Briefing your board on the Labour Codes: the five numbers to bring

Why this is now a board conversation

India’s four Labour Codes came into force on 21 November 2025. Final Central Rules landed on 8 May 2026. The Income-tax Act 2025 followed on 1 April 2026. That is two new baselines inside one financial year, and both touch cost lines the board already watches: payroll, gratuity provisioning, and statutory risk.

You will be the one the board asks. Not because you wrote the Codes, but because compliance and cost now sit on the same line item, and that line item is yours. This guide gives you five numbers to bring, and answers to the three questions boards tend to ask.

The five numbers

1. The 50% wages-deeming exposure. Under the Code on Wages, excluded pay components — allowances, bonus, employer PF and similar — are checked against a 50% threshold. If they exceed 50% of an employee’s total pay, the excess is added back into “wages” for benefit calculations. If your CTC structures lean heavily on allowances, this changes the base gratuity and other statutory benefits are calculated on. Source: Code on Wages, the 50% deeming rule (confirmed in the verified knowledge base).

2. Gratuity accrual start. On an India-registered fixed-term contract, gratuity now accrues from one year of service, pro-rata, replacing the old five-year qualifying period for that category. Source: Social Security Code §53, fixed-term employment. Count how many fixed-term contracts you carry, and what one year of accrued gratuity on each looks like.

3. International Worker PF exposure. For any foreign national on assignment through an Indian entity, PF runs at 12% employer plus 12% employee on the full global package. This includes home salary, cost-of-living allowance and offshore allowances — not just the India-delivered slice — and there is no ceiling. This is Para 83 of the EPF Scheme, and it predates the Codes; it has not been replaced by them. Source: EPF Scheme Para 83 (confirmed).

4. The threshold jumps. Standing orders and prior-permission-for-layoffs requirements now bite at 300 workers, up from 100. Contract-labour licensing bites at 50, up from 20. If your headcount sits in either gap, obligations you didn’t have last year may now apply, or ones you had may have lifted. Source: Industrial Relations Code thresholds (confirmed).

5. The Para 83 litigation position. Only the Karnataka High Court has ruled against enforcing Para 83 (Stone Hill Education Foundation, 25 April 2024). The Bombay and Delhi High Courts have both upheld it. The Supreme Court issued notice in the LG Electronics case on 12 March 2026 — notice only, no stay, no ruling on the merits. It directed that no final orders be passed against the petitioners meanwhile. Outside Karnataka, EPFO keeps enforcing Para 83 in full. If you have assignees, this is not a settled question, and it is not one to bet on being resolved in your favour.

The three questions boards ask

“Are we exposed, or are we compliant?” Answer with the deeming-rule check (number 1) and the threshold check (number 4), applied to your actual headcount and pay structures. Don’t give a general statement that “the Codes are in force.” Boards want to know if the exposure is theirs.

“What does this cost us this year versus next?” Gratuity is the clean answer: it is provisioned, not paid. So the P&L impact of the one-year accrual rule shows up as a reserve movement, not a cash outflow, in the first year. PF for assignees is cash, monthly, and immediate — that is the number that moves the current-year budget. Keep the two separate in the board pack; conflating them either overstates or understates the year-one hit.

“Who else has been fined or sued over this?” Say what is known and flag what isn’t. The Para 83 litigation (number 5) is public and ongoing. Penalty scale is public too: unpaid wages carry escalating fines under the Wages Code. A deducted-but-unpaid employee PF or ESI contribution is a criminal offence under the Social Security Code. It carries imprisonment of one to three years and a fine, and it is not compoundable.

Bringing the tax crosswalk

A labour-code point is not finished for a board until its tax consequence is stated. Gratuity above the old exemption structure sits under §19 of the Income-tax Act 2025. The employer-PF perquisite cap that catches high-value International Worker PF is §17(1)(h), at ₹7,50,000 a year. Contributions above that are taxable to the employee, not a shelter for the company. Illustrative: on an assignee with ₹18 lakh a year in employer PF, roughly ₹10.5 lakh sits above that cap. It becomes the employee’s taxable perquisite, which usually means a bigger tax-equalisation bill back to the company.

Bringing it into the room

Do not bring the whole Codes. Bring the five numbers above, applied to your actual headcount, contract mix, and assignee population. State plainly where the position is settled (thresholds, deeming rule, PF mechanics) and where it is genuinely open (Para 83’s ultimate fate, most state rules). That distinction — settled versus open — is what turns a compliance briefing into something the board can act on.

General guidance, not legal advice — work the specific position through with India counsel before relying on it.