Is a Salary Structure Revision Mandatory for All Employers Under the New Labour Laws?

India’s four new Labour Codes are set to come into effect on November 21, 2025, marking one of the biggest labour law reforms in recent years. Since the announcement, there has been widespread confusion about whether employers must immediately change employee salary structures.

The most discussed change is the rule that requires at least 50% of an employee’s total Cost to Company (CTC) to be classified as basic salary. At present, many companies keep basic pay at around 30% to 40% of CTC, which may require restructuring to meet the new compliance standards.

However, experts clarify that salary restructuring is not necessarily immediate for all organisations, and implementation will depend on multiple factors.

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Is Immediate Salary Restructuring Mandatory?

Although the Labour Codes will officially come into force on November 21, 2025, full implementation may not happen instantly across all states.

This is because labour is a concurrent subject, meaning both the central and state governments must align regulations. Each state will need to issue its own notifications and rules based on the central framework.

As a result, while the law is active at the central level, actual enforcement and payroll-level changes may roll out gradually across states.

Therefore, companies are not always required to change salary structures immediately, but they must prepare for compliance.

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What Happens If Companies Do Not Comply?

Non-compliance with the new Labour Codes may lead to:

• Labour department scrutiny and inspections
• Claims of underpayment of wages or statutory benefits
• Financial penalties under the updated legal framework

To avoid future legal and financial risks, companies are advised to proactively review their payroll structures.

Employers should carefully assess:

• Cost to Company (CTC) breakdown
• Basic salary percentage
• Allowances and variable pay components
• Statutory benefits linked to wages

Early evaluation will help ensure smoother transition once enforcement begins.

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When Can Salary Structure Be Kept Unchanged?

Companies can retain their existing salary structure only if it already meets the new requirement.

This means:

• Basic salary is 50% or more of total CTC
• Salary components comply with the definitions under the new Labour Codes

If the basic pay is below 50%, employers will need to restructure compensation. This may involve adjusting allowances such as HRA, special allowances, or performance-linked pay to align with the revised wage definition.

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Conclusion

The Labour Codes 2025 introduce a major shift in India’s salary structure framework, especially the requirement to maintain at least 50% basic salary in total CTC.

While immediate restructuring may not be mandatory in every case, employers should start reviewing payroll structures early. Proper preparation will help businesses ensure compliance, avoid penalties, and smoothly transition into the new labour law regime once state-level implementation begins.