New Labour Codes 2026: Complete Guide to the 4 Codes Replacing 29 Labour Laws for Kerala Employers

A New Era for Indian Labour Law: What Every Kerala Employer Must Know

India is undergoing the most significant transformation of its labour law framework since independence. Twenty-nine central labour Acts are being consolidated into four comprehensive Labour Codes — the Code on Wages, 2019; the Industrial Relations Code, 2020; the Social Security Code, 2020; and the Occupational Safety, Health and Working Conditions (OSH) Code, 2020. For Kerala employers, this is not merely a legislative exercise — it represents a fundamental shift in how every aspect of employment, from hiring to wages to social security to workplace safety, will be regulated and enforced.

The new Labour Codes were passed by Parliament between 2019 and 2020 and received presidential assent. While the central government has notified the rules under each Code, implementation has been phased. As of mid-2026, several states have begun enforcement, and Kerala is expected to follow suit imminently. This guide provides a comprehensive overview of each Code, the changes it brings, what stays the same, and a practical action plan for Kerala businesses to achieve full compliance when the Codes come into force.

For context on how the existing labour law framework currently operates in Kerala, read our Kerala Employment Laws Overview and Complete Labour Law Compliance Guide.

Why the Labour Codes? The Problem with 29 Separate Acts

Before understanding the new Codes, it is essential to understand why the reform was needed. India's labour law framework had grown over seven decades into a complex, overlapping, and at times contradictory patchwork of legislation. An employer in Kerala could be simultaneously governed by the Factories Act, 1948 (for working conditions), the Shops and Commercial Establishments Act, 1960 (for leave and hours), the Contract Labour Act, 1970 (for contract workers), the Payment of Wages Act, 1936 (for wage timing), the Minimum Wages Act, 1948 (for wage rates), the Payment of Bonus Act, 1965 (for annual bonus), the EPF Act, 1952 (for retirement savings), the ESI Act, 1948 (for medical benefits), the Payment of Gratuity Act, 1972 (for terminal benefits), the Maternity Benefit Act, 1961 (for maternity leave), the Industrial Disputes Act, 1947 (for dispute resolution), the Trade Unions Act, 1926 (for union registration), and several others — each with its own definitions, thresholds, registers, returns, and inspection regimes.

The new Codes address this complexity in three fundamental ways: first, they harmonise definitions across all labour legislation — terms like "employee," "wages," "factory," and "contractor" now have uniform meanings across all four Codes. Second, they simplify compliance by merging multiple Acts into single Codes with one set of rules and one inspection scheme. Third, they raise applicability thresholds to reduce the compliance burden on smaller enterprises. This means that while the number of individual statutes reduces from 29 to 4, the underlying protections for workers are largely preserved — and in some cases enhanced. For a practical understanding of thresholds, see our MSME Statutory Compliance Guide.

Code 1: Code on Wages, 2019 — The New Wage Framework

The Code on Wages, 2019, consolidates and replaces four existing laws: the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. It is the most consequential of the four Codes for the day-to-day operations of Kerala businesses because it governs how every employee's wages are structured, paid, and adjusted.

Key Changes Under the Wage Code

Universal definition of "employee": The Wage Code introduces a single definition that covers all persons employed in any capacity — including contract labour, temporary workers, and gig workers — removing the distinction between "workmen" and "non-workmen" that caused significant classification disputes under the old regime. This expanded coverage directly affects how employers classify their workforce for minimum wage applicability.

National minimum wage: For the first time, the central government can fix a national minimum wage that serves as a floor. States like Kerala, which currently have higher minimum wages than the national floor (Kerala's minimum wages are among the highest in India), will maintain their state-specific rates — but they cannot fix rates lower than the national minimum. This dual structure means employers must track both the central notification and the Kerala state government's notifications. Our Kerala Minimum Wages Calculator helps you stay current with applicable rates.

Maximum hours of work: The Wage Code caps working hours at 48 hours per week or 9 hours per day, aligning with the Factories Act and Shops Act provisions. Overtime must be paid at twice the ordinary rate (unchanged from the current regime). However, the Code also empowers the central government to fix different hours for different categories of employees — a provision that may be used to create special rules for IT workers, gig workers, or seasonal industries. For overtime calculation, use our Overtime Calculator.

Floor wage for contract workers: The Code mandates that contract workers must be paid wages equal to regular employees performing the same work — putting the "equal pay for equal work" principle on a statutory footing. This directly impacts Kerala businesses in manufacturing, hospitality, and construction that rely heavily on contract labour. Our Contract Labour Act Compliance Guide covers the current framework.

Gender pay parity: The Wage Code prohibits discrimination in wage rates on the ground of gender — a provision carried forward from the Equal Remuneration Act. Employers must maintain transparency in wage determination and be prepared to demonstrate that wage differentials are based on objective factors, not gender.

Code 2: Industrial Relations Code, 2020 — The New Dispute Resolution Framework

The Industrial Relations Code consolidates the Industrial Disputes Act, 1947; the Trade Unions Act, 1926; and the Industrial Employment (Standing Orders) Act, 1946. For Kerala employers, this Code has the most significant implications for workforce management, discipline, and dispute resolution.

Key Changes Under the IR Code

Threshold for standing orders increased: The requirement to prepare and certify standing orders (terms of employment) has been raised from establishments employing 100 or more workmen to 300 or more workers. This is a significant relief for mid-sized Kerala businesses that previously had to navigate the complex standing orders certification process. However, even if your establishment falls below the threshold, having clear written standing orders is still a best practice for disciplinary proceedings and employee handbooks.

Re-skilling fund for retrenchment: Under the IR Code, employers retrenching workers must pay 15 days' wages plus deposit an additional amount equivalent to 15 days' wages into a government-managed re-skilling fund. This is a new cost that did not exist under the Industrial Disputes Act. Kerala employers planning workforce restructuring must budget for this additional liability. Our Employee Termination Guide covers the current retrenchment framework.

Negotiating union and council: The IR Code introduces the concept of a "negotiating union" — a single trade union with majority membership — to simplify collective bargaining. In establishments with multiple unions, the Code provides a mechanism for determining the sole negotiating union through a secret ballot. This is particularly relevant for Kerala's manufacturing and plantation sectors where multiple unions are common.

Notice of change reduced: The notice period for changes in service conditions has been reduced from 21 days to 14 days. Grievance redressal committees must be constituted in every establishment employing 20 or more workers. For Kerala's SME sector, this means having a formal grievance mechanism even at relatively small scales.

Code 3: Social Security Code, 2020 — Extended Coverage for All Workers

The Social Security Code consolidates nine laws including the EPF Act, ESI Act, Payment of Gratuity Act, Maternity Benefit Act, and the Building and Other Construction Workers Act. This Code dramatically expands the scope of social security coverage to include gig workers, platform workers, and unorganised sector workers — significantly broadening the compliance landscape for employers.

Key Changes Under the Social Security Code

Unified social security organisation: The Code establishes a Social Security Fund that consolidates the EPFO and ESIC into a more unified framework. While the EPFO and ESIC will continue to operate separately for the near term, the Code enables the government to create a single-window compliance system. For now, Kerala employers must continue filing EPF ECR and ESIC monthly returns separately. Our EPF ECR Filing Guide and ESIC Monthly Return Filing Guide cover the current processes.

Gig and platform workers: In a landmark move, the Code brings gig workers and platform workers (such as delivery personnel, ride-share drivers, and freelance workers) within the ambit of social security. Employers who engage gig workers — including Kerala's growing food delivery and e-commerce logistics sector — must register these workers and contribute to the Social Security Fund. The contribution rates for gig workers will be notified separately by the central government. This is a significant new compliance obligation that did not exist under the old framework.

Increased gratuity ceiling: The maximum gratuity exemption under the Income Tax Act has been raised to ₹20 lakhs (already implemented via a separate notification). The Social Security Code empowers the government to fix the maximum gratuity payable. For now, the existing formula (15/26 × last drawn salary × years of service) continues to apply. Use our Gratuity Calculator for instant computation.

ESIC coverage extended: The Code extends ESIC coverage to establishments in districts where ESIC has been implemented, regardless of the nature of the establishment. Kerala has already leveraged Section 1(5) of the ESI Act to cover shops, hotels, restaurants, and educational institutions. The Code makes this extension national and permanent. Our ESIC Benefits Guide for Kerala Employers explains the complete coverage framework.

Maternity benefit harmonisation: The Code retains the 26-week maternity benefit under the Maternity Benefit Act, 1961. However, it introduces the possibility of extending these benefits to gig and platform workers — something the current law does not cover. For the existing maternity benefit framework under ESIC, see our ESIC Maternity Benefits Guide.

Code 4: Occupational Safety, Health and Working Conditions (OSH) Code, 2020

The OSH Code consolidates 13 existing laws including the Factories Act, 1948; the Kerala Shops and Commercial Establishments Act, 1960 (to the extent it deals with working conditions); the Contract Labour (R&A) Act, 1970; the Building and Other Construction Workers Act, 1996; the Plantations Labour Act, 1951; the Mines Act, 1952; and others. For Kerala employers in manufacturing, construction, hospitality, and plantations, this Code is the most directly relevant to daily operations.

Key Changes Under the OSH Code

Applicability threshold increased: The Factories Act threshold has been raised from 10 to 20 workers (with power) and from 20 to 40 workers (without power). This means many smaller manufacturing units in Kerala that were previously required to register as factories and comply with the full Factories Act regime may now fall outside the net. However, they remain covered under the Shops and Commercial Establishments Act of their respective states. For Kerala specifically, the state government may choose to apply lower thresholds — it is essential to verify the notification applicable to your industry.

Contract labour abolition threshold: Under the OSH Code, the central government can prohibit contract labour in any establishment employing 50 or more workers (reduced from the previous threshold of 100). This means establishments with 50+ workers using contract labour for core activities may face restrictions on contract engagement. Kerala's manufacturing and plantation sectors should review their contract labour deployment in light of this provision.

Inter-state migrant workers: The OSH Code provides enhanced protections for inter-state migrant workers, including mandatory accommodation, free medical facilities, and a portable passbook. Given Kerala's large migrant workforce from West Bengal, Assam, Bihar, and Odisha — employed primarily in construction, manufacturing, and plantations — this is a particularly significant compliance area for Kerala employers. Our Interstate Migrant Workers Act Guide covers the current framework.

Employee working conditions: The OSH Code prescribes that every employee has the right to: a clean workplace, adequate ventilation, reasonable working hours, weekly holidays, and a harassment-free environment. While these provisions largely mirror existing protections, their codification into a single statute makes enforcement more streamlined. Employers must maintain a register of all employees, display an abstract of the Code at the workplace in English and Malayalam, and file annual returns electronically. For current register requirements, see our Kerala Shop Act Compliance Guide.

What Changes for Kerala Employers: A Practical Summary

Aspect	Old Regime	New Labour Codes
Number of applicable Acts	29 central Acts + state-specific Acts	4 Codes + state-specific rules
Factory threshold	10 workers (power) / 20 (no power)	20 workers (power) / 40 (no power)
Standing orders threshold	100 workmen	300 workers
Contract labour prohibition	Appropriate government discretion	Core activities in establishments with 50+ workers
Gig worker coverage	Not covered	Covered under Social Security Code
National minimum wage	No statutory floor	Central government can fix national minimum wage
Same definitions across laws	Different definitions in each Act	Uniform definitions across all 4 Codes
Inspection regime	Multiple inspectors under different Acts	Single inspector for each Code (web-based inspection allocation)
Digital compliance	Mixed (some online, some physical)	All returns, registers, and notices to be maintained digitally

Implementation Status and Timeline (as of June 2026)

As of mid-2026, the implementation of the Labour Codes remains a work in progress. The draft rules under all four Codes have been published and finalised by the central government. Several states — including Uttar Pradesh, Madhya Pradesh, Gujarat, and Rajasthan — have already published their state rules and commenced enforcement. Kerala has published draft rules for all four Codes and is in the final stages of stakeholder consultation. Industry associations in Kerala expect the state rules to be notified within the next 3-6 months.

The key actionable insight for Kerala employers is this: do not wait for the formal notification to begin preparation. The wage-related provisions (Code on Wages) can be implemented immediately without disrupting existing compliance. The structural changes (contract labour thresholds, standing orders, gig worker registration) require proactive adjustments to policies and contracts. Starting the preparation now — at least 6 months before full enforcement — is the difference between a smooth transition and a scramble that drains your HR team's bandwidth.

How to Prepare Your Kerala Business for the New Labour Codes: 5-Step Action Plan

Step 1: Conduct a compliance gap analysis. Review your current employment contracts, wage structures, HR policies, standing orders, and statutory registrations against the provisions of each of the four Codes. Identify areas where the new Code requirements differ from current practice. This includes checking whether your establishment falls under the revised applicability thresholds for factory registration, standing orders, and ESIC coverage.

Step 2: Update employment contracts and policies. The Codes introduce new definitions of "wages," revise overtime provisions, and mandate new disclosures to employees. Review and update your employee handbooks, offer letters, and policies to align with the uniform definitions and minimum standards under the Codes. For guidance on handbook creation, see our Employee Attendance and Leave Policy Guide.

Step 3: Digitise your compliance infrastructure. The Codes mandate electronic maintenance of all statutory registers, returns, and notices. If your establishment still maintains physical registers for wage records and attendance, now is the time to transition to a digital HRMS or payroll platform. Our Payroll Software Comparison Guide covers the best options for Kerala businesses.

Step 4: Audit your contract labour deployment. The reduced threshold for contract labour abolition (50 workers) and the enhanced protections for inter-state migrant workers mean that establishments using contract labour for core activities need to reassess their engagement models. Determine whether contract workers can be regularised and ensure contractors hold valid licenses under the Contract Labour Act.

Step 5: Engage expert compliance support. The transition from 29 Acts to 4 Codes, even with simplified compliance, requires expert navigation — especially in Kerala where state-specific rules overlay the central framework. GHR Consultancy, with 30+ years of labour law experience in Kerala, offers end-to-end Labour Code transition support including compliance gap analysis, contract and policy updates, digital compliance setup, and ongoing compliance management.

Common Myths About the New Labour Codes

Myth 1: "The Codes make it harder for employers." Reality: While the Codes expand coverage to gig workers and raise certain standards, they also simplify compliance through uniform definitions, higher applicability thresholds (especially for factories and standing orders), and a single inspection regime. The net compliance burden for most Kerala SMEs is expected to decrease.

Myth 2: "The Codes abolish EPF and ESIC." Reality: The EPF Act and ESI Act continue under the Social Security Code. The contribution rates, benefit structures, and compliance procedures remain substantially the same. The main change is the enabling power to extend coverage to gig workers and platform workers.

Myth 3: "Kerala will not implement the Codes." Reality: Labour is on the Concurrent List — both central and state governments legislate on it. The Codes are central legislation that override state laws only to the extent that state laws are inconsistent. Kerala will implement the Codes through its own state rules, similar to how it currently implements the Factories Act, Shops Act, and Minimum Wages Act. The state government has already published draft rules for consultation.

Myth 4: "I already comply with the old 29 Acts, so I automatically comply with the Codes." Reality: While many provisions are carried forward, the Codes introduce new definitions, new compliance requirements (especially for gig workers), and revised thresholds. Assuming automatic compliance without a gap analysis is a compliance risk.

Why GHR Consultancy Is Your Trusted Partner for Labour Code Transition

GHR Consultancy, led by M N Anilkumar, has been at the forefront of labour law compliance in Kerala for over three decades. Our team has been tracking the Labour Code reforms since the Bills were first introduced in Parliament in 2019. We have developed comprehensive transition frameworks for our clients across manufacturing, hospitality, IT, healthcare, and plantation sectors in Kerala.

Our Labour Code readiness services include: a full compliance gap analysis comparing your current practices against the requirements of all four Codes; updating employment contracts, HR policies, and employee handbooks to align with uniform definitions and new provisions; assistance with digital register migration (from physical to electronic formats); contract labour engagement model review and restructuring; gig worker registration and compliance setup; and ongoing compliance management — monthly returns, register maintenance, and inspection support.

Whether you run a small manufacturing unit in Palakkad, a hotel in Kochi, a plantation in Munnar, or an IT services company in Thiruvananthapuram, our team can help you navigate the new Labour Code regime with confidence. Contact us today for a free initial consultation and let us build your Labour Code compliance roadmap.

Also explore our related guides: Complete Labour Law Compliance Guide, Digital Compliance and E-Returns Guide, Penalties Under Labour Laws Guide, and Complete Payroll Management Guide.