THE CODE ON WAGES, 2019

Section

Sec-1 “Short title,extent and commencement.”

(1) This Act may be called the Code on Wages, 2019

(2) It extends to the whole of India

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette appoint; and different dates may be appointed for different provisions of this Code and any reference in any such provision to the commencement of this Code shall be construed as a reference to the coming into force of that provision.

Sec-2 Definitions

“(k) “”employee”” means, any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled,semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;”

“(y) “”wages”” means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—”

(i) basic pay;

(ii) dearness allowance; and

(iii) retaining allowance, if any

but does not include––

“(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;”

(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;

(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(d) any conveyance allowance or the value of any travelling concession;

(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;

(h) any overtime allowance;

(i) any commission payable to the employee;

(j) any gratuity payable on the termination of employment;

(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

PROVISO-1

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:

PROVISO-2

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage

Explanation

Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;

YOUR TAKE HOME SALARY MAY DECLINE

Update your employees’ salary structure, which will benefit you, your employees, and comply with the new Salary Structure as prescribed by the Govt. of India

Computing Salary from 1st April 2021 will be a little different from Previous Financial Years for 2 Reasons :

a) Wage Code 2019: From April 2021, your organisation has to follow the salary structure as per wage Code 2019/2020.

NOTE:-50% of the gross remuneration should cover DA and Basic in Salary Structure.

b) Choice of Tax Regime for TDS from Salary : Employees have to opt for the Tax Regime of their choice before getting the First Month Salary in April 2021.

“NOTE:-The decision has to be taken by the employee at the beginning of the Financial Year. There is no way to change the regime anytime during the financial year”

SUMMARY NOTE on New Wage Code 2019:-(BY CA. RAHUL SINGH)

a) As per New Wage Code 2019 ,50% of CTC(Gross Remuneration) shall cover Basic and DA in Salary Structure for Calculation of PF & Gratuity

b) If Basic Salary is Less than 50% of CTC ,then Shortfall must be made up from other components of CTC.

c) Employee’s take home salary to reduced if basic salary is less than 50% of CTC

d) Take home salary to reduces as PF Contribution rises

CTC COMPONENTS :-

WAGES: Means ALL REMUNERATION 

Component to be Included:

a) BASIC PAY

b) DEARNESS ALLOWANCE(DA)

c) RETAINING ALLOWANCE (RA)

Component to be Excluded:

a) STATUARY BONUS

b) HOUSE ACCOMMODATION

c) EMPLOYER’S PF CONTRIBUTION

d) CONVEYANCE ALLOWANCE

e) HOUSE RENT ALLOWANCE(HRA)

f) OVERTIME ALLOWANCE

g) COMMISSION PAYABLE

h) SPECIAL ALLOWANCE

i) OTHER ALLOWANCE

ANALYSIS OF SALARY STRUCTURE AS PER NEW WAGE CODE 2019

Analysis of Salary Structure As Per New Wage Code 2019

Author Bio

Qualification: CA in Practice
Company: Rahul S Singh and Associates ,Chartered Accountants
Location: South Delhi, Delhi, India
Member Since: 11 Jul 2020 | Total Posts: 6
I am recently qualified Practicing Chartered Accountants (CA) in May 19 and also a B.Com graduate from Delhi University View Full Profile

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