Your Obligations as an Employer Under the New Labour Codes

Under Section 17 of the Code on Wages, 2019, wages must be disbursed within strict statutory time limits determined by the wage cycle:

Key Legal Shift: Under the erstwhile Payment of Wages Act, 1936, these timelines applied primarily to employees earning below a statutory wage threshold (last revised to Rs 24,000/month) and allowed up to 10 days for establishments with 1,000+ workers. Under the new Code, the 7-day monthly limit applies universally to every single employee across the organization, regardless of salary level or total workforce headcount.

Note on payroll cycles: The 7-day rule applies exclusively to monthly salaries; establishments paying weekly or fortnightly wages operate under much shorter settlement windows.

Under Section 18(3) of the Code on Wages, total authorized deductions made from an employee’s wages in any given wage period cannot exceed 50% of total wages.

Crucial Context: "Wages" here refers to the unified definition under the Code: Basic Pay, DA, and Retaining Allowance, with any allowances exceeding 50% of total remuneration added back.

If an employee takes a substantial company loan or salary advance, the employer cannot deduct the entire sum at once if it causes total deductions to cross 50% of that month’s wage base. Employers must structure recoveries into smaller monthly instalments to remain compliant.

Under Section 17(2) of the Code on Wages, when an employee’s service ends, all wages due must be disbursed within two working days.

This mandatory 2-day timeline is triggered when an employee:

• Resigns from service (voluntary exit)
• Is dismissed or removed from employment
• Is retrenched
• Becomes unemployed due to closure of the establishment

Impact on Enterprise Offboarding: The explicit inclusion of resignation is one of the biggest operational shake-ups in the Labour Codes. Standard enterprise HR practices taking 30 to 60 days to complete departmental asset sign-offs and issue FnF settlements are no longer permissible for wage components.

Statutory Nuance on Benefits: The 2-working-day mandate specifically governs wages due (including earned salary and encashable leaves where defined as wages). Other statutory terminal benefits follow their respective statutory timelines—for example, Gratuity must be paid within 30 days of becoming due under Section 53 of the Code on Social Security, 2020.

Under Section 6(1)(f) of the Occupational Safety, Health and Working Conditions (OSH) Code, 2020, no employee can be engaged in any establishment without the employer issuing a formal appointment letter in the prescribed format.

Immediate Action Required: While the law provided a 3-month transition window from the effective date to issue compliant appointment letters to existing personnel, that transitional period has elapsed. Any establishment that has not yet regularized formal appointment letters for all staff members must do so immediately.

Under Section 6(1)(c) of the OSH Code, employers are required to arrange free-of-cost annual health examinations or clinical tests for designated categories of employees.

Understanding the division of authority is essential here:

• Under Central OSH Rules: Employers in dock work, mines, and building or other construction work must provide a free annual medical examination for all employees aged 40 and above.
• State Rule Expansions: Because state governments are the "appropriate government" for standard factories and commercial establishments, several states (including Maharashtra's draft rules) have extended this mandate to cover every worker aged 40 and above across all factories and establishments.
• Hazardous Processes: Any establishment carrying on hazardous operations must arrange periodic medical examinations for workers regardless of their age.

Employers must review the state-specific rules applicable to each operating location to determine the precise medical check-up requirements for their sector.

Under Section 22 of the OSH Code, establishments exceeding specific workforce headcount thresholds are legally required to appoint qualified Safety Officers:

As the workforce expands beyond these minimum floors, the statutory ratio mandates the appointment of additional safety officers to maintain appropriate safety oversight across shifts and working locations.

The OSH Code establishes strict dual liability mechanisms under Section 55 to guarantee wage protection for contract workers:

• Contractor’s Primary Obligation: The contractor is primarily responsible for disbursing wages within the prescribed wage cycle (within 7 days of the wage period).
• Principal Employer’s Fallback Liability: If the contractor defaults or makes short payment within the statutory period, the principal employer is legally obligated to pay the full wages or unpaid balance within 15 days (as specified under the Central Rules).
• Statutory Right of Recovery: The principal employer has the unchallengeable statutory right to recover any wage amounts paid on behalf of the contractor by deducting from invoices, drawing against the contractor’s security deposit, or recovering the sum as a debt.
• Experience Certificate on Demand: Every contractor is statutorily required to furnish an official Service / Experience Certificate (Form XIV) to contract workers upon termination of their engagement.