What This Issue Delivers
This issue is designed not as a general introduction to labour law, but as a practical business update. It highlights developments that can affect payroll costs, employee benefits, workforce classification, HR technology, contractor exposure, working-time controls and management accountability.
Each topic explains the regulatory position, the business consequence, the relevant statutory provisions and the practical implementation priorities for businesses.
This issue covers:
- Code on Social Security: Beyond EPF and ESI
- AI, automation and responsible employment decisions
- Labour-code compliance dashboards for management oversight
- Resignation, absconding and job-abandonment procedures
- Attendance, working hours and overtime controls
- Detailed HR compliance readiness framework
Important regulatory position: The Ministry of Labour and Employment’s March 2026 FAQs state that the four Labour Codes were implemented with effect from 21 November 2025. The revised definition of wages and related gratuity treatment therefore require active implementation rather than future planning alone.
Why These Updates Matter for Businesses
Labour-law compliance is most useful when businesses can clearly understand what has changed, which functions are affected, what records should be maintained and what management action is required.
This newsletter therefore, focuses primarily on practical legal information, regulatory developments and implementation priorities rather than promotional messaging.
Regulatory update: The legal or policy development that businesses should note.
Business impact: The likely effect on HR, payroll, finance, operations or contractor management.
Relevant provisions: Only those statutory sections that directly support the topic.
Management action: Practical steps that can be taken internally.
Professional support: A brief indication of areas in which DSB Law Group may assist, based on its confirmed HR and labour-law advisory work.
Business Functions Covered
The newsletter is relevant not only to HR teams. Wage-definition changes affect finance and payroll. Contractor defaults affect procurement and principal-employer risk. Working-time data affects operations. Employee-data systems affect technology governance. Unresolved labour exposures can also affect due diligence, transactions and enterprise value.
Labour compliance should therefore be treated as a cross-functional governance responsibility.
Areas of Support by DSB Law Group
Where professional assistance is required, DSB Law Group supports organisations in areas such as:
- HR and labour-law advisory
- Employment documentation
- Wage-structure review
- Contractor compliance
- Policy implementation
- Statutory compliance assessment
- Employment-related legal support
References to DSB Law Group in this newsletter are limited and included only where relevant to the subject being discussed.
Code on Social Security: Beyond EPF & ESI
The Code on Social Security, 2020 requires businesses to look beyond monthly EPF and ESI deposits. It consolidates the framework governing provident fund, employee state insurance, gratuity, maternity benefit, employee compensation and social-security measures for unorganised, gig and platform workers.
For employers, the practical effect is that workforce classification, wage design, payroll, benefits, contractor management and record keeping must operate as one connected compliance system.
What Is New and Business-Critical
The most immediate change is the operational effect of the common definition of “wages.”
The Ministry’s March 2026 clarification confirms that the revised wage definition has applied since 21 November 2025 and is relevant to gratuity calculations. It also clarifies that where excluded remuneration components exceed the statutory 50% threshold, the excess is added back for wage computation.
This means salary structures designed around a low basic-pay component and multiple allowances require fresh review.
The same official clarification states that fixed-term employees directly engaged by the employer become eligible for gratuity after completing one year under the contract.
Businesses using fixed-term hiring must therefore align employment contracts, payroll data and gratuity provisioning rather than treating gratuity as applicable only after five years.
Relevant Provisions
- Section 2(88), Code on Social Security, 2020: Definition of wages and the 50% inclusion mechanism.
- Section 53: Payment of gratuity, including retirement, resignation, death, disablement and fixed-term employment.
- Sections 60–71: Maternity-benefit entitlements, payment, leave and employer duties.
- Sections 113–114: Registration and schemes concerning unorganised workers, gig workers and platform workers.
- Section 111: Record-keeping requirements.
Key Areas Businesses Should Review
1. Wage Structure and Gratuity Cost
Employers should test each salary component against the statutory wage definition. Merely naming a component “allowance,” “incentive” or “reimbursement” does not by itself determine its legal treatment.
The organisation should model the financial impact on gratuity and other wage-linked obligations, document the legal basis for the structure and align payroll configuration with the approved treatment.
2. Fixed-Term Employment
Fixed-term arrangements should be clearly documented as direct employment for a defined period.
The employment contract should specify:
- Tenure
- Role and responsibilities
- Remuneration
- Applicable benefits
- Completion or termination conditions
- Notice requirements
- Gratuity treatment
Gratuity eligibility and provisioning must be assessed from the beginning of the engagement rather than at the exit stage.
3. Maternity Benefit
Section 60 provides up to 26 weeks of maternity benefit for an eligible woman, subject to statutory conditions. A woman with two or more surviving children is ordinarily entitled to 12 weeks.
Adoptive and commissioning mothers are also covered in specified cases.
Businesses should review:
- Maternity-leave policies
- Payroll treatment during maternity leave
- Return-to-work arrangements
- Work-from-home provisions where suitable
- Manager awareness and training
- Protection against adverse employment action
- Record-maintenance requirements
4. Contractor and Principal-Employer Risk
Contractor engagement should be supported by:
- Current worker lists
- Attendance records
- Wage-payment proof
- Bank-transfer evidence
- Statutory challans
- Employee-wise contribution details
- Contractor registrations and licences
- Contractual safeguards
- Periodic compliance certification
A certificate from a contractor should not be the only evidence relied upon. Reconciliation of deployed workers with contribution records is essential.
5. Gig and Platform Workforce
Businesses operating digital platforms or using gig-based service models should map worker categories and monitor notified schemes and contribution requirements.
The framework recognises gig and platform workers, but the precise financial and operational obligations must be assessed with reference to applicable notifications, schemes and rules.
Where Professional Review May Be Useful
Businesses may require external review where wage components, gratuity exposure, fixed-term employment, contractor records or employee-benefit policies are unclear.
DSB Law Group may assist with:
- Wage-structure review
- Employment documentation
- Contractor compliance
- Statutory compliance assessment
- HR-policy implementation
- Employment-related legal support
Management Action for This Quarter
- Recalculate wage-linked exposure using the revised definition effective from 21 November 2025.
- Identify all fixed-term employees and review gratuity eligibility.
- Reconcile payroll, EPF, ESI and contractor-worker data.
- Update maternity, nomination and benefit records.
- Review salary structures with a high proportion of allowances.
- Assess contractor documentation and statutory evidence.
- Present quantified compliance gaps and remediation dates to management.
AI, Automation & Labour Codes
AI is increasingly used for recruitment, attendance, payroll, performance measurement, workforce planning and compliance alerts.
The Labour Codes do not create a separate “AI compliance” chapter. However, automated HR decisions remain subject to wage, equality, working-time, disciplinary and record-keeping obligations.
The legal responsibility remains with the employer even where a decision is generated or supported by software.
Why This Is Vital for Businesses
Automated errors scale quickly.
A wrong overtime rule can affect hundreds of employees. A biased screening model can exclude a class of candidates. An attendance system may treat approved remote work as absence. A performance algorithm may be relied upon in disciplinary action without giving the employee a fair opportunity to respond.
The efficiency benefit of automation must therefore be matched by governance, documentation and human review.
Relevant Provisions
- Section 3, Code on Wages, 2019: Prohibition of discrimination on the ground of gender in wages and recruitment for the same or similar work, subject to the Code.
- Section 14, Code on Wages, 2019: Overtime at not less than twice the normal rate for covered employees.
- Section 17: Statutory timelines for wage payment.
- Section 18: Deductions may be made only as authorised under the Code.
- Sections 29–38, Industrial Relations Code, 2020: Standing orders and disciplinary-process requirements for covered industrial establishments.
- Section 33, OSHWC Code, 2020: Maintenance of registers, records and returns.
High-Risk AI Use Cases
Recruitment Screening
Candidate-ranking tools should be tested for unfair or disproportionate outcomes.
The system should not rely on irrelevant personal indicators. Job criteria must be role-based, documented and applied consistently.
A human reviewer should be able to:
- Examine the recommendation
- Understand the basis of the score
- Correct inaccurate information
- Override the system where necessary
- Record the final decision
Attendance and Productivity Monitoring
Biometric, mobile and productivity systems should distinguish between:
- Attendance
- Active work
- Authorised travel
- Approved leave
- Remote work
- Training
- Business meetings
- System downtime
Constant monitoring that is unnecessary for the role may create employee-relations and privacy concerns.
The organisation should clearly define:
- What data is collected
- Why it is collected
- Who can access it
- How long it will be retained
- How employees may correct errors
Payroll Automation
Payroll systems must be configured for the correct:
- Employee category
- Wage period
- Minimum-wage requirement
- Overtime rule
- Deduction limits
- Statutory contribution base
- Leave treatment
- Bonus and gratuity settings
Every material rule change should be approved, tested and logged.
Exception reports should be reviewed before salary release.
Performance and Disciplinary Decisions
A system-generated score should not itself become proof of misconduct or poor performance.
The employee must receive:
- Relevant particulars
- An opportunity to explain
- Access to the applicable policy or criteria
- A fair decision by an authorised person
Where standing orders apply, the process must align with them.
Where Professional Review May Be Useful
Legal review may be useful where automated HR systems affect:
- Recruitment
- Attendance
- Wages and overtime
- Employee evaluation
- Promotion
- Disciplinary action
- Termination
- Employee-data processing
DSB Law Group may assist with policy drafting, employment documentation, payroll-related legal review and employee-process compliance.
Six Controls Every Automated HR Process Should Have
- A documented purpose and legal basis.
- Tested data and rule accuracy.
- Human review for consequential decisions.
- An employee explanation or correction mechanism.
- System logs and approval history.
- Periodic bias, error and compliance audits.
What Automation Should Never Replace
- A fair disciplinary process
- Independent managerial judgement
- An employee’s opportunity to explain and be heard
- Legal review of sensitive employment decisions
- Consideration of medical or exceptional circumstances
- Accountability of the final decision-maker
Building a Labour Code Compliance Dashboard
A labour compliance dashboard should not be a decorative scorecard.
It should provide management with reliable evidence of:
- Statutory payments
- Registrations and licences
- Employee records
- Working-time compliance
- Contractor status
- Inspections
- Employee claims
- Outstanding liabilities
- Unresolved compliance risks
The dashboard must enable action, ownership and escalation.
Why Traditional Compliance Trackers Are No Longer Enough
Many organisations maintain separate payroll sheets, HR files, contractor folders and location-wise registers.
This creates data mismatches and makes it difficult to determine whether a green compliance status is supported by actual evidence.
A useful dashboard links every obligation to:
- Its legal basis
- Responsible owner
- Due date
- Supporting document
- Financial exposure
- Current status
- Closure approval
- Escalation authority
Relevant Record and Display Provisions
- Section 50, Code on Wages, 2019: Notice-board display and related employer obligations.
- Section 111, Code on Social Security, 2020: Record keeping.
- Section 33, OSHWC Code, 2020: Registers, records and returns.
- Section 68, Industrial Relations Code, 2020: Duty to maintain muster rolls of workers.
- Section 30, Industrial Relations Code, 2020: Preparation and certification of standing orders for covered establishments.
Recommended Dashboard Architecture
Employee Master
The dashboard should capture:
- Employee category
- Legal entity
- Location
- Department
- Designation
- Date of joining
- Appointment letter
- Policy acknowledgements
- Wage structure
- Statutory coverage
- Nomination details
- Leave records
- Transfer records
- Exit status
Wage and Payroll Compliance
The dashboard should monitor:
- Applicable minimum wages
- Wage period
- Salary-payment date
- Deductions and recoveries
- Overtime calculation
- Overtime approvals
- Bonus exposure
- Gratuity exposure
- Social-security contribution base
- Payroll-to-attendance reconciliation
- Unresolved payroll exceptions
Contract Labour
The dashboard should monitor:
- Contractor licences and registrations
- Agreement validity
- Worker deployment
- Attendance
- Wage-payment proof
- Bank-payment evidence
- EPF and ESI challans
- Employee-wise contribution details
- Audit rights
- Indemnity clauses
- Contractor defaults
- Remediation status
Working Conditions and Safety
The dashboard should include:
- Working hours
- Weekly offs
- Overtime
- Shift schedules
- Notice of periods of work
- Incidents and accidents
- Medical examinations
- Safety training
- Welfare facilities
- Corrective actions
- Inspection observations
- Closure evidence
Management Reporting That Creates Accountability
The monthly report should identify:
- Overdue actions
- Repeat defaults
- Location-wise exposure
- Department-wise exposure
- Estimated financial liability
- Upcoming statutory deadlines
- Contractor defaults
- Pending notices
- Inspection observations
- Decisions requiring senior-management approval
A compliance percentage without underlying evidence or risk classification can create false comfort.
Where Professional Review May Be Useful
A legal or compliance review can help verify whether the dashboard reflects the obligations actually applicable to the establishment.
DSB Law Group may assist with:
- Statutory compliance assessment
- Documentation review
- Employment-policy review
- Legal alignment of management reporting
- Contractor-compliance review
- Labour-law advisory
Dashboard Test
For every item marked “compliant,” management should be able to answer:
- What is the legal requirement?
- Who owns it?
- When was it completed?
- Where is the evidence?
- Who verified it?
Resignation, Absconding & Job Abandonment
Resignation, unauthorised absence and job abandonment require different responses.
An employer should not treat absence as automatic resignation or terminate employment merely by changing the employee’s status in the HR system.
The process must be supported by:
- The employment contract
- Applicable HR policy
- Standing orders, where relevant
- Attendance records
- Documented communication
- A reasoned final decision
Updated Business Position
Under Section 17(2) of the Code on Wages, wages payable to an employee who has resigned, been removed or dismissed, or been retrenched must be paid within two working days.
This makes exit coordination between HR, payroll, IT, finance and administration time-sensitive.
The organisation should not delay undisputed statutory wages merely because asset recovery or another reconciliation remains pending.
Relevant Provisions
- Section 17(2), Code on Wages, 2019: Payment of wages within two working days in specified exit situations.
- Section 18: Only authorised deductions may be made from wages.
- Sections 29–38, Industrial Relations Code, 2020: Standing orders, misconduct and disciplinary-process framework for covered industrial establishments.
- Section 53, Code on Social Security, 2020: Gratuity on resignation and other specified termination events, subject to the Code.
Recommended Due-Process Flow
- Verify absence: Confirm attendance, leave status, manager communication and possible system errors.
- Contact the employee: Use official email, phone and other documented channels.
- Issue a written notice: State the period of absence and provide a reasonable opportunity to report or explain.
- Send a final notice: Specify the consequence of continued non-response in accordance with policy and applicable standing orders.
- Evaluate the record: Consider medical, emergency, safety, harassment or other explanations before deciding.
- Pass a reasoned decision: Record the facts, documents, applicable clauses and approval.
- Complete exit controls: Deactivate access, recover assets, preserve records and settle lawful dues within applicable timelines.
Frequent Business Errors
- Using “absconding” as an automatic legal conclusion
- Failing to provide a fair opportunity to respond
- Withholding all salary until company property is returned
- Making deductions without a documented and legally permissible basis
- Ignoring inconsistencies between appointment letters and HR policies
- Failing to preserve notice delivery and communication records
- Delaying final wage payment beyond the statutory timeline
- Treating short-term absence as job abandonment
- Ignoring medical or emergency circumstances
- Closing the employee record without a reasoned approval
Where Professional Review May Be Useful
External support may be appropriate where an employee exit involves:
- Disputed notice pay
- Prolonged absence
- Disciplinary action
- Gratuity
- Deductions
- Asset recovery
- Potential litigation
- Inconsistent employment documents
DSB Law Group may assist with employment documentation, notices, policy interpretation and employment-related legal support.
Exit-Control Priority
Update the exit SOP so that the following are handled through separate but coordinated workstreams:
- Undisputed wage payment
- Gratuity assessment
- Notice-period treatment
- Lawful deductions
- Asset recovery
- IT-access deactivation
- Full-and-final settlement
- Record preservation
Attendance, Working Hours & Overtime
Attendance is not merely an HR record.
It supports:
- Wage calculation
- Overtime
- Weekly rest
- Leave administration
- Employee safety
- Productivity analysis
- Payroll accuracy
- Dispute resolution
Hybrid work, mobile attendance, early login, late logout and after-hours messaging have made working-time compliance more complex.
Employers need a system that records actual work, not merely physical entry.
Updated Legal Position
Section 25 of the Occupational Safety, Health and Working Conditions Code, 2020 provides that a worker should not be required or allowed to work for more than eight hours a day, subject to the applicable framework and notified conditions.
Section 27 addresses extra wages for overtime.
Separately, Section 14 of the Code on Wages requires overtime payment at a rate not less than twice the normal rate for covered employees whose minimum wage has been fixed under the Code.
Relevant Provisions
- Section 25, OSHWC Code, 2020: Daily and weekly working hours, leave and related conditions.
- Section 26: Weekly and compensatory holidays.
- Section 27: Extra wages for overtime.
- Section 31: Notice of periods of work.
- Section 33: Registers, records and returns.
- Sections 13–14, Code on Wages, 2019: Normal working day, day of rest and overtime wages.
Business-Critical Risk Areas
- Employees working beyond scheduled hours without recorded approval
- Remote or hybrid work performed outside normal hours
- Manager messages or instructions creating additional work time
- Biometric records not reconciled with payroll
- Incorrect employee categorisation for overtime purposes
- Weekly-off work not captured or compensated
- Shift changes not reflected in the system
- Spread-over limits not monitored
- System rounding that deletes part-hours
- Unrecorded early login or late logout
- Incorrect overtime rates
- Mismatch between attendance, leave and payroll data
Recommended Control Framework
- Define: Specify normal hours, shifts, breaks, weekly offs and overtime eligibility.
- Authorise: Require documented approval for additional work.
- Capture: Record actual work through reliable and accessible systems.
- Verify: Obtain manager confirmation and provide employees with an opportunity to correct errors.
- Integrate: Connect approved time data with payroll.
- Alert: Identify excessive hours, repeated weekend work and unusual exceptions.
- Reconcile: Compare attendance, access logs, leave and payroll every month.
- Audit: Periodically test whether the system reflects actual working practices.
Where Professional Review May Be Useful
Professional review may be useful where attendance records, overtime eligibility, shift practices or payroll calculations are inconsistent.
DSB Law Group may assist with:
- Wage and payroll-related legal review
- Employment-policy review
- Working-time compliance assessment
- Statutory compliance review
- Employment documentation
- Labour-law advisory
Key takeaway: Accurate attendance protects employee entitlements, payroll integrity and the employer’s compliance position.
HR Compliance Readiness Checklist
Readiness cannot be measured only by whether returns were filed.
A business is genuinely ready when its employment documents, payroll rules, worker classification, benefits, contractor records, working conditions, disciplinary procedures and management reports are aligned and supported by evidence.
1. Wage and Payroll Readiness
- Has the wage structure been retested under the revised statutory definition effective from 21 November 2025?
- Has the organisation modelled the impact on gratuity and other linked obligations?
- Are wage periods and payment dates compliant?
- Are deductions legally authorised and documented?
- Is overtime paid using the correct rate and verified data?
- Are payroll changes approved and supported by a system log?
- Are minimum-wage requirements mapped location-wise?
- Is attendance reconciled with payroll every month?
2. Employment Documentation
- Are appointment letters consistent with current law and actual practice?
- Are fixed-term, probation, notice, transfer and confidentiality clauses clear?
- Do policies match contracts and standing orders?
- Are policy acknowledgements and revisions preserved?
- Are employee categories correctly identified?
- Are job roles and reporting relationships documented?
- Are employee records complete and updated?
3. Social Security and Benefits
- Are EPF and ESI registrations complete and reconciled with payroll?
- Has fixed-term employee gratuity eligibility been reviewed?
- Are gratuity provisions based on the current wage definition?
- Are maternity records complete?
- Are nomination records current?
- Are injury and compensation records maintained?
- Are contractor worker details matched with statutory contributions?
- Are employee additions and exits updated in statutory systems?
4. Contract Labour
- Are contractor licences, registrations and agreements current?
- Does the business receive employee-wise wage and contribution evidence?
- Are worker deployment and attendance reconciled?
- Does the agreement contain audit, indemnity and record-access rights?
- Are repeat contractor defaults escalated and remediated?
- Is wage-payment evidence verified?
- Are statutory challans reconciled with worker lists?
5. Working Conditions and Safety
- Are working hours, breaks, weekly offs and overtime monitored?
- Are notices of periods of work and required displays current?
- Are incidents, training and corrective actions documented?
- Are excessive working hours and fatigue risks reviewed?
- Are location-specific requirements mapped?
- Are welfare facilities reviewed?
- Are shift and overtime records preserved?
6. Employee Relations and Exits
- Is there a fair and documented grievance process?
- Are show-cause, enquiry and disciplinary procedures aligned with applicable standing orders?
- Does the exit SOP meet the two-working-day wage-payment requirement where applicable?
- Are lawful deductions separated from asset recovery and disputed claims?
- Are gratuity, notice pay and final settlement reviewed before closure?
- Are absence and job-abandonment procedures documented?
- Are employee communications and delivery proof preserved?
7. Technology and Data Controls
- Are automated employment decisions subject to human review?
- Are payroll and attendance rules tested after each change?
- Are access rights and audit trails maintained?
- Can employees correct attendance or payroll errors?
- Are HR vendors contractually required to support audits and preserve records?
- Are sensitive employee records protected?
- Are system changes approved and logged?
- Are backups maintained securely?
8. Management Oversight
- Is every obligation assigned to a named owner?
- Are high-risk defaults quantified and escalated?
- Does management receive a monthly exception report?
- Are corrective actions tracked to documentary closure?
- Is an independent legal or compliance review conducted periodically?
- Are repeat failures identified?
- Are contractor defaults reported?
- Are material risks presented to senior management?
Where Professional Review May Be Useful
A focused readiness review can help identify whether employment documents, wage practices, contractor records and internal policies are aligned with applicable requirements.
DSB Law Group may assist with:
- HR and labour-law advisory
- Policy implementation
- Employment documentation
- Wage-structure review
- Contractor compliance
- Statutory compliance assessment
- Employment-related legal support
Management takeaway: The highest labour-law risk often lies not in the absence of a policy, but in the gap between the policy, the payroll system, actual management practice and available evidence.
Professional Support, Where Required
The principal purpose of this publication is to inform businesses about relevant labour-law developments and implementation priorities. Where a matter requires tailored advice, DSB Law Group may assist with HR and labour-law advisory, employment documentation, wage-structure review, contractor compliance, policy implementation, statutory compliance assessment and employment-related legal support
Disclaimer
This publication is intended for general informational and educational purposes and does not constitute legal advice. Applicability may vary according to the establishment, workforce category, location, appropriate government, notified rules and the specific facts of a matter. Businesses should obtain a tailored legal review before implementing or changing employment, payroll or compliance practices.
