Following the proposals of Second National Commission on Labour, the Ministry of Labour and Employment presented the Code on Wages, 2017 in the Lok Sabha on August 10, 2017. Nonetheless, the said code couldn’t turn into a reality due to the dissolution of Lok Sabha. On July 23, 2019, the Code on Wages was re-represented in the Lok Sabha. The two Houses of the Parliament have now passed the Code which enables the Centre to set a base statutory pay, a move expected to profit 500 million labourers across the nation. The Code unites, subsumes and changes four important work laws on compensation, in particular:

(a) The Equal Remuneration Act, 1976;

(b) The Minimum Wages Act, 1948;

(c) The Payment of Wages Act, 1936;

(d) The Payment of Bonus Act, 1965

herein referred to as “current laws”.

The Code on Wages ( hereinafter referred to as Code) tries to universalize the arrangements of minimum wages and convenient instalment of wages, which will be registered depending upon the least living conditions. It is imagined that states will use a computerised model for the creation of a database for payment of wages to labourers. Under the code on compensation, the work service intends to streamline the meaning of wages by amalgamating the current laws.

Key points of Code on Wages 2019

1. Applicability of Code on Wages

As per the Minimum Wages Act 2019, the provisions of the act attracted only scheduled employments and for Payment of Wages Act 1936, only those employees who were working at wages on Rs 24,000 or less per month were eligible for the benefits of the concerned act, but after the enactment of Code on Wages 2019, all employees are covered under the said code irrespective of the activities and functions. Section 2(k)[1] of the Code defines employee which includes a person working in the capacity as- unskilled, skilled, semi-skilled, manual, supervisory, managerial, operational, administrative, technical or clerical work, which tells us about the nature of the Code to widen its ambit regarding various establishments.

2. Sustained and Homogeneous Definition of the Term Wages

Section 2(y)[2] of the Code gives a common definition of wages for all the current laws. The earlier regime of having a different meaning of wage in current laws created a sense of confusion regarding deductions, payments and contributions. The present definition in the code gives clarity regarding the things included and things not included within the ambit of definition, also proviso to the clause says provident fund, employer’s contribution towards pension, house rent allowance, conveyance allowance, commission payable to employee, overtime allowance are not described as wages as in clauses (a) to (i), but as per the wordings of the proviso, if the payment under said clauses exceed 50% of the total remuneration collaborated as wages, then, in that case, the concerned remuneration will be considered as wages. Dearness pay, basic pay and retaining allowance is to be included in the definition whereas-any bonus, values of house accommodation, contribution, conveyance allowance, sum for special expenses, house rent allowance, remuneration payable as award by a court or tribunal, overtime allowance, commission, gratuity and retrenchment compensation is not to be included within the definition.

3. Overtime

The Code has prescribed a minimum rate for overtime work done by the concerned employee. The overtime rate prescribed in the said code is 2 (two) times the normal rate of wages under Section 14[3].

4. Floor Wages And Minimum Wages

The code prescribes the central government to establish a uniform minimum wage rate and floor wage by considering the minimum living standards of workers as given in Section 9[4] of the Code which can be distinguished as per different regions and making it mandatory to revise the concerned rate every 5 years. The rate which will be fixed by the Central government should in no case be less than the prescribed floor wages.

Appropriate governments for determining the minimum wage rate shall consider the following condition as per Section (6)(6)(a), (b) and (c)[5]

  • Compulsorily (shall) consider skill of workers-unskilled, semi-skilled, skilled and highly skilled or geographical area or both; and
  • Not compulsorily (may) consider their arduousness of work like temperature or humidity normally difficult to bear, hazardous occupations or processes or underground work as may be prescribed by that Government; and
  • The norms of such fixation of the minimum rate of wages shall be such as may be prescribed.

5. No Gender Discrimination

Section 3[6] of the Code clearly states its views regarding gender-based discriminations and prohibits such discrimination in terms of recruitment and wages.

6. Eligibility, Qualification and Disqualification For Bonus

In the Payment of Bonus Act 1965, the bonus was to be given only to the workers earning up to Rs 21,000. In the Code, this limit has been removed and the discretion rests with the appropriate government. A minimum of 30 days as working has been prescribed, along with that minimum bonus amount is also prescribed as 8.33% of the wages earned or Rs 100 whichever is higher as per Section 26(1)[7]. In Section 29[8] i.e. Disqualification of bonus, a new clause (d) – Conviction for sexual harassment has been inserted. Section. 26(3)[9] prescribes provision for maximum bonus, it says if allocable surplus exceeds the amount of minimum bonus payable to the employees under that sub-section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year, bonus which shall be an amount in proportion to the wages earned by the employee during the accounting year, subject to a maximum of twenty per cent of such wages.

7. Increase in Limitation Period

Claims under Code and procedure thereof i.e. Section 45[10] increases the limitation period of filing for claims by the employees to 3 years as per Section 45(6)[11].

8. Implementation of Digital Methods

Electronic and digital means of payment have been introduced as a valid payment method under Code.

9. Uniform Mode Of Inspection

An Inspector-cum-Facilitator shall be appointed as a single authority for the overall compliances and advising workers and employees regarding provisions of Code as per Section 51[12]. The code also tells us about the generation of web-based inspection and calling of information electronically as per Section 51(2)[13].

10.Penal Provisions

The code has made a uniform provision (Section 52)[14] for the penalties under the current laws.

⇒ The penalties can be classified into 3 forms as –

  • Paying to an employee amount less than what is due to him


 If the same offence is committed within 5 years then-

Fine-up to Rs 1 lakh.

Imprisonment-up to 3 months or both.

  • Improper records

Fine-Rs 10,000.

  • Any other contravention

 Fine-Rs 20,000.

If the same offence is committed within 5 years then-

Fine-up to Rs 40,000.

Imprisonment-up to 1 month or both.

Also, the Code gives the employer an opportunity to prevent from committing the offence for the first time within a stipulated time but no such opportunity is to be given if the employer commits the same offence within 5 years. (exception of opportunity to prevent committing offence-for offences related to paying an employee amount less than what is due to him).

Compounding of offences is also seen where offences can be compounded at a sum of 50% of the maximum fine.

11. Formation Of Uniform Advisory Board

Under the said Code, Section 42[15] prescribes for the formation of a Central and State advisory board which will be common for all the current laws.


Code makes this chance to compound the provisions of the current laws in single, uniform manner and is a stage forward toward the simplicity of business for employers, employees and workman. Code on Wages makes the filing and maintenance of records uniformly and reduces confusion, also a basic standard of living and covering almost all employees within the ambit of the code acts as a reward by the implementation of the said Code.

[1] As seen at retrieved on 10th December 10 2019, 2:47 pm.

[2] Ibid

[3] As seen at retrieved on 10th December 10 2019, 3:15 pm.

[4] Ibid.

[5] As seen at retrieved on 10th December 10 2019, 3:37 pm.

[6] Ibid

[7] As seen at retrieved on 10th December 10 2019, 3:56 pm.

[8] Ibid.

[9] As seen at retrieved on 10th December 10 2019, 4:49 pm.

[10] Ibid.

[11] As seen at retrieved on 10th December 10 2019, 5:15 pm.

[12] Ibid.

[13] As seen at retrieved on 10th December 10 2019, 5:30 pm.

[14] Ibid.

[15] As seen at retrieved on 10th December 10 2019, 6:15 pm.

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