If you run an India subsidiary, GCC, or outsourced delivery center owned by a foreign parent, you already live in two worlds: global policies from HQ, and India’s fast-moving compliance reality. The New labour code shift is one of those moments where “we’ll handle it later” becomes expensive—because payroll structure, contractor models, working hours, and statutory filings all get pulled into the same spotlight.

In this guide, you’ll understand what the New labour code package actually is (the 4 consolidated labour codes), what has been notified as effective, and—most importantly—how to execute a practical 90-day compliance plan without drowning your leadership team. We’ll translate legal changes into operational steps: what to change in offer letters, how to pressure-test your salary structure, what to watch if you use staffing vendors, and what controls foreign owners should demand as proof.

New labour code—what changed in India (2025–26)

The 4 labour codes at a glance

India’s reform consolidates a large set of central labour laws into four buckets: Wages, Industrial Relations, Social Security, and Occupational Safety/Health/Working Conditions. A government press release frames this as implementation of four codes and “rationalising 29 existing labour laws.”

What “effective from 21 Nov 2025” really means

For operators, the headline is that the Government issued Official Gazette notifications appointing 21 November 2025 as the commencement date for the codes (via code-wise notifications). For example, the Code on Wages notification appoints 21 Nov 2025 as the date specified provisions come into force. The Industrial Relations Code notification similarly appoints 21 Nov 2025 as the date its provisions come into force. The OSHWC Code notification also appoints the same date. (Social Security provisions were also notified with the same date in the Gazette notification set.)

Practical point for foreign owners: treat this as a “board-level compliance switch.” Even if state rules and operational details evolve, your India entity will be expected to show (a) a readiness plan, (b) updated policies/contracts, and (c) evidence of controls—especially if you’re venture-backed, PE-owned, or work with large enterprise customers.

Why this matters more for foreign-owned India ops

Foreign-owned companies often have:

• multi-location presence (Bengaluru + Pune + NCR)

• heavy contractor usage (staffing vendors, BPO partners)

• global compensation templates (US-style allowances/benefits)

• accelerated hiring + restructuring cycles

That mix increases exposure to wage-structure issues, threshold-based obligations, and vendor non-compliance that can “flow up” to the principal employer.

New labour code—4 impact areas employers must re-check

Wages & payroll structuring (Code on Wages)

The compliance shocker for many companies is not “minimum wage” (most compliant firms already pay above it), but how wages are defined and how salary components may need rebalancing. Several employer-focused explainers highlight that allowances/exclusions are capped so that “wages” remain at least a defined share of total remuneration (often discussed as the “50% rule”).

Example (why CFO + HR must coordinate):
If an employee’s CTC is ₹20L and you structure Basic+DA as ₹6L (30%) and the rest as allowances, you may end up exceeding the permitted exclusion share—meaning part of those allowances can be reclassified into “wages,” affecting PF-linked costs and gratuity computations in many cases (depending on how rules apply to your setup). The real-world effect: higher statutory outgo and lower flexibility in “take-home optimization” models.

Unique insight (not emphasized enough on competitor pages):
For foreign-owned India entities, wage-structure changes also impact transfer pricing cost bases (for cost-plus models) and pricing negotiations with HQ or overseas customers. If your India center is billed on cost-plus and payroll costs rise 5–10%, that’s a commercial issue—not just a compliance issue.

Hiring, restructuring & disputes (Industrial Relations Code)

Two widely-cited operational changes are threshold-based:

• Prior government permission for layoff/retrenchment/closure applies at 300 or more workers (raised from 100), with flexibility for states to enhance further.

• Standing Orders applicability threshold is discussed as moving to 300 workers in several analyses.

What this means for you:

• If you’re a fast-scaling GCC, your “headcount plan” can accidentally cross thresholds.

• For PE-backed rollups, you can inherit threshold exposure post-acquisition.

Also, fixed-term employment is repeatedly framed as being treated with parity to permanent workers (benefits and protections), reducing the “easy flexibility” many employers assume they get.

Social security expansion (Social Security Code)

The Social Security Code is positioned as a broad consolidation and expansion of coverage (including unorganised/gig/platform workers) across schemes, subject to rules/schemes.

Foreign-owner angle: if you use platform-based or flexible work models (delivery, field ops, on-demand workforce), your compliance model may need a redesign—because “workforce” is no longer only your payroll.

Safety, hours & working conditions (OSHWC Code)

OSH is the area where global companies often think they are fine (“we follow ISO / global EHS”), but India compliance requires specific registers, reporting, and establishment-wise obligations. The OSHWC Code has been brought into force via notification effective 21 Nov 2025.

A recurring theme in official and professional summaries is modernization: streamlined compliance, broader coverage, and clearer employer duties (especially where you operate factories, warehouses, labs, or shift-based operations).

New labour code for foreign-owned companies in India

“Appropriate Government” + multi-state footprint

If your India entity operates in multiple states or has complex registrations, one of the first practical questions is: which authority is my “appropriate government” for a given obligation? This matters for filings, inspections, and threshold interpretations.

Actionable control: create a one-page “entity footprint” matrix:

• legal entity name + PAN + GST + EPF/ESI codes

• locations (state-wise)

• headcount by location

• contractor headcount by location

• applicable registrations & licenses

This single page becomes your audit shield when a foreign board asks: “Are we compliant under the New labour code, yes or no?”

Contractors, vendors, and joint liability risk

Foreign-owned companies lean heavily on staffing vendors—often to stay asset-light. Under Indian labour compliance, vendor failure can become your failure via principal employer obligations and reputational risk.

Unique insight: add labour-code compliance into vendor onboarding the same way you add data security clauses:

• monthly proof of PF/ESI deposits

• wage payment evidence

• statutory returns checklist

• right-to-audit clause

• escalation SLA

This turns compliance into a repeatable operational workflow, not a once-a-year scramble.

Expat secondments & cross-border HR policies

Secondments (US/Singapore employee working in India for 6–18 months) are where global policy templates break:

• attendance/working hours proofs

• overtime treatment

• local benefits alignment

• workplace safety training evidence

Best practice: create an “India addendum” to the global handbook explicitly mapped to the New labour code themes (wages, IR, social security, OSH), and require written acknowledgment.

90-day compliance playbook for the New labour code

Day 0–30: Gap assessment & evidence pack

1. Payroll stress-test: run a sample of your CTC structures and check exposure to wage-definition reshaping (the “50% rule” discussions).

2. Threshold watchlist: track establishments nearing 300 headcount, because multiple obligations are discussed around that level.

3. Document control: centralize contracts, registers, policies, vendor proofs into a single compliance folder with version control (investors love this).

Day 31–60: Fix payroll + contracts + registers

• Update offer letter templates (wage components clarity, fixed-term clauses where used).

• Update vendor contracts with labour compliance annexures (proofs + audit rights).

• Train HR/payroll on what changes operationally when codes consolidate reporting and enforcement.

Day 61–90: Implement controls + audit drills

• Run an internal “inspection simulation” (who answers, what documents, within what time).

• Create a monthly dashboard: wage compliance flags + contractor proofs + incident logs (OSH).

• Present a short board memo: “New labour code readiness status” with red/amber/green.

Quick takeaways

• The New labour code framework is now tied to Gazette notifications appointing 21 Nov 2025 as the effective date across codes.

• Payroll structure (not just minimum wages) is a major risk area under the New labour code discussions around wage definition and “50% rule.”

• Headcount thresholds (notably 300) materially change IR-related compliance expectations.

• Foreign-owned companies should treat vendor compliance as a principal-employer risk, not “vendor’s problem.”

• Build an audit-ready evidence pack in 90 days—your future self will thank you.

FAQs

Q1. Does the New labour code apply to foreign-owned companies in India?
Yes. If you operate an Indian entity/establishment, the New labour code applies based on your activities, headcount, and location—ownership nationality doesn’t exempt you.

Q2. Will the New labour code reduce take-home pay?
It can, especially for new offers where wage components are rebalanced toward “wages” (often discussed via the 50% rule), increasing statutory-linked components in some cases.

Q3. What is the Industrial Relations Code threshold change everyone talks about?
Multiple summaries note the threshold moving to 300 workers for prior permission in layoffs/retrenchment/closure and for standing orders applicability.

Q4. We use staffing vendors—what’s the biggest New labour code risk?
Vendor non-compliance (PF/ESI/wage payments) can become your operational and reputational risk. Build monthly proof collection + audit rights into contracts.

Q5. What should a foreign parent ask the India team this quarter?
Ask for a one-page New labour code readiness dashboard: payroll stress-test results, threshold watchlist, vendor proof status, and OSH evidence log.

The New labour code is not a single “new rule”—it’s a restructuring of how India expects employers to run wages, workforce relations, social security coverage, and safety/working conditions. With Gazette notifications appointing 21 November 2025 as the effective date across the codes, foreign-owned India operations should assume enforcement attention will rise and documentation expectations will tighten.