The New Labour Codes — Deep Dive for the Hospitality Industry [Article 2]

India’s labour-law transformation is the biggest regulatory reset in decades. While Article 1 from Hospitality Herald, explained the laws and broad implications, this second part focuses on practical implementation, hospitality-specific examples, financial impact, compliance strategy, and worker benefits — with all points supported by references.

1. Implementation Timeline & Current Status (as of late 2025)

Although all four codes were passed between 2019–2020, their unified nationwide implementation began on 21 November 2025, according to notifications by the Ministry of Labour & Employment.

Source: Ministry of Labour & Employment, Government of India – PIB Notification (2025)

What’s now mandatory:

Nationwide floor wage
New standardised definition of “wages”
Digital compliance portal
Inclusion of gig/platform workers in social security
New working-hour and safety norms
Higher retrenchment threshold (300 workers)

State rules are gradually being aligned, but the central notification ensures the codes are already enforceable.

2. Hospitality-Specific Impacts (Hotels, Restaurants & F&B Businesses)

A. Payroll & Salary Structure Changes

Under the new definition of “wages,” the basic salary must be at least 50% of total CTC.
Source: Times of India analysis on new wage structure impact

Impact on hospitality:

Many hotels structure pay using multiple allowances (service charge share, F&B allowances, incentives).
These allowances can no longer be used to artificially reduce PF or gratuity liabilities.
Gratuity & PF contributions will increase, raising long-term staff benefits.

Example:
Earlier: Basic ₹12,000, CTC ₹25,000
Now: Basic must be ≥ ₹12,500 (50% of CTC)
→ PF/Gratuity base increases → higher employer contribution.

B. Work Hours, Overtime & Weekly Off Compliance

Under OSH&W Code, the standard legal work limit is:

8 hours/day
48 hours/week
Maximum 12 hours/day with overtime
Source: Occupational Safety, Health and Working Conditions Code, 2020

Hospitality impact:

Hotels often schedule 10–12 hour shifts due to peak hours.
Now overtime MUST be recorded and paid formally.
Split shifts must be documented.
Staff in 24/7 operations (front office, kitchen, housekeeping) must receive compliant weekly offs.

C. Contract & Casual Labour Will Need Formalisation

This is huge for hospitality because:

Banquet staffing
Housekeeping outsourcing
Kitchen stewarding staff
Event manpower
Security services
…are often brought in through vendors.

Under the new codes:

Contract workers must be registered in social security systems.
Worker records must be maintained digitally.
Vendors must be compliant — or liability shifts to the hotel.
Source: Code on Social Security, 2020

D. Retrenchment & Downsizing Flexibility

Earlier threshold: Permission required to retrench >100 workers
New threshold: Up to 300 workers can be retrenched without government approval.
Source: Reuters – Labour Code Implementation Report (Nov 2025)

Impact:

This brings flexibility for:

Seasonal resorts
Large banquet hotels
Chains undergoing restructuring

However, retrenchment still requires:

Notice pay
Compensation
Legal documentation

3. How Hospitality Businesses Can Prepare (Action Plan)

Step 1: Audit Employee Categories

Classify your workforce:

Permanent
Fixed-term
Contract
Apprentices
Gig/platform (delivery, valet partners)

This ensures correct application of social security rules.

Step 2: Review All Wage Structures

HR must revise:

Basic salary ratios
Allowances
Service charge calculations
Gratuity calculations
PF base

Payroll software updates are critical.

Step 3: Digital Compliance Setup

All records now require:

E-registers
Digital attendance
Electronic registers of wages
Online returns

This reduces inspector visits but requires clean, real-time data.

Step 4: Overtime & Shift Re-planning

Especially for:

Kitchens
Front office
Security
Housekeeping
Banquets

Hotels must design shifts balancing:

Peak business
New legal limits
Overtime pay

Step 5: Vendor & Outsourcing Audit

Hotels must check whether vendors:

Provide PF/ESI
Follow wage codes
Maintain proper registers

If they don’t, hotels are legally accountable.

4. Benefits for Staff: Why Workers Should Celebrate These Codes

A. Higher Social Security Benefits

PF, ESIC, insurance, maternity benefits become more accessible.
Earlier loopholes where employers kept basic salaries low are now closed.

B. Written Employment Letters Mandatory

Workers receive clear documentation of:

Role
Salary
Hours
Duties
Source: Industrial Relations Code, 2020

This protects them from arbitrary changes.

C. Safer Workplaces

Mandatory:

Clean drinking water
Medical rooms for large establishments
Safety audits
Emergency protocols
Source: OSH&W Code

Great for high-risk areas like kitchens, engineering, laundry.

D. Gig & Platform Workers Finally Recognised

Delivery partners, aggregator-employed riders, and part-time hospitality gig workers now get:

Insurance
Pension
Social security fund access

A major paradigm shift.

5. Case Studies (Realistic Hospitality Examples)

Case Study 1: A 150-Room Hotel

Staff strength: 190
60 outsourced housekeeping workers
Old payroll: Basic salary formed 30% of CTC

After Codes:
Basic must become 50% → Employer PF increases → Higher long-term benefit for staff.

Hotel impact: Annual HR cost increases slightly
Staff impact: Future retirement benefits increase significantly

Case Study 2: A Casual-Dining Restaurant Chain

Many staff working 10–12 hours
Overtime often informal

After Codes:
All overtime must be documented and paid at statutory rates.
Restaurant must implement electronic punch-in/out system.

Business impact: Predictable labour cost
Staff impact: Fair compensation for extra hours

Case Study 3: Banquet Events at a Resort

Uses a vendor supplying 40 helpers for weekend events

After Codes:
Vendor must ensure:

Registered workers
PF/ESI compliance
Correct wages

If not, liability shifts to the resort.

6. Final Perspective: Is This Good or Bad for Hospitality?

✔ For Businesses

Pros:

Simplified compliance
More flexibility for restructuring
Reduced inspector harassment
Digital record-keeping reduces paperwork

Cons:

Higher PF/Gratuity costs
Mandatory overtime payments
Payroll restructuring workload
Vendor compliance needs monitoring

✔ For Workers