The Government of India has notified the new labour codes—including the Code on Social Security, 2020, Wage Code, 2019, and OSHWC Code, 2020—ushering in major changes to employee-benefit rules.
These changes (effective 21st Nov 2025) affect Gratuity, Leave Encashment, Provident Fund, Pension, and the underlying definition of wages, which serves as the basis for several benefits.
Below is a simplified summary for HR, finance and actuarial teams.
|
Benefit Area |
Key Change |
Reference |
Impact on Employers / Actuarial Liability |
|
Wages Definition |
Broader “wages” definition; several allowances included unless they |
SS Code, Sec. 2(88) |
Higher wage base may increase PF, gratuity and leave-encashment |
|
Gratuity Eligibility |
Fixed-term employees become eligible without 5-year rule; no minimum |
SS Code, Sec. 53 |
Liability increases for contract/FTE workforce; actuarial models must |
|
Leave Encashment |
Paid annual leave beyond 30 days must be encashed. |
OSHWC Code, Sec. 32(vii) |
Annual instead of exit-only encashment → recurring financial |
|
Provident Fund & Pension Coverage |
Coverage expands to include gig, platform, and unorganised workers. |
SS Code, Ch. III, IV, IX |
Broader compliance; potential contribution outflow; wage-base |
|
Social Security Fund |
National fund for gig/unorganised workers established. |
SS Code, Sec. 141 |
Administrative and reporting obligations; aggregator contributions may |
What This Means for Employers & Actuaries
-
Higher liabilities across gratuity, PF and leave encashment due to a broader wage base.
-
Earlier provisioning for fixed-term employees’ gratuity.
-
Annual leave liability recognition, not just at separation.
-
Review HRIS/payroll rules, especially wage-mapping and leave-carryover logic.
-
Update actuarial valuation models for revised eligibility, wage base and encashment patterns.
Conclusion
The new labour codes streamline India’s social-security framework but introduce material changes to employee-benefit cost structures. Early impact assessment—especially for actuarial valuations and budgeting—is essential for smooth adoption.
Disclaimer
This summary is for informational purposes only. Please refer to the official notified text of the Code on Social Security, 2020, Wage Code, 2019, OSHWC Code, 2020, and state rules for full compliance requirements. Seek legal or actuarial advice before making policy decisions.