The 2026 Labour Codes: The Hiring Compliance Checklist Before Your Next Offer Letter

On 21 November 2025, India's four new Labour Codes — the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code — took effect, replacing 29 older labour laws in one move. That's the headline most coverage led with. The part that actually matters for your next offer letter is quieter: "took effect" and "fully enforced with final rules everywhere" are two different things, and the gap between them is exactly where hiring-compliance mistakes are happening right now.

What's actually true today, and what's still rolling out

The four codes are in force in principle since November 2025. But the central rules that operationalize the detail were only finalized around April 2026, and they apply first to establishments under central government jurisdiction — banking, insurance, telecommunications, mining, air transport, railways, and central public sector undertakings. Most private-sector employers sit under state jurisdiction instead, and state-level rules are patchier: some states have finalized their own rules, others still have drafts out for comment, and a few are further behind. If you're not certain which category your establishment falls into, that's worth confirming with counsel specifically — it genuinely changes month to month right now, not something a general article can pin down for your exact state.

What follows isn't contingent on that uncertainty resolving, though — these five items are worth acting on regardless of exactly where your state's rules currently stand.

1. Written appointment letters are now mandatory for every hire

Before November 2025, the obligation to issue a written appointment letter was inconsistent — mostly tied to the Industrial Employment (Standing Orders) Act, and mostly relevant to larger establishments. The Industrial Relations Code changes that: a written appointment letter is now a statutory requirement for every worker, regardless of establishment size or sector, whether they're permanent, fixed-term, contract, or gig.

This applies whether the hire is a full-time employee, a fixed-term contract, or a gig/contract arrangement — the days of an informal offer email standing in for a real appointment letter are over, on paper at least.

2. The "50% wages" rule quietly rewrites your CTC math

This is the one most likely to catch employers off guard, because it doesn't announce itself the way a headline law change does — it just changes the arithmetic under an offer letter that looks the same as always. Under the Code on Wages, Basic pay plus Dearness Allowance must be at least 50% of an employee's total remuneration. If a pay structure pushes Basic below that threshold through heavy allowances, the excess above the 50% mark gets added back into "wages" for statutory calculations anyway.

Why this matters: many Indian employers have historically kept Basic as low as 20–30% of CTC specifically because Provident Fund, ESI, and gratuity are all calculated on Basic — a lower Basic meant lower statutory contributions on both sides. That structuring approach no longer achieves what it was designed to.

The practical effect: total CTC doesn't have to change, but employer PF and gratuity liability go up, and the candidate's monthly take-home typically goes down, purely from the restructured math — worth explaining honestly to a candidate reviewing an offer, rather than letting them discover it on their first payslip. If you're sanity-checking what a specific offer actually pays out monthly under the new structure, the CTC ↔ in-hand salary calculator breaks down exactly where the gap comes from.

3. Full and final settlement: 2 working days, no exceptions

This one isn't new information if you've read our other articles on notice and layoffs, but it's worth restating here as an offboarding-process item, not just a candidate-rights one: under Section 17(2) of the Code on Wages, all wages owed to a departing employee — salary, leave encashment, other dues — must be paid within 2 working days of their last working day, regardless of whether they resigned, were terminated, or retrenched. The old norm of 30–45 days is no longer defensible; delayed settlement carries a real penalty under Section 54, up to ₹50,000 for a first offense. If your offboarding process still assumes a multi-week runway to process a final settlement, that assumption needs to change alongside your hiring paperwork.

4. POSH: the older law everyone still gets wrong

Worth being precise here: an Internal Complaints Committee isn't part of the four new Labour Codes — it's a requirement under the Prevention of Sexual Harassment (POSH) Act, 2013, which has been law for over a decade. It's included in this checklist because it remains one of the most commonly skipped hiring-adjacent compliance obligations at smaller and growing companies, and a new-Labour-Codes compliance review is a natural moment to check it alongside everything else.

Any employer with 10 or more employees at a given office or administrative unit must constitute an ICC, with a specific composition:

Failing to constitute an ICC carries a penalty of ₹50,000 for a first violation, with repeat non-compliance risking cancellation of the business's operating license. If you've crossed 10 employees and haven't formally constituted one, that's a same-week fix, not a someday one.

5. Background verification: consent is becoming a real compliance question

The Digital Personal Data Protection Act, 2023 is being phased in gradually — the Data Protection Board was set up in November 2025, with further provisions phasing in through November 2026 and May 2027 — so it's not accurate to say every substantive obligation is fully enforced today. But the direction is unambiguous: BGV consent is moving from "good manners" to a documented, specific, informed consent requirement, separate from a general clause buried in an offer letter or employment agreement.

The safer practice, ahead of full enforcement rather than after it: use a standalone BGV consent form that states plainly what will be checked, which third-party vendor is involved, and how long the data is retained — rather than relying on a boilerplate line inside the offer letter. It costs you almost nothing to do now, and it's exactly the kind of thing that's expensive to retrofit once enforcement catches up.

A one-page checklist before your next offer letter goes out

Where AxureOne fits in

We build a compliant appointment letter, a wage structure that actually respects the 50% rule, and consent-based BGV into every hire we run from the start — not something bolted on after an audit finds the gap. If you'd rather build hiring compliance in from the first requisition than retrofit it later, talk to us about the role you're hiring for.

If you're also trying to shrink how long each hire takes, not just how compliant it is, see why your hiring process takes 45 days (and how to get it to 15). And if compliance gaps like a withheld document or a botched settlement have ever turned into a bigger dispute down the line, the real cost of a bad hire in India covers what that actually adds up to. For what a transparent recruiting fee looks like from a firm that takes this kind of detail seriously, see recruitment agency fees in India, decoded.