will be applicable.
4	For the calculation of gratuity, will wage components other than those specified under clauses (a) to (c) of included part and (a) to (k) of excluded part of Section 2(88) of the Code on Social Security, 2020, be included?	Any payment made to employee which is not part of components mentioned under section 2(88) of the Code on Social Security,2020 shall not be considered for calculation of gratuity.
5	For Fixed Term Employees (FTE), is gratuity payable on completion of exactly one year of service or more than one year of service is required for calculation of gratuity under the Labour Codes?	Fixed Term Employee (FTE) will be eligible for gratuity if he/she renders service under the contract for a period of one year (from start of contract).
6	Whether States can levy cess on gig and platform workers, and if so, this will result in a dual financial burden on aggregators?	As per section 114(4) of the Code on Social Security, 2020, the contribution to be paid by the aggregators for the funding Schemes for gig workers and platform workers will be notified by the Central Government. The said contribution will be credited to Social Security Fund set up by the Central Government for social security and welfare of the gig workers and platform workers.
7	In case of contract labour, whether gratuity liability is to be borne by the Principal Employer or the Contractor?	As per the section 53 of the Code on Social Security, 2020, the employer (i.e. Contractor) will pay gratuity on rendering of five years continuous service at the rate of 15 days wages for each completed year of service based on the last drawn wages.
8	Whether gratuity for service rendered prior to 21 November 2025 will be calculated under the Payment of Gratuity Act,1972, and service on or after that date under the Labour Codes?	The employee will be paid gratuity based on the rate of wages last drawn by the employee at the time of superannuation or retirement or resignation or death etc, on and after 21.11.2025 as per the provisions of Code on Social Security, 2020.
9	What types of benefits or facilities will be considered as “remuneration in kind” under the definition of wages? Please provide illustrative examples.	Benefits under the terms of employment such as food coupons, ration items, mobile recharge etc. would constitute remuneration in kind.

Conclusion:

At Pragnaa, we see the Code on Social Security, 2020 as more than just a legal reform—it is a shift toward building a more accountable and inclusive workforce ecosystem. By bringing multiple legislations under one umbrella, the Code reduces complexity while expanding the scope of social security to previously uncovered segments like gig and unorganised workers.

However, compliance under this Code requires more than basic awareness. It demands structured processes, accurate documentation, and proactive monitoring. Organizations that treat this as a strategic priority—not just a statutory obligation—will be better positioned to mitigate risks and build long-term workforce stability.

Pragnaa supports businesses in navigating these changes with clarity and confidence. From compliance assessments to end-to-end implementation support, our focus is on helping organizations stay compliant, audit-ready, and future-ready.

As the labour law landscape evolves, one thing is clear—strong compliance is no longer optional; it is a business necessity.