New Labour Code: These contract workers may get minimum 2% annual salary hike; check if you qualify

The New Labour Code rules from the central government have set a mandatory minimum 2% annual salary increase for certain contract workers. This is outlined in Rule 185 of the Occupational Safety, Health and Working Conditions (OSHWC) Central Rules, 2026, notified on May 8, 2026. However, not all employees will benefit from this. Let’s break down who is eligible, where it applies, and why this rule matters for both workers and employers.

Rule 185 specifies that a contractor’s regular worker is entitled to an annual salary hike of at least 2% of wages. This applies when the worker is regularly employed under mutually accepted employment conditions. The aim is to ensure steady wage growth for contract workers who often miss out on benefits available to permanent employees. The rule is now part of the OSHWC Central Rules, 2026.

The 2% increment applies only to “regular workers of a contractor.” These are employees hired legally through a third-party contractor and not directly by the company. Experts say the rule is specifically designed for contract workers working continuously under contractor arrangements. If eligible, employers must ensure the annual wage increase even if there is no separate salary revision policy in place.

Employees directly on a company’s payroll are not covered under Rule 185. This includes permanent staff as well as fixed-term employees hired directly by the company. Since the rule only applies to workers employed through contractors, regular corporate employees cannot claim the mandatory 2% annual increment under the New Labour Code framework.

Yes, the rule makes the increment mandatory for eligible contract workers. According to labour law experts, companies and contractors cannot avoid the increase even if they do not wish to provide yearly hikes. Once the worker falls under the contractor category defined in Rule 185, the minimum 2% annual wage increase becomes compulsory under the OSHWC Central Rules, 2026.

No, the rule is not automatically applicable across all states. Since this provision is part of the OSHWC Central Rules, it mainly applies to establishments where the central government is the “appropriate government.” State governments may still need to notify their own rules before similar provisions become applicable in establishments controlled by the state governments.

The rule currently covers establishments controlled by the central government. These include railways, mines, oil fields, major ports, air transport services, telecom companies, banks, insurance companies, Central Public Sector Undertakings (PSUs), subsidiaries, corporations, and autonomous bodies under the Central government. Contractors working for these establishments must comply with the 2% annual increment rule for eligible workers.