What Foreign Companies Need to Know About India’s Labour Codes???

India has become an increasingly attractive destination for foreign companies looking to build teams, establish operations and access skilled talent.

But entering the Indian market involves more than finding the right employees.

One of the biggest considerations is understanding India’s changing employment law framework.

India’s four Labour Codes came into force on 21 November 2025, consolidating 29 existing Central labour laws into four broader codes. The government describes the reform as an effort to simplify compliance while strengthening wages, social security, workplace safety and worker protections.

For a foreign company hiring its first employee in India, these changes can seem complicated.

The important thing is knowing where the major compliance responsibilities begin.

What Are India’s Four Labour Codes?

The earlier labour-law framework consisted of numerous separate Central laws.

The new framework brings them together into four principal Codes:

• Code on Wages, 2019
• Industrial Relations Code, 2020
• Code on Social Security, 2020
• Occupational Safety, Health and Working Conditions Code, 2020

The objective is to create a more streamlined employment framework, with fewer registrations, forms and returns. The Ministry’s compliance handbook notes that the framework reduces 31 returns to a single electronic return, 181 forms to 73 and 84 registers to 8.

For international employers, however, simplification does not mean compliance can be overlooked.

Salary Structures May Need a Closer Look

One of the most important areas for foreign companies is the definition of “wages.”

Under the Code on Wages, certain allowances exceeding the prescribed 50% threshold are included in wages for statutory purposes. This can affect calculations connected with benefits and contributions, including PF and gratuity.

This means companies should not simply copy a salary structure from another country and apply it to Indian employees.

Compensation structures should be reviewed for Indian requirements before employment begins.

Minimum Wages Are No Longer Just a Local Question

The Code on Wages provides for minimum wages across employments and introduces a statutory floor wage framework.

For foreign companies, this reinforces an important principle: compensation must be reviewed against the applicable Indian wage requirements rather than relying only on the employee’s negotiated salary.

Employers should therefore regularly review salary structures as applicable wage requirements evolve.

Social Security Has Become More Significant

Foreign companies also need to understand India’s social-security obligations.

The Social Security Code covers areas including EPF, ESI, gratuity and other social-security provisions. The government has also highlighted expanded coverage for unorganised, gig and platform workers under the new framework.

For conventional employees, companies should pay particular attention to:

• EPF applicability
• ESI applicability
• Gratuity obligations
• Maternity-related benefits
• Statutory contributions
• Employee records and documentation

These responsibilities should be built into payroll processes rather than handled as an afterthought.

Appointment Letters Are Important

Foreign employers sometimes focus heavily on payroll while overlooking employment documentation.

The Labour Codes reinforce the importance of formal employment documentation, including appointment letters.

For an international company, the employment agreement should clearly establish matters such as:

• Job responsibilities
• Compensation
• Working arrangements
• Leave provisions
• Notice requirements
• Benefits
• Confidentiality obligations
• Termination conditions

A properly structured employment relationship creates clarity for both the company and the employee.

Workplace Safety Applies Beyond Traditional Factories

The Occupational Safety, Health and Working Conditions Code is not relevant only to large industrial employers.

Its framework addresses occupational safety, working conditions and employee welfare, with provisions covering areas such as health checks and workplace facilities where applicable.

This matters for foreign companies because India’s workforce is increasingly distributed across offices, remote arrangements, service businesses and specialised workplaces.

Employers need to understand which requirements apply to their particular establishment and workforce.

Women Employees and Working Hours

The new framework also provides for greater participation of women across sectors, including provisions relating to night work subject to applicable conditions and safeguards.

For multinational companies operating around global time zones, this can be particularly relevant.

A company cannot simply import its overseas working-hours policy into India without checking whether the arrangement complies with applicable Indian requirements.

State-Level Compliance Still Matters

This is one of the most important points for foreign companies.

Although the Labour Codes create a more unified framework, implementation can involve both Central and State authorities, and detailed rules remain important.

The Ministry’s compliance handbook itself notes that its provisions primarily address establishments for which the Central Government is the appropriate government and that further details are prescribed through rules.

Therefore, an employer hiring in Maharashtra may encounter practical compliance requirements that need to be assessed differently from an employer operating elsewhere.

What Should Foreign Companies Do Before Hiring?

Companies entering India should build compliance into their hiring strategy from day one.

A practical checklist includes:

• Identify the correct employing entity or employment structure
• Determine applicable Labour Code requirements
• Review salary structures
• Check PF and ESI applicability
• Prepare compliant employment documentation
• Establish payroll and statutory processes
• Review working-hour and leave requirements
• Understand applicable state-level requirements
• Maintain employee records
• Monitor regulatory updates

The biggest mistake is treating compliance as something to fix after the first employee joins.

Final Thoughts

India’s Labour Codes represent a significant change in the country’s employment framework.

For foreign companies, the opportunity is clear: a more consolidated system can make employment compliance easier to understand and manage.