The new labor code has given a big relief to the contract employees. Under the Occupational Safety, Health and Working Conditions (OSHWC) Central Rules, 2026, it has now been made mandatory for certain contract employees to get a salary increase of at least 2 percent every year. After this notification issued on 8 May 2026, the expectations of those working through third parties, i.e. contractors, who are often deprived of the facilities provided to permanent employees, have increased.
What does rule 185 say?
Rule 185 of OSHWC Central Rules is mainly designed for regular workers of contractors. According to this rule, contract employees working continuously under mutually agreed employment conditions will be entitled to get an increase of at least 2 percent in their wages every year. It is often seen that the salary of contract workers remains stuck at the same level for years. The direct objective of this new system is to ensure continuous increase in the income of such employees, so that they can also feel financial security.
Who will get the direct benefit of this new rule?
The benefit of this mandatory increment will be available only to those employees who fall in the category of ‘regular workers’ of the contractor. This simply means that those who have not been appointed directly by the company, but are on the payroll of a third-party contractor. Labor law experts clearly say that if an employee falls in the category of contractor under Rule 185, then it becomes mandatory to give annual increment. Even if the contractor or the main company does not have any separate appraisal or increment policy, they will still have to give this minimum increase.
Why permanent employees will not get this benefit
It is also very important to know to whom this new rule does not apply. Employees who are working directly on the payroll of a company are completely out of the scope of Rule 185. This includes the regular (permanent) staff of the company as well as directly hired fixed-term employees. Since this rule has been specifically designed keeping in mind the category of people working under contract system, direct employees of the corporate sector or companies will have no right to claim 2 percent mandatory increment under this specific framework of the new labor code.
In which departments will this system be implemented
Has this rule been implemented simultaneously in the entire country? The answer is, no. At present this rule will be applicable only in those establishments where the Central Government is in the role of ‘Appropriate Government’. These include railways, mines, oil fields, major ports, air transport services, telecom companies, banks, insurance companies, central public sector undertakings (PSUs), and corporations or autonomous bodies working under the central government. Contractors providing services at these places will have to follow this rule for their eligible employees. At the same time, for the institutions coming under the state governments, the state governments will have to notify separate rules at their level, only after which the employees there will be able to get its benefits.
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