A question I keep hearing from people who work in cooperative institutions goes something like this: we are governed by our own bye-laws and a Board elected by members, so surely the new Labour Codes work differently for us? It is a fair question. It also has a short answer that many unions would rather not hear.
Yes, the Codes apply to you
The four Labour Codes came into force on 21 November 2025 and repealed 29 central labour laws in one stroke. Nothing in that framework carves out a special category for cooperatives. What decides whether a provision applies to you is the nature of the establishment and the number of people it employs, not the legal form of the organization. A dairy union running a processing plant is an industrial employer like any other. A village society with a handful of staff is a very different case. That difference is exactly where the thresholds matter.
State rules add another layer. Most dairy establishments fall under state jurisdiction, which means the Codes become fully workable only once your state has notified its rules. Reports from the spring of 2026 listed Gujarat among the states that had notified rules under most of the Codes. Rule status keeps moving, so check the current notifications on your state labour department's portal before you rely on any summary, including this one.
Your pay structure is the first thing to check
The Code on Wages defines wages as basic pay plus dearness allowance plus retaining allowance. If the items excluded from that definition add up to more than half of total remuneration, the excess is added back into wages for purposes such as PF and gratuity. Put simply, basic plus DA should make up at least half of what you pay.
Plenty of cooperative pay structures were built decades ago around a modest basic and a long list of allowances, often frozen into settlements or scales that nobody has reopened in years. If that describes your union, the arithmetic changes. PF contributions rise on a larger base. Gratuity liability rises with it. Take-home pay for some employees dips slightly. Practitioners also report that the Ministry's March 2026 clarifications count overtime towards the half-of-remuneration test, so confirm that point in the FAQ itself rather than relying on anyone's summary.
The harder question for cooperatives is how to restructure when pay terms sit inside a long-term settlement or an agreement with a union. That is a conversation to have with your legal advisers and employee representatives early, not after the first payroll run. I have written about the dilemma before in Complicated Reality: The 50% Basic Rule Dilemma for Cooperatives and about the mechanics in Decoding the 50% Basic Rule Under the New Wage Code. The planning side is covered in Wage Structure Transformation in a Cooperative Organization.
Contract labour is where dairy plants carry the most exposure
If I had to pick the single provision that deserves a hard look at every dairy plant, it would be contract labour under the OSH Code. Three changes matter most.
The threshold moved. Contract labour provisions now apply where 50 or more contract workers are engaged, up from 20 under the old Contract Labour Act. That relieves some smaller units but does little for a large plant that runs hundreds of contract workers through several contractors.
Core activities are off limits for contract labour, with exceptions. The Code prohibits engaging contract labour in the core activities of an establishment. Three exceptions exist. The first is where the normal functioning of the establishment is such that the activity is ordinarily done through a contractor. The second is where the work does not need full-time workers for the major part of the day. The third is a sudden surge in work that has to be finished within a specified time. Certain support services are listed as non-core and stay open to contractors, including sanitation, security, canteen and catering, transport, courier services and civil or construction work.
For a dairy plant that means milk reception, processing, pasteurization and packing sit close to the core of what the establishment exists to do. Canteen, housekeeping, security and transport do not. The uncomfortable work is going through every contractor arrangement and asking honestly which side of that line each one falls on. Where an activity looks core and the contract rests on one of the exceptions, document the reasoning now rather than when an inspector asks.
The principal employer carries real liability. If a contractor fails to pay wages, the principal employer must pay and recover the amount from the contractor afterwards. The principal employer also answers for welfare facilities such as drinking water and canteen arrangements. For a union that has relied on contractors to carry statutory risk, this changes the calculation. Registration, contractor licensing and wage payment verification need a proper routine, not an annual scramble. The structure of the Code is explained in The OSH Code, 2020: One License, Contract Labour and Women's Rights.
Establishments with ten or more inter-state migrant workers also come within the Code. Given how many dairy plants rely on workers from other states for shift and packing work, check this threshold against your headcount.
Seasonal peaks and fixed-term employment
Dairy runs in cycles. Milk arrives in far greater volume during the flush season than in the lean months. Plants staff up and down around that rhythm. The Codes give employers a formal option for this: fixed-term employment. A fixed-term employee is entitled to the same wages and benefits as a permanent employee doing similar work.
The part that surprises people is gratuity. Fixed-term employees qualify for gratuity after one year of continuous service, calculated pro rata, instead of the five-year rule for permanent staff. A worker engaged for a nine-month flush season would not qualify. One who is re-engaged on back-to-back terms and completes a year of continuous service could. Do not design contracts around avoiding that threshold. Tribunals have a long record of looking through arrangements that exist only to defeat statutory benefits.
Fixed-term employment and contract labour are different things. A fixed-term employee is on your own payroll under a time-limited contract. A contract worker is supplied by a contractor. Mixing up the two is a common error in seasonal workforce plans. I have looked at how to plan the numbers in Manpower Planning and Skill Audit for Dairy Plant Operations.
Industrial relations: the thresholds that matter
The Industrial Relations Code raises the threshold for mandatory standing orders and for prior government permission for layoffs and retrenchment from 100 workers to 300. A large processing plant will usually clear that bar. A smaller chilling centre or a cattle feed unit may not. For establishments below the line, certified standing orders that already exist remain valid. I would keep them in place. A drop in headcount is not a reason to dismantle the disciplinary framework your supervisors know how to use.
Strikes are covered by notice rules that apply to industrial establishments generally. A strike notice must be given within sixty days before striking. Workers cannot go on strike within fourteen days of giving that notice. Your union leadership and your management side should both know these timelines before a dispute starts, not during one.
Whatever the headcount, the fairness of your internal process matters more than the threshold. If you are working through a misconduct case, Standard Procedure for Departmental / Domestic Inquiry in an Organization lays out the sequence that holds up when a decision is challenged. The wider picture of the Code is in The Industrial Relations (IR) Code, 2020.
Exits can no longer wait for the next committee meeting
The provision that will test cooperative processes most is the timeline for final settlement. Wages due on cessation of employment have to be paid within two working days. In many unions an exit involves approvals that move at committee speed: a recommendation from one office, sign-off from another and sometimes a nod from the Board. That chain does not fit inside two working days unless you redesign it.
The practical fix is to prepare the calculation before the last working day instead of after it. Leave encashment, bonus and notice adjustments can be computed when notice is served. Authority to release payment can be delegated to a named officer within defined limits, so a Board meeting is not a precondition for paying a retiring employee what is plainly due. Gratuity runs on its own timeline under the Social Security Code, but the calculation should still start on the cessation date.
Why this matters more when Boards rotate
Cooperatives have an extra challenge that private employers rarely face. Elected Boards change every few years. Each new Board arrives with its own priorities. Compliance work that depends on one chairman's attention disappears when that chairman leaves.
The answer is institutional memory. Keep a written compliance calendar that survives any change of leadership. Brief every new Board on the handful of obligations that carry personal and corporate liability. Treat gratuity provisioning on the larger wage base as a standing finance item rather than a surprise. I explored this stabilizing role of HR in Managing Change in a Cooperative: How HR Can Maintain Stability When Leadership Rotates and the structure that supports it in HR Structure and Responsibilities in Dairy Unions.
A sensible first ninety days
Start with the pay structure. Map every grade against the half-of-remuneration test and estimate the effect on PF and gratuity before any decisions are made. In parallel, list every contractor engaged at your plants and sort the activities into core and non-core. Next, rebuild your exit process around the two-working-day rule and name the officers authorized to release payment. After that, confirm your state's rule status for each Code and note what is still pending. Finish by briefing the Board and your employee representatives with a short, plain document that says what is changing and what has been done about it.
None of this is dramatic. Most of it is the unglamorous work of tidying arrangements that have drifted over decades. Cooperatives that do it early will find the Codes manageable. Those that wait for the first inspection or the first claim will find the same work much harder under pressure.
This article is for general information and reflects the Codes and published clarifications as I understand them at the time of writing. Rules and state notifications continue to change, so verify the current position and take legal advice before acting on any specific point.
By HR Mit HR Professional | Mit's HRM Insights
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