India will enforce the Four Labour Codes from 21 November 2025. These Codes consolidate 29 different labour laws into a unified and simplified legal framework. Every organization operating in India must prepare for this transition by conducting a complete labour law audit.
You can download the Labour Law Audit Checklist 2025 attached with this article to support internal compliance assessment.
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Why a Labour Law Audit Is Mandatory Before November 2025
The new system requires significant changes in payroll structure, safety compliance, digital registers, contract management and HR records. Without an audit, most organizations will be at high risk of penalties, inspection difficulties and grievances filed by employees.
The new enforcement model includes Inspector cum Facilitators who will guide companies toward compliance, but repeat mistakes and non cooperative behavior may result in penalties.
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Labour Law Audit Checklist: Key Compliance Areas
The Labour Law Audit must cover all four Labour Codes, along with workforce categorization and digital documentation.
1. Code on Wages 2019
The new definition of Wages applies across all labour provisions. Allowances cannot exceed 50 percent of total compensation. Any excess must be added back to the statutory wage base, which increases PF, ESI, gratuity and bonus liability.
What to check
• Salary restructuring as per wage definition
• PF, ESI and gratuity contribution calculations
• Full and final settlement timelines
2. Industrial Relations Code 2020
Government approval will be required only if retrenching 300 or more workers. However, organizations must contribute 15 days wages per worker into a Reskilling Fund when retrenchment takes place.
What to check
• Standing Orders updated for units with 300 or more workers
• Proper documentation for layoff, closure or retrenchment
• Reskilling Fund calculation process
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3. Code on Social Security 2020
This Code expands social security coverage to gig workers, platform workers and contract labour. ESIC is now applicable across India and commuting accidents are considered employment related.
What to check
• UAN and ESIC compliance for all applicable workers
• Verification of contractor licences and wage records
• Budget increase for employer social security contributions
4. Occupational Safety Health and Working Conditions Code 2020
Applicable to establishments with 10 or more workers. Maximum 8 working hours per day with overtime paid at twice the wage rate. Leave rules will be notified by the Central Government.
What to check
• Compliance with working hours and safety standards
• Time tracking and overtime monitoring
• Safety facilities for women workforce and welfare
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Workforce Documentation and Classification
The Codes officially recognize permanent employees, fixed term employees, gig workers and platform workers. Fixed term employees now become eligible for gratuity after only one year of service.
What to check
• Updated employment contracts with correct worker category
• Statutory registers digitized and securely stored
• Reclassification of workers wherever applicable
Digital Compliance Transformation Requirement
Legacy manual compliance will no longer support Single Registration, Single Return and centralized monitoring under the new Codes. State specific rules must be tracked in real time.
Organizations need automated systems to meet these digital transition requirements and avoid penalty risks.
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Digiliance New Labour Code Compliance Software
Digiliance provides an advanced compliance management platform designed for the Four Labour Codes.
Key benefits
• Automated PF, ESI, bonus and gratuity calculation
• Real time State wise rule update alerts
• Digital statutory registers with consolidated return filing
• Contractor compliance monitoring
• Inspection ready reporting with audit trails
Digiliance also provides Compliance Gap Audit services to implement required corrections before the new Codes take effect.
Impact of Non Compliance After Implementation
• Monetary penalties and statutory interest
• Disruption during inspections
• Increased employee litigation risk
• Loss of trust and employer brand damage
First time minor violations may be compounded at a reduced fine, but repeated violations will result in stricter actions.
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Final Compliance Preparation Actions
• Download and complete Labour Law Audit Checklist 2025
• Update payroll structure and HR policies
• Digitize registers and compliance records
• Conduct internal training for HR and Payroll teams
• Use compliance audit software to avoid manual errors
• Track State notifications continuously
Frequently Asked Questions
Which companies need to follow the new Labour Codes
All establishments with one or more employees must comply.
Will statutory costs increase
Yes, due to the new wages definition and gratuity eligibility changes.
Is digital compliance mandatory
Yes, because returns and registers must now be consolidated and maintained electronically.
Do Digiliance services include both audit and software
Yes, organizations can choose either or both depending on requirement.
Get Ready for New Labour Code Compliance
Connect with Digiliance Labour Law Compliance Team and upgrade your compliance system for 2025.
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