New Labour Codes India 2025: Complete Compliance Checklist for SMEs (With Penalties Guide)

India has undergone its biggest labour law reform in decades. The government replaced 29 old, fragmented labour laws with 4 unified Labour Codes, effective November 21, 2025. If you run a business in India and haven't yet audited your compliance posture, you are at legal risk right now.

This guide gives HR managers, business owners, and compliance officers a complete, actionable checklist — along with penalties for non-compliance and how to automate the entire process.

What Are the 4 New Labour Codes?

Why SMEs Must Act Immediately

Most large corporations have already updated their policies. But MSMEs and startups are still operating under old compliance assumptions. The new Codes introduce:

• Single registration across all applicable Codes
• Single annual return replacing multiple filings
• Fixed-Term Employment now recognised nationally — no retrenchment compensation
• Gratuity eligibility potentially reduced to 1 year for fixed-term workers
• Floor wage concept under Code on Wages — even state minimum wages cannot go below this

The 4 Labour Codes: Key Changes Explained

1. Code on Wages, 2019

• Covers all employees — no wage ceiling for applicability
• Employer must pay wages within 2 days of daily workers' last working day
• Overtime rate: twice the normal wage rate
• Penalty: Up to ₹50,000 for first offence; up to ₹1,00,000 for repeat offences

2. Industrial Relations Code, 2020

• Standing Orders now mandatory for establishments with 300+ workers (earlier: 100+)
• Retrenchment/layoff notice period: 60 days for 300+ worker units (earlier required central govt approval at 100+)
• Fixed-Term Employment legally recognised — no separation notice or retrenchment compensation required
• Penalty: Illegal strikes/lockouts can attract up to ₹50,000 fine or 3 months imprisonment

3. Code on Social Security, 2020

• EPF applicability: 20+ employees (unchanged)
• ESI applicability: 10+ employees (unchanged), wage ceiling revised
• Gratuity: Fixed-term employees get gratuity proportionate to their term — even if less than 5 years
• Gig/Platform Workers now covered under social security provisions for the first time
• Penalty: Non-deposit of EPF/ESI can attract 1–3 years imprisonment + fine

4. Occupational Safety, Health & Working Conditions Code, 2020

• Applicable to establishments with 10+ workers
• Mandatory annual health check-ups for workers aged 45+
• Working hours: Max 8 hours/day, 48 hours/week; overtime needs written consent
• Penalty: Up to ₹2,00,000 for safety violations; up to ₹3,00,000 for repeat violations

✅ Labour Code Compliance Checklist for SMEs (2025–26)

Registration & Licensing

• Obtain single registration under the applicable Labour Code(s)
• Update existing EPF, ESI, and professional tax registrations
• Register under the new Occupational Safety Code if 10+ workers

Wages & Payroll

• Map current salary structure against Code on Wages floor wage
• Ensure Basic + DA ≥ 50% of CTC (where applicable under state rules)
• Review overtime records and payment rates
• Ensure timely wage disbursement (within 7th/10th of next month)
• EPF, ESI & Social Security
• Verify EPF deduction on new wage definition (includes Basic + DA + retaining allowance)
• Update ESI contributions for eligible employees
• Calculate gratuity eligibility for fixed-term employees
• Check if any gig workers on platform are now covered under social security

Statutory Registers & Records

• Register of wages (Form I under Code on Wages)
• Register of deductions
• Register of overtime
• Register of fines
• Attendance register
• Leave records with balance
• Accident and health records (OSH Code)

Returns & Filings

• File Single Annual Return (replaces multiple old returns)
• Quarterly EPF/ESI e-filings
• Issue pay slips to all employees every wage period

Employment Contracts

• Update appointment letters for Fixed-Term Employment clauses
• Revise standing orders if 300+ employees
• Update HR policy manual to reflect new Code provisions

Penalty Reference Table

How to Automate Labour Code Compliance

Manually tracking all 4 Codes across registers, returns, payroll, and filings is practically impossible for a lean HR team. This is where compliance software steps in.

SNexa Labour Code Compliance is purpose-built for Indian businesses navigating the new Labour Codes. It helps you:

• ✅ Maintain all statutory registers digitally in one place
• ✅ Auto-calculate EPF, ESI, gratuity under updated Code definitions
• ✅ Generate ready-to-file single annual return formats
• ✅ Track compliance deadlines with built-in alerts
• ✅ Produce audit-ready reports for inspections

Whether you're an SME owner, HR head, or CA/CS handling client compliance — SNexa eliminates the manual burden and protects your business from costly penalties.

👉 Download SNexa Labour Code Compliance Software →

Frequently Asked Questions

Q: When did the 4 Labour Codes come into effect?
A: The four Labour Codes were officially notified and became effective on November 21, 2025, replacing 29 central labour laws.

Q: Does the new Code on Wages apply to all businesses?
A: Yes. Unlike older laws that had wage ceiling thresholds, the Code on Wages applies to all employees across all establishments with no wage ceiling.

Q: Can I still use old statutory forms and registers?
A: No. The new Codes prescribe new forms (e.g., Form I under Code on Wages). Old registers are no longer valid for compliance.

Q: Is gratuity now payable before 5 years of service?
A: Yes, for Fixed-Term Employees, gratuity is payable proportionate to their service period, even if less than 5 years.

Q: What is the easiest way for SMEs to manage all 4 Code compliances?
A: Using dedicated labour compliance software like SNexa Labour Code Compliance automates registers, filings, and deadline tracking in one dashboard.

Last updated: June 2026 | Source: Ministry of Labour & Employment, Government of India