Labor Codes 2025 (Sharad)

Labor Codes for NGOs & How to be Ready (Part 1)

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Thank you Sharad from Saathi Development Services for sharing this resource with us. 

Session Layout

Why Comply with Other Laws?

Section 12AB(5) of Income Tax Act states:

Labor Codes Overview

The Four Codes:

  1. The Code on Wages, 2019: Amends and consolidates the laws relating to wages and bonus.

  2. Industrial Relations Code, 2020: Amend and consolidate the laws relating to social security with the goal to extend social security to everyone in organised, unorganisedand any other sectors

  3. The Social Security Code, 2020: Consolidates and amends the laws relating to trade unions, conditions of employment in industrial establishments, investigation and settlement of industrial disputes

  4. Occupational Safety, Health & Working Conditions Code, 2020: Focussed on consolidating and amending the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment

Comparison: Before vs. Under the Codes


What will change under Labor Codes

The Code on Wages, 2019

Subsumed Legislations

The Code on Wages, 2019 subsumes the following:

  1. The Payment of Wages Act, 1936

  2. The Minimum Wages Act, 1948

  3. The Payment of Bonus Act, 1965

  4. The Equal Remuneration Act, 1976

Provisions Prior to Code on Wages

Chapter Layout in Code

Key Provisions: Definitions & Coverage

Key Provisions: Definition of 'Wages'

Section 2(y)-Wages means all remuneration i.e. salary, allowance or otherwise expressed in money or capable of being so expressed payable if terms of employment fulfilled. It has 4 parts:

1. Inclusions:

2. Exclusions (11 items):

3. Conditional Inclusion:

4. Remuneration in Kind:

Meaning and Inclusions

Exclusions

means all remuneration payable by way of salary, allowances or otherwise; expressed or capable of being so expressed in terms of money and includes:a) Basic pay) Dearness allowance) Retaining allowance

Exclusions (11)

  • bonus payable but not forming part of remuneration
  • House rent allowance
  • Value of house accommodation and utilities (light, water, medical attendance or amenity)
  • Remuneration payable under any award/settlement between parties or court order
  • Employer contribution to provident fund/pension fund
  • Sum paid to defray special expenses due to nature of work
  • Conveyance Allowance/travelling concession
  • Any Commission payable with accretions
  • Any Overtime Allowance
  • Any gratuity payable on termination- Any retrenchment compensation/retirement benefit./ex gratia on termination

Exclusions capped at 50% of total remuneration (except gratuity and retrenchment compensation)

 

Remuneration in kind to the extent it does not exceed 15% of total wages shall be included in wages

Illustrations: Calculation of Wages

Scenario 1

Total remuneration:

Type

Amount (INR)

Basic

8,000

HRA

4,000

Special allowance

6,000

Conveyance

2,000

Overtime

3,000

Commission

2,000

Total

25,000

Specified exclusions:

Type

Amount (INR)

HRA

4,000

Conveyance

2,000

Overtime

3,000

Commission

2,000

Total

11,000

Calculation of wages:

Type

Amount (INR)

Basic

8,000

Special Allowance

6,000

Conditional inclusion (if specified exclusions exceeds 50% of total remuneration, i.e., INR 12,500)

-

Total (lower of inclusions or 50% of total remuneration)

14,000

Wages: INR 25,000 - INR 11,000 = INR 14,000 (i.e., total remuneration (-) exclusions)

Scenario 2

Total remuneration:

Type

Amount (INR)

Basic

8,000

HRA

4,000

Special Allowance

4,000

Conveyance

4,000

Overtime

3,000

Commission

2,000

Total

25,000

Specified exclusions:

Type

Amount (INR)

HRA

4,000

Conveyance

4,000

Overtime

3,000

Commission

2,000

Total

13,000

Calculation of wages:

Type

Amount (INR)

Basic

8,000

Special Allowance

4,000

Conditional inclusion (if specified exclusions exceeds 50% of total remuneration, i.e., INR 12,500)

500

Total (lower of inclusions or 50% of total remuneration)

12,500

Wages: INR 25,000 - INR 13,000 + INR 500 = INR 12,500 (i.e., total remuneration (-) exclusions (+) inclusions)

Sample calculation for exclusion from Wages-typical NGO comp

Per month

Basic

50000

HRA-50% of Basic

25000

Special Allowance-25% of Basic

25000

Er PF-12% of Basic

6000

Gross Salary

106000

Gratuity-4.81% of Basic

2405

EL-18 days on Basic

2466

CTC

110871

Calculation of Wages

 

Exclusions

 

HRA

25000

Er PF

6000

Conveyance

 

Total exclusions

31000

Exclusion % of CTC

28

Key provisions in the Code

Applicability of Payment of Bonus to NGOs

NGOs are not covered under Payment of Bonus Chapter 4, Section 41(1)(e) if they are:

Action Points for NGOs

The Code on Social Security, 2020

Subsumed Legislations

The Code on Social Security, 2020 subsumes:

EPF & Misc Provisions Act 1952

ESI Act

Maternity Benefit Act 1961

Payment of Gratuity Act 1972

Labor Codes for NGOs & How to be Ready (Part 2)

Read the information below in 15+ languages by selecting your preferred language using the translation tool in the top left corner of the screen.

Thank you Sharad from Saathi Development Services for sharing this resource with us. 

Layout of Session

The Code on Social Security, 2020

Subsumed Legislations

Chapter Layout in Code

First Schedule of SS Code - Applicability

Definition of Establishment means:

Key Provisions in the Code

Fixed Term Employee (FTE) & Gratuity

Gig & Platform Workers

Sample Comp Structure: Before vs. After New Wage Definition

Component Before New Definition After New Definition
Basic 50,000 50,000
HRA 25,000 (50% of Basic) 25,000
Special Allowance 25,000 (25% of Basic) 1,000
Conveyance - 23,880
Gross Salary 106,000 106,000
Er PF 6,000 (12% of Basic) 6,120 (12% of Wages)
Gratuity Provision 2,405 (4.81% of Basic) 2,453 (4.81% of Wages)
EL Provision 2,466 (18 days on Basic) 2,515 (18 days on Wages)
CTC 110,871 110,968
Take Home 100,000 99,800
Exclusion % of CTC 28% 50%

Note: In the "After" scenario, exclusions are capped at 50%. The structure is tweaked (shifting Special Allowance to Conveyance/others) to manage the 50% limit.

Action Points under SS Code for NGOs

The Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC)

Subsumed Legislations

Provisions prior to OSH code

Chapter Layout in Code

Chapter 1: Preliminary
Chapter 2: Registration
Chapter 3: Duties of Employer and Employee
Chapter 4: Occupational Safety and Health
Chapter 5: Health, Safety and Working Conditional
Chapter 6: Welfare provisions
Chapter 7: Hours of Work and annual leave with wages
Chapter 8: Maintenance of Registers and Records
Chapter 9: Inspector cum Facilitators
Chapter 10: Special provisions of employment of women
Chapter 11: Contract labor and ISMW etc
Chapter 12: Offences & Penalties
Chapter 13: Misc

Key Provisions (OSHWC Code)

Contract Labor Provisions

Leave & Other Provisions

Action Points under OSHWC Code for NGOs

The Industrial Relations Code, 2020

Subsumed Legislations

Definition of Industry

"Industry" means any systematic activity carried on by co-operation between an employer and worker (whether such worker is employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not,—
(i) any capital has been invested for the purpose of carrying on such activity; or 
(ii) such activity is carried on with a motive to make any gain or profit, but does not include —
(i) institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service; or
(ii) any activity of the appropriate Government relatable to the sovereign functions of the appropriate Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or
(iii) any domestic service; or (iv) any other activity as may be notified by the Central Government;

Key Impact Areas

Key Takeaways

Compliance Checklist under Labor Codes

Wage Code

SS Code

OSH Code

Employee classification

EPF, Gratuity,EL-Basis

Hours and days of Work per week (5/6 days)

Definition of Wages

EPF contribution %

Max hours per day

Revisit and revise comp structure

EDLI contribution %

Leave calendar

Minimum Wages (both central & state for multi state orgs)

ESI coverage pan India

CL/SL (not as per codes)

Payment of Wages timelines

Opt in/opt out EPF & ESI

EL eligibility and carry forward. Also consistency of OSH and S&E Act for EL

FnF

Flexi hiring through FTE

Appointment Letter

Deductions from Wages specified

Gratuity for FTE >1 year

Annual health checkup

Equal remuneration for all gender

Retrospective application of Wages for Gratuity

Health & Working conditions

 

Compulsory insurance of Gratuity

Welfare provisions

 

Vacancy notification on career centre

OSH standards

 

Availing SS services

Prohibition forengaging contract labor in core activity

 

ISMW

Wage Slip

Other SS Laws - Coexisting

Shops & Establishment Act (State Act)

Professional Tax (PT)

Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013 

Apprentices Act 1961