New labour codes for contractors: what changed
Four new labour codes now replace many old labour laws. Here is what changed for contractors and manpower agencies, in plain words, with a simple checklist.
The four codes and the dates
Four labour codes came into force on 21 November 2025. They replaced 29 old labour laws. The old Contract Labour Act 1970 is one of them.
| Code | What it covers |
|---|---|
| Code on Wages 2019 | Wages, pay day, wage slips, registers |
| Industrial Relations Code 2020 | Workers, unions and disputes |
| Code on Social Security 2020 | PF, ESI, gratuity and bonus |
| OSH Code 2020 | Safety, health, working conditions and contract labour |
The Central Rules under all four codes came on 8 May 2026. Each state makes its own rules too. Some states are still finishing them.
The 50% wage rule, with an example
Under the codes, "wages" means Basic + DA (+ retaining allowance). Allowances like HRA, conveyance and overtime can be at most 50% of total pay. If they are more, the extra part is added back to wages.
This rule applies to PF, ESI, gratuity and bonus. So it can raise your PF amount.
| Item | Worker A | Worker B |
|---|---|---|
| Total pay | ₹20,000 | ₹20,000 |
| Basic + DA | ₹8,000 | ₹12,000 |
| Allowances | ₹12,000 | ₹8,000 |
| 50% of total pay | ₹10,000 | ₹10,000 |
| Extra added back | ₹2,000 | Nil |
| Wages for PF | ₹10,000 | ₹12,000 |
Contract labour rules under the OSH Code
- 50 workers, not 20. The contract labour rules now apply when there are 50 or more contract workers. Before, it was 20.
- One licence for 5 years. A contractor with 50 or more workers needs one licence. It is valid for 5 years and can cover work in many places.
- No separate registration for the principal employer. The principal employer (your client) does not need a separate contract labour registration.
- Client must pay if you do not. If the contractor does not pay wages, the principal employer must pay them.
Pay day, wage slips, registers and overtime
- Pay day: pay monthly wages before the 7th of the next month.
- Wage slip: give every worker a wage slip on or before pay day. Paper or electronic is fine.
- New registers: Form I (Employee Register), Form IV (Register of Wages, Overtime, Advances, Fines and Deductions) and Form IX (Attendance Register-cum-Muster Roll). Keep them for 5 years.
- Overtime: pay OT at twice the normal rate of wages.
PF wage ceiling (limit) is now ₹25,000 a month from 17 September 2026. It was ₹15,000. This came by a separate notification. It is not part of the codes' start date.
What to do this month
- Check your pay structure. Make sure Basic + DA is at least half of total pay, or work out the add-back.
- Count your contract workers at each client. If you have 50 or more, plan for the new licence.
- Pay wages before the 7th.
- Give every worker a wage slip on or before pay day.
- Use the ₹25,000 PF ceiling for pay from 17 September 2026.
- Ask each client which register forms they want from you.
Law details depend on your state. Check your state's rules with your auditor or labour consultant before you change pay.
How ContractPay can help
ContractPay works out PF, ESI and OT for each client site. It makes PDF payslips for all workers, the bank file and the PF ECR file every month. See contract labour payroll software.
Questions people ask
When did the new labour codes start?
The four labour codes came into force on 21 November 2025. The Central Rules came on 8 May 2026. Your state may have its own rules too.
Do the contract labour rules apply to me if I have 30 workers?
Under the OSH Code, the contract labour rules apply when there are 50 or more contract workers. Before, it was 20. Check your state rules with your labour consultant.
Is the ₹25,000 PF ceiling part of the labour codes?
No. The PF ceiling of ₹25,000 came by a separate notification from 17 September 2026. Before that, it was ₹15,000.
What happens if a contractor does not pay wages?
The principal employer must pay the wages. This is why clients now check wage payments by their contractors more closely.
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