2025 has brought the biggest labour reform in India’s history — the Four Labour Codes have officially replaced 29 old laws.
And for small businesses, startups, factories and MSMEs, this means new compliance rules, new documents, new wage structures and new responsibilities.
🚨 Important Update: India’s New Labour Codes Are Now in Effect
India’s four Labour Codes were brought into effect from 21 November 2025, replacing and rationalising 29 Central labour laws into a new consolidated framework.
The four Labour Codes are:
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Code on Social Security, 2020
- Occupational Safety, Health and Working Conditions Code, 2020
However, employers and MSMEs should not assume that every compliance requirement applies in exactly the same way to every business.
The practical compliance requirements may depend on factors such as:
- Type of establishment
- Nature of business and industry
- Number of employees or workers
- Type of workers engaged
- Applicable Central and State rules
- Specific provisions relevant to the establishment
Therefore, businesses should review their individual compliance position instead of relying on viral social-media claims or assuming that one rule applies universally to every employer.
This checklist has been updated for 2026 to help MSMEs understand the key areas they should review under India’s new Labour Code framework.
But don’t worry — we’ve created a simple, practical, no-confusion checklist that every small business can follow.
And yes — you’ll get a downloadable PDF version at the end.
Let’s begin!
you may also like to read: India Labour Law 2025: What the New Four Labour Code Means for MSMEs and Small Businesses
Why Small Businesses Must Follow the New Labour Code
If you run a shop, factory unit, office, workshop or startup, the new rules apply to you.
Non-compliance can lead to:
- Penalties
- Fines
- Legal notices
- Closure risks
- Loss of government benefits
Staying compliant is now easier than before — but only if you follow the right checklist.
you may also like to read:India’s 10-Minute Delivery Moment: New Labour Laws, Government Reforms & Smart Lessons for Businesses.
🧾 NEW LABOUR CODE COMPLIANCE CHECKLIST (2026)
(Save this list, bookmark it, or download the PDF at the end)
you may also like to read: Four Labour Codes vs. Old Labour Laws: The Ultimate Side-by-Side Comparison
💰 Salary Structure and the New Definition of Wages
One of the most widely discussed aspects of India’s new Labour Code framework is the revised definition of “wages.”
However, employers should be careful about the popular claim that:
“Basic salary must always be exactly 50% of CTC.”
This is an oversimplification.
The legal framework focuses on the statutory definition of wages and the treatment of various components of remuneration. Certain exclusions may be considered while calculating wages, but where excluded components exceed the legally permitted limit, the excess may need to be added back for the purpose of calculating wages.
MSME Compliance Checklist
☐ Review your current salary structure
☐ Identify all salary components and allowances
☐ Review which components fall within the statutory definition of wages
☐ Check whether excluded components exceed the legally permitted threshold
☐ Review the possible impact on PF, gratuity and other applicable benefits
☐ Avoid artificially structuring salaries primarily to reduce statutory liabilities
Important
The rule should not be interpreted as a universal requirement that every employee’s basic salary must be exactly 50% of their CTC.
Businesses should review their salary structures according to the applicable legal definition of wages and relevant rules.
⏰ Working Hours, Overtime and Attendance Compliance
Working-hour compliance should not be treated as a simple universal rule such as “all employees can work 8 or 12 hours per day.”
The applicable requirements can depend on the nature of the establishment, the category of workers and the applicable legal provisions and rules.
MSME Compliance Checklist
☐ Maintain accurate attendance records
☐ Maintain records of working hours
☐ Review applicable daily and weekly working-hour limits
☐ Provide applicable rest intervals and weekly rest
☐ Identify overtime hours correctly
☐ Ensure overtime payments are made where legally applicable
☐ Maintain proper overtime records
Important
Employers should not rely on WhatsApp messages or social-media posts claiming that the new Labour Codes automatically permit a universal 12-hour working day.
Always check the requirements applicable to your establishment and workers.
⏰ Working Hours, Overtime and Attendance Compliance
Working-hour compliance should not be treated as a simple universal rule such as “all employees can work 8 or 12 hours per day.”
The applicable requirements can depend on the nature of the establishment, the category of workers and the applicable legal provisions and rules.
MSME Compliance Checklist
☐ Maintain accurate attendance records
☐ Maintain records of working hours
☐ Review applicable daily and weekly working-hour limits
☐ Provide applicable rest intervals and weekly rest
☐ Identify overtime hours correctly
☐ Ensure overtime payments are made where legally applicable
☐ Maintain proper overtime records
Important
Employers should not rely on WhatsApp messages or social-media posts claiming that the new Labour Codes automatically permit a universal 12-hour working day.
Always check the requirements applicable to your establishment and workers.
👷 Gig Workers, Platform Workers, Contract Workers and Part-Time Employees
Businesses should avoid treating all non-traditional workers as belonging to the same legal category.
A worker may be classified differently depending on the actual nature of the working relationship.
For example:
- Gig workers
- Platform workers
- Contract workers
- Fixed-term employees
- Part-time employees
- Consultants
- Agents
may have different legal characteristics and compliance implications.
MSME Compliance Checklist
☐ Identify the correct nature of each working relationship
☐ Review whether a person is an employee, worker, contractor or independent service provider
☐ Maintain appropriate agreements and employment documentation
☐ Check applicable social-security obligations
☐ Review contractor-related compliance where applicable
☐ Do not simply label an employee as a consultant to avoid statutory obligations
Important
Worker classification should be based on the actual facts and nature of the relationship, not merely the title used in a contract or agreement.
6️⃣ Gratuity, Social Security & Benefits
✔ Gratuity for fixed-term employees after 1 year
New benefit under the Social Security Code.
✔ Ensure maternity benefits for eligible employees
Mandatory compliance.
✔ Maintain PF/ESI registers
Inspection-ready documentation.
7️⃣ Digital Compliance (Highly Recommended)
✔ Keep all documents backed up digitally
PDFs, Drive, Dropbox or HRMS.
✔ Automate salary slips, attendance & payroll
Avoid compliance errors.
✔ Maintain digital proof of payment
Bank transfers preferred.
Why This Checklist Matters
The Four Labour Codes are designed to:
- Simplify compliance
- Reduce confusion
- Support ease of doing business
- Protect workers’ rights
- Formalize employment in India
Small businesses that adopt the new rules early will avoid penalties AND qualify for more government benefits and credit support.
✅ The Practical MSME Labour Code Compliance Checklist
Use this checklist as a starting point for reviewing your business.
🧾 1. Employee Documentation
☐ Issue and maintain appropriate appointment or employment documentation
☐ Maintain employee identity and employment records
☐ Maintain attendance records
☐ Maintain wage and salary records
☐ Maintain records required for your category of establishment
💰 2. Salary and Wages
☐ Review salary components
☐ Check the applicable definition of wages
☐ Review minimum-wage requirements
☐ Ensure timely payment of wages
☐ Review deductions from wages
☐ Review overtime payments where applicable
🏦 3. Social Security
☐ Check PF applicability
☐ Check ESI applicability
☐ Review gratuity obligations
☐ Review applicable employee welfare and social-security requirements
☐ Maintain relevant employee registration and contribution records
⏰ 4. Working Hours
☐ Maintain attendance records
☐ Review applicable working-hour limits
☐ Review weekly-off requirements
☐ Maintain overtime records
☐ Ensure applicable overtime payments
🏭 5. Workplace Safety
☐ Identify workplace safety requirements applicable to your business
☐ Provide required safety equipment where applicable
☐ Maintain workplace safety records
☐ Review health and welfare requirements
☐ Conduct appropriate safety training
👩💼 6. HR Policies
☐ Review employment agreements
☐ Review leave policies
☐ Review workplace conduct policies
☐ Review disciplinary procedures
☐ Review termination and separation procedures
☐ Update policies where required under applicable laws
🌐 7. State-Specific Compliance
☐ Check applicable State Government rules
☐ Review state-specific minimum wages
☐ Review establishment-specific registration requirements
☐ Check applicable Shops and Establishments requirements
☐ Monitor notifications affecting your business
⚠️ Final Compliance Reminder
There is no single checklist that can automatically determine compliance for every business in India.
A manufacturing unit, retail shop, startup, warehouse, construction company and professional-services business may have different compliance obligations.
Use this checklist as a practical starting point and obtain professional advice for significant compliance decisions affecting your business.
❓ FAQ – New Labour Code Compliance checklist for Small Businesses
1. Does the new labour code apply to very small businesses?
Yes. Even 1–5 employee businesses must follow basic rules like appointment letters, wage standards and safety norms.
2. Will salaries automatically change under the new codes?
Not automatically. Employers must restructure CTC as per the 50% basic salary rule.
3. Are digital salary slips valid?
Yes, digital slips are valid and even recommended.
4. Do startups also need to follow these rules?
Absolutely. Startups and tech companies must comply like any other employer.
5. What is the biggest change for MSMEs?
The biggest changes are:
– 50% mandatory basic salary
– Mandatory appointment letters
– Unified licensing and safety rules
👤 About the Author
Tabrez Khan
Founder of Business Zindagi, Tabrez simplifies complex government policies, MSME schemes, startup laws and financial topics for Indian small businesses. His writing is known for clarity, accuracy and real-world usefulness.
⚠️ Disclaimer
The information provided in this article and the downloadable PDF is for general educational and informational purposes only. While we strive to ensure accuracy, labour laws and compliance requirements may be updated through government notifications, state rules, and official circulars from time to time.
This checklist should not be considered as legal, financial, or professional advice.
Small businesses, employers, and HR managers are advised to consult a qualified labour law consultant, legal advisor, or HR professional for specific compliance requirements applicable to their business type, state regulations, or industry.
Business Zindagi and the author are not responsible for any loss, penalty, or legal implications arising from the use of the information provided in this article or its related documents.
🔗 Authentic Sources & References
Here are verified government links related to the new Labour Codes:
- Ministry of Labour & Employment (India)
https://labour.gov.in - Labour Codes – Official Government Portal
https://labour.gov.in/labour-codes - Code on Wages (Official PDF)
https://labour.gov.in/sites/default/files/Code%20on%20Wages%2C%202019.pdf - Social Security Code (Official PDF)
https://labour.gov.in/sites/default/files/SocialSecurityCode2020.pdf - Industrial Relations Code (Official PDF)
https://labour.gov.in/sites/default/files/Industrial%20Relation%20Code%202020.pdf - OSH Code (Official PDF)
https://labour.gov.in/sites/default/files/OSHCode2020.pdf