Third Schedule explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Third Schedule lists eleven conditions of service for which an employer must give notice before changing them. Its heading reads "Conditions of service for change of which notice is to be given", and it is cross-referred to section 40 and section 101(1). If a planned change falls on this list, the notice comes first.
The Third Schedule has eleven items: wages (including the period and mode of payment), provident fund, pension or similar contributions, allowances, hours and rest intervals, leave and holidays, shift working, classification by grades, withdrawal of a customary concession, new or altered discipline rules, rationalisation likely to lead to retrenchment, and increase or reduction in numbers employed. Section 40 is the section that requires the notice; the Schedule says what it covers. The Central Government may amend the list under s.101(1).
The eleven items at a glance
| No. | Condition of service |
|---|---|
| 1 | Wages, including the period and mode of payment |
| 2 | Contribution paid or payable by the employer to any provident fund or pension fund or for the benefit of workers under any law for the time being in force |
| 3 | Compensatory and other allowances |
| 4 | Hours of work and rest intervals |
| 5 | Leave with wages and holidays |
| 6 | Starting, alteration or discontinuance of shift working otherwise than in accordance with standing orders |
| 7 | Classification by grades |
| 8 | Withdrawal of any customary concession or privilege or change in usage |
| 9 | Introduction of new rules of discipline, or alteration of existing rules, except so far as provided in standing orders |
| 10 | Rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workers |
| 11 | Any increase or reduction (other than casual) in the number of persons employed or to be employed in any occupation, process, department or shift, not occasioned by circumstances over which the employer has no control |
How the Schedule is used
Section 40 is where the obligation sits, and the Schedule is what gives it content. Read the section first for the notice requirement, how it is given and the exemptions, in our article on sections 40 and 41. The Central Rules, 2026 also deal with the manner of giving notice, for Central-sphere establishments; where the State Government is the appropriate Government, the State's own rules apply. For the conduct of the change itself after notice, see section 90 on conditions of service during pendency of proceedings.
For HR and payroll teams, the practical step is to run every planned change, such as a new pay structure, a shift pattern or a headcount reduction, against this list. Our labour law compliance team can help you screen changes against the Schedule before the notice is drafted.
Item by item
Items 1 to 5: pay, contributions, allowances, time, leave
Item 1 covers wages "including the period and mode of payment". So a change from monthly to weekly payment, or from cash to bank transfer, is on the list, not only a change in the amount. Item 2 covers the employer's contribution to provident fund, pension fund "or for the benefit of the workers under any law for the time being in force". Item 3 covers "compensatory and other allowances". Item 4 covers hours of work and rest intervals. Item 5 covers leave with wages and holidays.
Items 6 to 9: shifts, grades, privileges, discipline
Item 6 covers starting, altering or discontinuing shift working "otherwise than in accordance with standing orders". If the certified standing orders already provide for the change, the item does not apply; see the First Schedule for what standing orders must cover. Item 7 covers classification by grades. Item 8 covers withdrawal of "any customary concession or privilege or change in usage". This is the item most often missed: a long-standing practice, such as a festival gift or a subsidised meal, is on the list even if no document records it. Item 9 covers new or altered rules of discipline, "except in so far as they are provided in standing orders".
Items 10 and 11: rationalisation and numbers
Item 10 covers "rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workers". The test is likelihood of retrenchment. Item 11 covers any increase or reduction, other than casual, in the number of persons employed or to be employed in any occupation, process, department or shift, "not occasioned by circumstances over which the employer has no control". An employer who reduces a shift's headcount for business reasons should therefore treat it as a notice item unless the reduction was forced by circumstances outside its control. For retrenchment procedure itself, see sections 71 and 72.
What to check before a change
| Planned change | Item |
|---|---|
| Move pay date or pay mode | 1 |
| Reduce the employer PF contribution base | 2 |
| Remove a transport or other allowance | 3 |
| New rest interval timings | 4 |
| Merge two holidays | 5 |
| Add a night shift not in standing orders | 6 |
| Re-grade a cadre | 7 |
| Stop a traditional bonus gift | 8 |
| New disciplinary code not in standing orders | 9 |
| Install machinery that will displace workers | 10 |
| Cut a department by a third | 11 |
The table is our illustration of how a change maps to an item; the Schedule text itself is the list above. Some of these changes may also engage other Codes.
Practical example
Example (invented). A factory plans to bring in a new packing line, which will need fewer workers, and to stop a customary Diwali sweets gift. The first is item 10 (rationalisation likely to lead to retrenchment) and possibly item 11 (reduction in numbers); the second is item 8 (withdrawal of a customary concession). The employer gives notice for both under section 40 before implementing them, and does not assume that the absence of a written policy on the gift removes it from the list.
Need help screening a change against the Third Schedule?
The notice requirement depends on matching the change to an item, and the item-8 and item-11 cases are where employers most often hesitate. Our labour law compliance team can help you screen planned changes and prepare the notice for your establishment.
Key takeaways
- The Third Schedule lists eleven conditions of service for which notice of change is required.
- Wages include the period and mode of payment (item 1), not only the amount.
- Shift and discipline changes are on the list only where standing orders do not already provide for them (items 6, 9).
- Withdrawing a customary concession or privilege needs notice (item 8).
- Rationalisation likely to lead to retrenchment, and changes in numbers employed, are on the list (items 10, 11).
- The Central Government may amend the list under s.101(1).
Read next
- Section 40-41: notice of change in conditions of service and exemption
- First Schedule: matters to be provided in standing orders
- Section 90: conditions of service to remain unchanged during pendency of proceedings
- Retrenchment notice draft under section 25F: format
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.