Labour Codes 2026: What Gujarat Factories Must Do

If you run contract labour in a Gujarat factory, the rulebook you were audited against in 2024 is not the rulebook you will be audited against now. The four Labour Codes went live on 21 November 2025, and most of the questions we get from clients start the same way: "what actually changed for us?"

The Short Answer

Four Codes replaced 29 separate labour laws. For a factory using contract workers, three of them matter day to day: the Code on Wages, the Code on Social Security, and the Occupational Safety, Health and Working Conditions (OSH) Code, which absorbed the old Contract Labour (Regulation and Abolition) Act, 1970 that most of our clients still refer to by name.

The practical shift is that contract labour is no longer treated as a lighter category of worker. Appointment letters, social security and wage structure now follow the worker, whoever is holding the payroll.

Five Changes Worth Acting On

1. Written appointment letters are mandatoryEvery worker, including contract and fixed-term staff, needs a written appointment letter. In practice this means your supplier should be able to hand you a copy for any worker on your floor, on request.
2. Basic wages must be at least 50 percent of grossThe Code on Wages sets a uniform definition of wages. Because PF and gratuity are calculated on basic, a compliant wage structure raises the statutory component. If a supplier's quote has not moved at all since 2024, ask how they are absorbing this.
3. Social security coverage widenedThe Code on Social Security extends coverage to categories that were previously outside the net. For contract staff on a factory floor, the practical effect is that PF and ESIC exposure is harder to argue your way out of.
4. Licensing moved to a single national systemThe OSH Code replaces separate state licences for staffing contractors with a single national licence, administered through the Shram Suvidha Portal. Ask your supplier which licence they now hold and under which regime it was issued.
5. Thresholds moved for standing orders and retrenchmentStanding orders and retrenchment approval thresholds rose from 100 to 300 workers. Whether this helps or hurts depends on your headcount, so it is worth checking where your site actually sits.

Professionals discussing a legal contract in a meeting — Most of the 2026 changes show up as paperwork long before they show up as a penalty.

Where Gujarat Sits Right Now

One thing to be realistic about: central codes and state rules are not moving at the same speed. Through 2026 many employers are working in a dual environment where legacy state requirements still apply alongside the new central codes until state rules formally supersede them. That is not a reason to wait. It is a reason to keep documentation for both, which is what we have been doing for client sites across Naroda, Vatva, Changodar and Rajkot since the codes came into force.

The factories that struggled in the first audit cycle were not the ones that broke a rule. They were the ones who could not produce a document fast enough to prove they had not.

What We Would Check This Quarter

If you do nothing else, do these three: get copies of appointment letters for every contract worker on your site, ask your supplier to show you their current licence and the regime it sits under, and compare this year's wage structure against the 50 percent basic rule. Those three cover most of what an inspector opens with.

If your supplier cannot turn these around inside a week, that is information about your supplier, not about the rules.

Not sure where your site stands under the new Codes?

We will walk your contract labour documentation with you and flag the gaps, no obligation.

Talk to Prarambh

What This Means for Your Next Audit

The practical test of whether your factory has genuinely adapted to the new Codes, rather than just being aware of them, is what happens in your next labour inspection or client compliance audit. Under the old framework, an inspector's checklist was fairly predictable: contractor licence, PF and ESIC challans, wage registers. Under the new Codes, that list has effectively grown, appointment letters for every worker including contract and fixed-term staff, wage structures verified against the 50 percent basic rule, gratuity provisioning checked against the one-year threshold rather than five, and licensing verified against the new single national system rather than a state-specific one.

Factories that treat this as a paperwork update, swapping old forms for new ones without actually changing the underlying wage structuring or provisioning practices, tend to discover the gap the hard way, during an audit rather than before one. The ones that come through cleanly are the ones who worked backward from the actual new requirements, not forward from what used to be sufficient.

A Practical Starting Point

If you haven't already done so, the highest-value first step is a wage structure review: for every role, direct and contract, confirm basic pay is at least 50 percent of gross, and understand what that does to your PF, ESIC, gratuity and bonus calculations. Everything else in the new Codes, in some way, traces back to that single definitional change, and getting it right early avoids a cascade of downstream corrections later.

Frequently Asked Questions

The four Labour Codes became operational on 21 November 2025. Central draft rules followed in December 2025 and have been getting finalised through 2026, while several states are still aligning their own rules, so many employers are currently working under both the new central codes and legacy state requirements.

The Contract Labour (Regulation and Abolition) Act, 1970 has been subsumed into the Occupational Safety, Health and Working Conditions Code. The obligations did not disappear; they moved. Registration, licensing and principal employer liability all continue in the new framework.

Yes. Written appointment letters are mandatory for all hires, including contract and fixed-term workers. Your manpower supplier should be able to produce a copy for any worker placed at your site when you ask for it.

For many employers, yes, modestly. Because basic wages must be at least 50 percent of gross and PF and gratuity are calculated on basic, the statutory portion of the cost rises. A supplier quoting exactly the same rate as two years ago is worth a direct question about how that is being funded.