Introduction
The consolidation of India’s 29 separate central labor statutes into four comprehensive Codes marks a significant shift in regulatory compliance for Global Capability Centres (GCCs). The new codes, which include the Code on Wages, 2019; the Industrial Relations Code, 2020; the Occupational Safety, Health and Working Conditions Code, 2020; and the Code on Social Security, 2020, officially took effect on November 21, 2025, with central rules being notified in May 2026. Despite this, many states, hosting large GCC clusters, have yet to implement state-specific rules, resulting in a transitional phase where previous regulations may still apply.
Key Changes and GCC Implications
Restructuring of Wages
The new regime unifies the definition of “wages” under the Code on Wages, 2019, encompassing basic pay, dearness allowance, and retaining allowance, alongside other components. For GCCs, this necessitates revisiting compensation structures traditionally reliant on allowances, as provident fund and gratuity liabilities are likely to increase, affecting overall cost-to-company unless adjustments are made.
Full and Final Settlement
Under the new framework, all employee exits require wage payments within two working days, irrespective of the nature of departure. This represents a shift from previous practices where such a deadline was only mandated in cases of employer-initiated exits, compelling GCCs to expedite exit payment processes.
Worker Classification and Retrenchment
The Industrial Relations Code redefines “worker,” raising the supervisory threshold to INR 18,000/month and altering retrenchment protocols. While procedural flexibility is enhanced for smaller GCCs, obligations concerning retrenchment notices and compensations remain intact.
Gratuity for Fixed-term Employment
Significant changes under the IR Code and the Code on Social Security include the entitlement of fixed-term employees to benefits equivalent to permanent staff, with gratuity payable pro-rata after one year. GCCs must now consider this in their budgeting, especially when engaging fixed-term specialists.
Night Work for Women
The Occupational Safety, Health and Working Conditions Code modernizes regulations to allow women to work night shifts nationwide, subject to safety provisions. This offers GCCs operating 24/7 shifts a streamlined national standard, although state-specific conditions may still apply pending local notifications.
Contract Labour Licensing
The OSH Code raises the contract labour licensing threshold, alleviating the administrative burden for GCCs operating across multiple states. However, previous state-specific rules might persist until new notifications are issued.
Gig and Platform Workers
For the first time, gig and platform workers are recognized under the Social Security Code, which mandates their registration and requires aggregators to contribute to a social security fund. GCCs utilizing such workers must ensure compliance regarding registration and contribution responsibilities.
Appointment Letters
The OSH Code mandates written appointment letters for all employees, requiring GCCs to transition from informal offer letters to formal documentation, necessitating immediate action to comply with this HR requirement.
Compliance Responsibility Across GCC Models
Understanding the compliance distribution across various GCC models is crucial. In captive centers, the Indian entity directly manages compliance. Managed services models transfer compliance risks indirectly to the multinational group through service agreements. In build-operate-transfer models, responsibilities shift post-transfer. Hybrid models necessitate clear delineation between core and non-core roles to determine compliance obligations.
Conclusion
The transition to the new labor codes necessitates a reevaluation of compliance strategies within GCCs. As these codes replace numerous statutes, GCCs must assess their operational models to ensure they meet the new regulatory demands while maintaining efficient and compliant operations.
About the Authors: Siddhi Ghatlia is a Partner and Riya Punamiya is an Associate at ALMT Legal.
Disclaimer: The views expressed are the authors’ own and do not necessarily reflect those of Bar & Bench.
