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May 11, 2026
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New labour code: Can higher gratuity and social security costs under Social Security Code, 2020 be offset by employers by salary restructuring?
India's new wage framework resets the employer compliance equation by bringing in key provisions of the Code on Social Security, 2020 into force, the Ministry of Labour and Employment has quietly triggered one of the most significant compensation and compliance shifts Indian employers have seen in decades, with effect from 21 November 2025.
The notification of the Social Security (Central) Rules, 2026 on 8 May 2026 also sets the tone for the long-awaited procedural and enforcement framework under the Code.
For years, compensation models across industries in India were designed around fragmented labour legislations. Employers optimised cost structures by keeping "basic wages" relatively low while loading compensation through allowances and flexible pay heads.
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