The Q4FY26 CHRO Dialogue

Executive Summary Culture remains the invisible force behind all business transformation – whether successful or otherwise.

CHROs hold the key to turning culture into an engine of growth.

The four Labour Codes are in force but implementation is incomplete. Companies should treat this as a live compliance obligation, not a future one.

A redefinition of the term 'wages' is the most significant change, reshaping gratuity, PF, social security contributions and retrenchment compensation.

Companies will need to recalibrate gratuity calculations and restructure compensation to meet the 50% rule.

Workforce classification now determines the full range of obligations: overtime, standing orders, union recognition, leave encashment and contract labour.

Gig and platform workers form a distinct category whose contribution rules are still forthcoming.

. Session 1: The Role of Culture in Business Transformation Across industries, business transformation remains a perennial ambition and yet, the hidden force that shapes its success or failure is culture. While leaders invest heavily in strategy and systems, culture is too often treated as window dressing. The reality is that culture is the decisive link between vision and values on the one hand, and on-ground delivery on the other. For CHROs, this is more than a theoretical gap: it is an urgent opportunity to turn culture from a risk factor into an engine for growth. In this session, Sanjay Menon, Managing Director of Publicis Sapient India and Global Head of Service Lines for SapientRazorfish, shared insights on this issue, based on his decades of experience spanning strategy, digital transformation and large-scale delivery across markets.

Why Culture is Often Overlooked Organisations often assume that strong plans, clear incentives and detailed roadmaps can overpower cultural friction. The reality is that culture dictates whether a given blueprint works. It is the unwritten rules and deeply held assumptions that shape how people react when the script goes off course . Culture explains why post-merger integration stalls, why promised synergies remain on paper and why repeated change announcements fail to move the needle on performance.

Culture is the iceberg beneath the surface. Rituals, posters and new slogans are visible above the waterline, but beneath lies the real weight: the beliefs people hold, the stories they tell each other and the assumptions that frame what is safe or risky. It is here that real transformation lives or dies. When leaders neglect this submerged layer, they risk inviting sabotage by silence, passive resistance and disengagement. For CHROs, the task is to surface what is unspoken and build shared understanding around it, turning hidden blockers into known design factors.

Purpose, Rituals and Real Human Connection Purpose has become a fashionable word, but its value is revealed only when it serves as the true North Star for tough choices. Purpose is not a line on a wall or a slick video for town halls; it is the principle that guides trade-offs when priorities collide. When leaders and teams face competing demands, purpose must resolve the dilemma. When it does not , cynicism sets in. Purpose must be real enough to stand up to pressure, and not fade when short-term gains tempt compromise.

However, purpose alone is not enough. Rituals, peer behaviour and daily symbols matter as much as big declarations. Peer-to-peer influence determines what really sticks: employees watch how their colleagues handle bad news, how leaders respond to dissent and whether openness is truly rewarded. If honesty is claimed but difficult questions are punished, the culture drifts into mistrust. Small rituals – such as recognising risk-takers, celebrating lessons learned from failure or openly sharing leadership missteps – signal that the culture welcomes experimentation and speaking up.

Peer influence is especially powerful in diverse, multigenerational workforces. Today’s younger employees bring a paradox: they expect purpose and social good, but they are also direct about personal gain. They want to see that the workplace matches its promises. They demand clarity, fairnessandrealparticipationinshapinghowworkgetsdone.Thismakesritualsandvisiblestories essential for reinforcing the true character of a company’s culture.

CHROs: The Invisible Architects No role is closer to this terrain than the CHRO’s. Far from being just a custodian of policies and

compliance, the CHRO today is a co-architect of the business future. They must hold up the mirror when there is dissonance between declared values and lived behaviours. They have to coach leaders to show vulnerability, not invincibility. Trust flows not from perfection, but from the courage to admit imperfection.

A strong culture does not mean rigid uniformity. Instead, it means holding the line on core values while allowing healthy variation where it spurs creativity. This balance of macro culture and micro cultures allows teams to adapt and innovate. Some units may need more structure; others, more flexibility. The trick is knowing which elements must never shift and where local nuance can thrive without undermining the whole.

This is much easier in theory than in practise. Sometimes it means having the hard conversation that not everyone will continue on the journey. A healthy culture cannot be diluted by factional leaders or silent saboteurs whose personal power depends on blocking change. CHROs must ensure that the organisation makes clear choices about who stays aligned and help leaders handle these calls with clarity and respect.

Implications for CHROs Practical questions guide this work: What part of the culture sets the speed limit for change? Which unwritten rules drain the power of our purpose? Where do our rituals contradict our stated values? How can leaders be helped to understand the impact of mixed signals? When leaders say they want fearless innovation but penalise failure, the message is clear: play it safe.

Remote work, hybrid teams, digital transformation and AI are pushing organisations to redesign work. But redesign is not only about tools and structures, it is about the glue that holds these changes together. That glue is culture. CHROs must nurture it, adapt it, and sometimes protect it from erosion by inertia. They must make culture visible through conversations that reach beyond posters. This can only be done by using real stories, real feedback and real accountability. The question every CHRO must ask is simple: ‘Is culture driving this transformation forward, or quietly holding it back?’ The answer depends on how honestly we confront what is hidden, and how consistently we act to align the visible with the invisible.

Transformation does not fail for lack of funding or technology; it fails when cultural realities are left unspoken. The deeper the hidden contradictions, the higher the risk of drift. CHROs stand on the frontline of this reality. They can either preserve the past or shape a culture that unlocks the future. When people see purpose and behaviour in sync, they lean in. When they see mismatches, they lean out. It is when culture, purpose and performance align that transformation gains its true edge.

. Session 2: Open House Conversation | India’s New Labour Code India’s newly-implemented Labour Codes represent a historic transformation of India’s labour environment, consolidating 29 separate laws into 4 four comprehensive Codes, covering Wages, Industrial Relations (IR), Social Security (SS), and Occupational Safety, Health and Working Conditions (OSH). All four Codes came into effect on 1 November 2025. Yet the practical compliance picture is anything but settled.

At a recent India CHRO session, run as an open house, Rashmi Pradeep, Partner at Cyril Amarchand Mangaldas, guided members through the current state of the Codes: What is in effect today? What is still pending; And how should organisations sequence their response?

Current Compliance Landscape All four Codes came into force in November, but state-level rules, which govern most private-sector obligations under the Wage, IR and OSH Codes, remain unfinished in most states. Only Arunachal Pradesh, Gujarat, Bihar and Mizoram have notified final rules. Central rules are directly relevant only for the SS Code; for everything else, state rules govern, unless the employer is in banking, insurance, or is a government entity.

The General Clauses Act provides a transitional bridge: where new rules are not yet in place, rules under the repealed laws remain live. The compliance framework therefore operates on three tracks:

Provisions not dependent on rules wages computation, benefits impact, timing of terminal payments are in effect from day one.

Provisions dependent on rules that existed under subsumed laws, such as the Factories Act, are also in effect from day one under those old rules.

Entirely new provisions, such as the reskilling fund and gig worker social security, carry no obligation until fresh rules are notified.

The Definition of Wages: The Central Challenge One of the primary objectives of the Codes was to bring uniformity across the 29 legislations they replaced, with the definition of wages as the centrepiece. Every financial obligation towards an employee, including gratuity, retrenchment compensation and notice pay, flows from this single definition. Wages capture everything regularly payable and expressible in monetary terms. Exclusions such as HRA, PF contributions and statutory bonus are permitted but capped in aggregate at 50% of total remuneration; anything beyond that threshold is added back. Employers must audit each pay component carefully: unnamed allowances default to wages, and named exclusions lose their shelter once the 50% ceiling is breached.

Two further definitional changes are worth noting. Contractors are now explicitly included within the definition of employer, carrying employer-level obligations towards their workers. Worker is a subset of the wider employee category, with supervisory roles earning up to Rs 18,000 per month now brought within its scope. For most private sector employers, state government rules will govern; central rules apply for the SS Code.

Code on Wages: Key Provisions Two-day full and final settlement: This applies to all employees, regardless of either salary level or the form of departure, whether termination, resignation, retirement or dismissal. Employers should shorten settlement cycles where possible and build contractual protections for situations involving unreturned assets.

Deductions cap: Deductions from wages are limited to 50% of monthly wages, including for senior management, with contractual clawback clauses.

Minimum wages and pay parity: States must legislate above a central floor wage. Pay parity provisions now explicitly cover transgender persons.

Code on Social Security: Gratuity, PF and New Categories The SS Code simplifies registration by consolidating multiple sign-ons (PF, ESIC, gratuity and others) into a single registration. How this will work in practice remains to be seen and will depend on further rule notification.

Gratuity computation: The formula is unchanged, but the base shifts from basic pay (historically 30–40% of CTC) to wages under the new definition. Any employee leaving after 1 November 2025 attracts this computation. Employers should update group gratuity insurer assumptions accordingly. Where gratuity exceeds the Rs 20 lac cap, the old computation may apply above the cap; below it, the new definition governs.

Fixed-term employees: Such employees are now entitled to gratuity after one year of service. Consultants whose contracts resemble master-servant relationships carry reclassification risk, particularly at junior levels.

PF and ESIC: The new wage definition is relevant for PF only where wages are below Rs 15,000. HRA is excluded from wages, which may shift some employees in or out of ESIC coverage. Existing schemes are preserved unchanged for at least one year.

Gig and platform workers: No immediate obligation. A social security board and contribution rate must first be notified. The risk of deemed employment claims in court remains a separate and ongoing concern.

Industrial Relations Code: Governance and Workforce Obligations Grievance Redressal Committees (GRC) : Mandatory for establishments with 20 or more workers (separate from Works Committees), with equal employer-worker membership and proportional representation of women. Required even where a trade union is recognised.

Standing orders: Required for industrial establishments with 300 or more workers (per establishment, not per company). The IT sector in Karnataka and Haryana retains its exemption. Model standing orders issued centrally will be treated as applicable unless an employer certifies its own.

Trade union recognition: This is now a national mandate. Unions meeting the applicable threshold (30% centrally; thresholds vary state-wise) must be formally recognised. Where no union reaches the threshold, a negotiating council is to be formed.

Worker reskilling fund: On retrenchment, employers must contribute 15 days' wages per worker to a government fund, in addition to standard retrenchment compensation. The government approval threshold for retrenchment and closure has risen from 100 to 300 workers for factories.

OSH Code: Working Conditions, Leave and Contract Labour Shops and commercial establishments (S&Es), which were earlier under state acts, now also need to comply with OSH code. Factories will need to switch from the Factories Act to the OSH Code.

Working hours: The Code prescribes 8 daily and 48 weekly hours. Several states have amended their S&E Acts to permit 9-10 hours, creating a conflict with central law that remains unresolved pending court interpretation.

Women workers and night shifts: Women workers may work between 7pm and 6am with written consent and adequate safeguards like transport, driver verification and security arrangements.

Annual leave and encashment: Workers accrue 1 day per 20 days worked, with a 30-day carry-forward cap. Year-end encashment is at the worker's option and accrues only from November 21 st ; historical leave under S&E Acts does not attract this right.

Contract labour: Use in 'core activity' is prohibited, with an exception for historically established arrangements. Principal employer obligations for PF and gratuity of contract workers persist; contract terms should explicitly pass these through to contractors.

Enforcement and Penalties Labour inspectors are now mandated to help employers achieve compliance, not merely penalise lapses.

Many violations can be resolved by paying a portion of the applicable fine, avoiding escalation or prosecution.

The SS Code allows employers to self-correct errors, particularly relevant for PF computation mistakes before formal enforcement action is triggered.

Authorities may not reopen matters more than five years old, providing protection against the long-standing practice of revisiting decades-old PF files.

Implementation Roadmap: Act Now versus Monitor The session concluded with a prioritised action framework. The following obligations require immediate attention:

Identify wage components under the new definition and model the financial impact on gratuity, PF, ESIC and terminal settlements. This should be done in a manner that does not reduce the overall benefits to an employee.

Wage threshold for applicability: for payment of bonus, each state will decide their individual thresholds. For now, it will be Rs 21,000 which is in line with the previous law.

Revise gratuity computation and provision; update group gratuity insurer on the new wage base.

Complete workforce mapping across employees, workers, fixed-term staff, contractors and gig workers. All obligations stem from this.

Design or validate the revised compensation structure, targeting wages at 50-80% of CTC without reducing aggregate benefits.

Review all contract labour arrangements to ensure principal employer obligations are contractually passed through.

Implement consent processes for women workers engaged on night shifts.

Review and update employment agreements, appointment letters and leave policies.

The following can be monitored without immediate action:

Minimum wage revisions (pending state notification)

Standing orders and GRC establishment

Trade union recognition processes

Worker reskilling fund (rules not yet notified)

Overtime tracking in services Gig worker social security contributions

Compulsory insurance and creche facilities

Communication to employees particularly around compensation restructuring, should be handled carefully, ideally aligned with the annual increment cycle to ensure that changes are understood and that no employee perceives a reduction in overall benefits.