Industry Seeks Urgent Clarifications On Labour Codes, Costs

New Delhi, Dec 29 (KNN) Industry bodies have sought urgent clarifications from the government on several compliance and cost-related issues under the new labour codes. 

Concerns Over Timing and Retrospective Application

One of the key concerns for employers is the timing of enactment of provisions such as wages constituting at least 50 percent of an employee’s total remuneration, reported TOI. 

Confederation of Indian Industry (CII) has urged the labour ministry to avoid retrospective application of new provisions, citing potential cost increases for employers. 

It also flagged confusion over the revised ESI wage definition, noting conflicting circulars issued after November 21, 2025, and sought clarity on its effective date.

CII flagged financial risks from retrospective gratuity and leave encashment, seeking clarity on timelines and uniformity between central and state rules under the new labour code.

ICAI Guidance on Accounting Treatment

Institute of Chartered Accountants of India (ICAI) advised auditors that any increase in gratuity liability must be recognised in the profit and loss account from the current quarter even though detailed rules are pending. The Centre is expected to notify draft rules soon, and ICAI also clarified the related tax treatment.

Industry Seeks Operational Clarity

Anshul Jain, national leader for regulatory affairs, PwC India, said firms still lack clarity on gratuity calculations, treatment of pre-November 21 service, and inclusion of Employee Stock Ownership Plans (ESOPs) and variable pay, as key central and state rules remain unnotified.

CII has sought clarity on the definition of wages, particularly whether performance-linked bonuses and share-based income would be included, and whether additional allowances would apply when basic pay and dearness allowance account for 50 percent of gross salary.

There is continued ambiguity over the applicable legal framework for non-manufacturing sectors, particularly whether compliance falls under state Shops and Establishments Acts or the labour codes read with state rules.

Industry has further sought clarity on the definition of ‘worker’, the applicability of working hours and overtime provisions, and the permissibility of engaging contract labour for core activities in manufacturing units.

(KNN Bureau)