Are you a contract worker? Here's why your salary must now go up by 2% every year

NEW DELHI: Certain contract workers in India may now be eligible for a mandatory minimum 2 per cent annual salary hike under the Centre's new labour code rules notified on May 8, 2026.

The provision comes under Rule 185 of the Occupational Safety, Health and Working Conditions (OSHWC) Central Rules, 2026. The rule makes it compulsory for eligible contract workers to receive at least a 2 per cent yearly increment in wages.

What does the rule actually say?

Rule 185 states that a worker who is "regularly employed" by a contractor and whose employment conditions are governed by mutually agreed standards must receive an annual increment of not less than two per cent of their wages.


Importantly, the 2 per cent increment provision is not merely a wage protection measure but is also tied to a worker's legal classification. Workers who receive this increment may be excluded from the definition of "contract labour" under the OSHWC Code, potentially entitling them to additional protections accorded to regular workers.


The move is aimed at protecting long-term contract workers who often do not receive structured yearly salary revisions like permanent employees.

Who is covered?

The rule applies only to "regular workers of a contractor." These are employees hired through third-party contractors rather than directly employed by a principal employer. Permanent employees and fixed-term employees hired directly by companies fall outside the scope of this rule.

Is the salary hike compulsory?

Yes. Companies and contractors cannot deny the increment if the worker falls within the category defined under Rule 185.


Which sectors are covered?

The provision applies to establishments where the Central government is the appropriate authority. These include:

• Railways (including metro rail)
• Mines
• Oil fields
• Major ports
• Air transport services
• Telecom companies
• Banks
• Insurance companies
• Central PSUs and autonomous bodies

Will it apply across India automatically?

No. Since the rule is part of the Central Rules, state governments will still need to notify similar provisions for establishments under their jurisdiction. This means implementation may vary across states and sectors.

The new labour codes replace 29 existing central labour laws with four consolidated codes covering wages, industrial relations, social security, and workplace safety. Other changes under the new codes include revised salary structures, overtime rules, gratuity norms, and work-hour regulations.