Labour Codes checklist for small employers
What a small or medium employer in Delhi should review under the four Labour Codes in force since 21 November 2025: the common wage definition and the 50% rule, the Rs 25,000 EPF ceiling, the bonus limits, gratuity for fixed-term staff, and the Delhi registrations and contributions.
Published by SKAG and Associates · Page maintained by CA Gaurav Singh (ICAI M.No. 539050) · Last updated: 30 October 2026
Note: General information as at 30 October 2026. Rules under the Codes are still being notified, so check the current rules for your State before acting. This is not a substitute for professional advice.
The Code on Wages, 2019, the Code on Social Security, 2020, the Industrial Relations Code, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 changed how wages are measured and added new obligations for employers of every size. The checklist below is a working list for a small business in Delhi. Payroll figures can be tested with the PF calculator, gratuity calculator, bonus calculator, minimum wages calculator and full and final settlement calculator.
1. Wages and salary structure
- Work out “wages” for each salary structure under the common definition (Section 2(y) of the Code on Wages): basic pay, dearness allowance and retaining allowance.
- Add up the excluded items (such as HRA, conveyance, overtime, commission). If they exceed 50% of total remuneration, add the excess back to wages.
- Use the resulting wage figure for PF, gratuity, bonus and leave encashment, and revise CTC letters where the base changes.
- Pay monthly wages by the 7th of the following month, and dues on resignation, dismissal or retrenchment within two working days (Section 17 of the Code on Wages).
- Check every rate against the current Delhi minimum wages; the Code applies minimum wages to all employees, not only scheduled employments.
2. Provident fund (from 17 September 2026)
- Apply the EPF wage ceiling of Rs 25,000 a month (S.O. 5109(E)); it was Rs 15,000 before 17 September 2026.
- Enrol employees with EPF wages between Rs 15,001 and Rs 25,000 who were not members.
- Update payroll: employer EPS share up to Rs 2,083 a month (8.33% of Rs 25,000), EDLI 0.5% of wages up to the ceiling, admin charge 0.5% (minimum Rs 500 a month).
- Deposit through the ECR by the 15th of the following month.
3. Bonus (limits notified 25 August 2026)
- Eligibility: employees earning up to Rs 21,000 a month who worked at least 30 days in the year (S.O. 4711(E)).
- Calculation on Rs 7,000 a month or the minimum wage fixed by the Central Government, whichever is higher (S.O. 4710(E)); both deemed effective from 21 November 2025.
- Pay at least 8.33% (or Rs 100 if higher) and at most 20% of wages, within eight months of the year end (30 November for a March year end).
4. Gratuity and fixed-term staff
- For fixed-term employees, provide gratuity pro rata on expiry of the term without the five-year condition; the Labour Ministry’s Compliance Handbook describes this as gratuity after one year of service (Section 53, Code on Social Security).
- Recompute the gratuity provision on the new wage base (50% add-back), as it raises the last-drawn wage for many structures.
- Pay gratuity within 30 days of it becoming payable.
5. Delhi-specific items
- Shops and Establishments: one-time registration on labourcis.nic.in, no fee; renewal rule omitted by the Delhi Shops and Establishments (Amendment) Rules, 2025, published on 9 December 2025.
- Labour Welfare Fund: establishments with 5 or more persons pay Rs 0.75 (employee) and Rs 2.25 (employer) per employee each half-year, before 15 July and 15 January.
- Professional tax: not levied in Delhi.
- Working hours: up to 9 hours a day and 48 a week under the Delhi Shops and Establishments Act, with overtime at twice the ordinary rate.
6. Registers, letters and returns
- Issue an appointment letter to every employee, including existing staff who never received one (Section 6(1)(f) of the OSH Code: staff without one at the commencement of the Code were to receive it within three months).
- Move wage, attendance and leave registers to the formats under the Codes; electronic registers are allowed.
- Keep wage slips for every wage period and the bonus and gratuity workings on file.
- Track State and central rules as they are notified; until then the existing rules continue where consistent with the Codes.
Worked example: the 50% add-back
An employee’s monthly pay is Rs 40,000: basic Rs 16,000 and allowances (HRA, conveyance, special allowance) of Rs 24,000. The allowances are 60% of total pay, Rs 4,000 more than half. That Rs 4,000 is added back, so wages under the Codes are Rs 20,000, not Rs 16,000. PF on Rs 20,000 is Rs 2,400 from each side, within the Rs 25,000 ceiling, and gratuity is worked out on the higher wage too.
Frequently Asked Questions
From when do the Labour Codes apply to a small employer?
All four Codes came into force on 21 November 2025. Until new rules are notified, the existing rules continue to the extent they are consistent with the Codes, according to the Labour Ministry’s FAQs.
What is the 50% rule in the wage definition?
The Codes define wages as basic pay, dearness allowance and retaining allowance, with listed items excluded. If the excluded items (such as HRA, conveyance and overtime) together exceed 50% of total remuneration, the excess is added back to wages for PF, gratuity, bonus and other calculations.
Is a fixed-term employee entitled to gratuity after one year?
The five-year service condition does not apply to gratuity on the expiry of fixed-term employment under the Code on Social Security, and gratuity is paid pro rata (Section 53 of the Code on Social Security). The Labour Ministry’s Compliance Handbook for Employers describes this as gratuity on termination of the contract period after one year of service.
Does a Delhi shop need to renew its Shops and Establishments registration?
No. Registration under the Delhi Shops and Establishments Act is one-time; the renewal rule (Rule 5 of the Delhi Shops and Establishments Rules, 1954) was omitted by the Amendment Rules published in the Delhi Gazette on 9 December 2025. Registration itself is online on labourcis.nic.in, with no fee.
Notes on each change, with the notification: Labour Codes in force, EPF wage ceiling Rs 25,000 and bonus limits under the Code on Wages. The firm’s payroll work is described on the accounting and payroll page.