Decoding Code on Wages 2019

1. Introduction

Newly implemented labour laws have geared up the process of giving India its modernised labour framework, enhancing internal policy-making, compliances, and reporting on the Social & Governance factor of ESG. The four codes received presidential assent in 2019 and 2020, consolidating 29 existing labour laws, some of which pre-dated independence. The implementation of the new labour codes notified on 21st November 2025 is still in process, as a large part of its operations depends on the rules yet to be notified by the central and state governments. Until then, compliances must be made under the erstwhile labour laws.

The Code on Wages 2019, consisting of 69 sections, subsumes four labour laws: The Payment of Wages Act, 1936; The Minimum Wages Act, 1948; The Payment of Bonus Act, 1965; and The Equal Remuneration Act, 1976. The new code also features a limited number of authorities, improving institutional efficiency and reducing the burden on public exchequer.

2. Key Features of the Code on Wages 2019e:

A. Uniform Definition of Wages Across All Industries.

B. Equal Remuneration for All Genders.

C. Fixation of Minimum Wages, and Floor wages.

D. Appointment of Inspector cum Facilitator.

E. New Ground for Disqualification for Bonus.

F. Deadlines for Timely Wage Payment.

G. Reduced Number of Authorities Improving Institutional Efficiency.

A. Uniform Definition of Wages Across All Industries: Section 2(y).

• Wages were assigned different meanings under different laws in the erstwhile regime. For example, HRA formed part of wages under the Minimum Wages Act, 1948, whereas overtime allowance, bonus etc., formed part of wages under the Payment of Wages Act, 1936.
• Under the new regime a uniform definition of wages across all industries is provided. Wages include all remuneration, including basic pay, dearness allowance, and retaining allowance (if any), but exclude house rent allowance, travel allowance, overtime allowance, gratuity, PF, retrenchment compensation, etc.
• 50% Threshold: It is further added in the first proviso that the expressly excluded allowances (except gratuity and retrenchment compensation) cannot cross the threshold of 50% of CTC, and the percentage exceeding will be added back to the wages.
• For example, an employee’s CTC is 50,000, out of which 18,000 is her wage, 27,000 is the excluded component (HRA, TA, etc), and 5,000 is another cost. As per the new law, the 2,000 will be added back to her basic wages so the new structure would be 20,000 (basic wages), 25,000 (excluded component), and 5,000 (other costs).

B. Equal Remuneration for All Genders [Section 3]

• Employers cannot discriminate between genders while handing out payouts if the work done by all employees entitled to that range of wages was same or of similar nautre, including similar responsbilities unless barred under a law.

Fixation of Minimun Wages and Floor Wages [Section 6 and Section 9]

• Section 9 prescribes fixing a floor wage for the entire country which is to act as a baseline. The central government may also notify different floor wages for different states.
• States have to decide minimum wages on a time-work or piece-work basis which cannot be lower than the national floor wage.
• Minimum wages notified by state governments may consist of Basic Wages + Cost of Living Allowance + Cash Value of Concessions (optional). The components have not been made mandatory; states may also include or exclude other components as they deem fit.

All Remuneration = Basic Pay + DA + RA (optional) + TA + PF + Overtime Allowance + Bonus + HRA + Gratuity + Retrenchment Compensation

Wages = Basic Pay + DA + RA (optional)

C. Appointment of Inspector cum Facilitator [Section 51]

• A new post of a labour inspector has been created to not only inspect the compliances, records on muster rolls, randomly check premises, inspect working conditions but also to facilitate and advise in complying with the labour laws.
• The 2019 code has also sought to digitize the inspection process by providing for web-inspection, calling of information for purposes of inspection electronically. Such approach sees a huge shift in the behaviour of government.

New Ground for Disqualification for Bonus [Section 29]

• The new regimes adds the ground of convict of sexual harassment as a disqualification from claiming bonus in addition to already existing grounds of fraud, theft or misappropriation, violent behaviour on companies’ premises.

D. New Deadlines for Timely Payment of Wages [Section 16]

Engagement                                   Deadline for Payment

Daily Basis                                        At the end of shift

Weekly basis                   Last working day of week i.e, before weekly holiday

Fortnightly basis           Before the end of 16th day

Monthly basis                7th day of suceeding month

3. Conclusion

The new code has brought significant changes resembling the modern India and the developments that have taken place in all these years. The compliance ecosystem in new labour codes is technology-oriented, comprehensible, and facilitative with the end goal of improving ease of doing business. However, it remains to be seen whether the rules made by the central and state governments are also made keeping in mind the simplification of process or whether they add other layers of complexity in achieving the goal.