Mandatory appointment letters and the shift to the Labour Codes
India's four Labour Codes -- the Code on Wages 2019, the Industrial Relations Code 2020, the Code on
Social Security 2020, and the Occupational Safety, Health and Working Conditions Code 2020 -- consolidated
29 earlier central labour statutes and came into force together on 21 November 2025. For the first time, a
written appointment letter in a prescribed format, stating designation, category, wages, and social security
details, is a universal statutory requirement for every employee -- previously this was only a best practice
or a state-specific rule in some jurisdictions.
Fixed-Term Employment
The Industrial Relations Code, 2020 formally recognizes Fixed-Term Employment (FTE) as a distinct category.
Fixed-term employees are statutorily entitled to parity with permanent workers on working hours, wages,
allowances, and other benefits, and -- notably -- become eligible for gratuity after just one year of
continuous service, on a proportionate basis, rather than the five-year threshold that still applies to
permanent employees. No retrenchment notice or compensation is payable on the natural expiry of a fixed-term
contract, since expiry is not treated as a termination in the technical sense.
Retrenchment notice, compensation, and the 300-worker threshold
Retrenching a “workman” under the Industrial Relations Code generally requires one month’s
written notice (or pay in lieu) plus retrenchment compensation of 15 days’ average pay for every
completed year of continuous service -- a formula largely carried forward from the earlier Industrial
Disputes Act, 1947. A significant change is that the threshold for needing prior government permission before
layoff, retrenchment, or closure has been raised from 100 workers to establishments with 300 or more workers,
giving employers below that size materially more flexibility, subject to the standard notice and compensation
requirements still applying. NRI entrepreneurs setting up an Indian subsidiary or branch office should factor
this 300-worker threshold into workforce-planning decisions from the outset, since staying below it preserves
considerably more flexibility to restructure the India operation later without needing prior government
approval.
Is a written appointment letter now legally required for every employee in India?
Yes -- since the Labour Codes came into force on 21 November 2025, employers are required to issue a
written appointment letter in the prescribed format to every employee, covering designation, category, wages,
and social security details, rather than this being merely a recommended practice.
Does a fixed-term employee get gratuity even after working less than 5 years?
Yes -- under the Industrial Relations Code, 2020, fixed-term employees become eligible for gratuity after
just one year of continuous service (paid proportionately), unlike permanent employees who generally still
need five years of continuous service to become eligible.
My company has 150 workers -- do I need government permission before retrenching anyone?
Under the Industrial Relations Code, 2020, the requirement for prior government permission before
retrenchment now applies only to establishments with 300 or more workers -- an establishment with 150 workers
falls below that threshold, though standard notice and retrenchment-compensation requirements still apply.
