Code on Wages, 2019
The Code on Wages, 2019 consolidates four key labour laws relating to wages and bonus. It aims to ensure equal remuneration for all employees irrespective of gender, establishes a universal minimum wage framework, and provides for timely payment of wages. The Code applies to all establishments and employees across organized and unorganized sectors.
CONSOLIDATES
Historical Context
Labour falls under the Concurrent List (Entry 24) in the Seventh Schedule to the Constitution of India. The Second National Commission on Labour in 2002 recommended consolidating existing labour laws into four or five codes on functional groupings. After nearly two decades of deliberation and multiple draft bills, the Code on Wages received Presidential assent in August 2019, becoming the first of the four labour codes to be enacted.
Key Provisions
Prohibition of Discrimination
CHANGEDNo employer shall discriminate between employees on grounds of gender in matters relating to wages.
- •Equal remuneration for same work or work of similar nature
- •Experience can be a ground for discrimination
- •Applies to ALL genders (male, female, transgender)
- •No discrimination in recruitment except where employment of women is prohibited
- •Prohibition of discrimination in conditions of employment
- •Certain wage components shall not form part of the wages, while computing equal wages
Minimum Wages
The appropriate Government shall fix minimum wages for different classes of employees.
- •Minimum wages applicable to all employments (organized and unorganized sectors)
- •Components include basic rate of wages and allowances
- •Different minimum wages may be fixed for different classes of work, age groups, and regions
- •Review of minimum wages at intervals not exceeding 5 years
Floor Wage
NEWThe Central Government shall fix the floor wage taking into account living standards of workers.
- •No state government can fix minimum wage below the floor wage
- •Floor wage may be different for different geographical areas
- •Factors considered include minimum living standards of workers
- •Binding on all states - creates national minimum benchmark
Payment of Wages
CHANGEDWages shall be paid in current coin or currency notes or by cheque or digital mode.
- •No wage limit for the applicability of the provisions dealing with payment of wages
- •Daily wage period: wages paid at end of shift
- •Weekly wage period: wages paid on last working day of week
- •Monthly wage period: wages paid before expiry of 7th day of succeeding month
- •Wages may be paid via bank account transfer or digital payment
- •On termination: Full wages within 2 working days
Definition of Wages - 50% Rule
NEWIf exclusions from wages exceed 50% of total remuneration, the excess is added back to wages.
- •Critical for calculating PF, ESI, gratuity, and bonus
- •Prevents manipulation of wage structures to minimize contributions
- •Employers must track all allowances and exclusions
- •May require restructuring of compensation packages
Overtime
Workers are entitled to overtime wages at twice the normal rate.
- •Overtime rate: twice the normal rate of wages
- •Working hours beyond normal working hours constitute overtime
- •Night shift allowances as prescribed
- •Must have employee consent for overtime work
Deductions from Wages
CHANGEDOnly specified deductions are permitted from wages, with a 50% cap.
- •Maximum total deductions: 50% of wages
- •Fines for acts or omissions specified by the employer
- •Deductions for absence from duty
- •Deductions for damage or loss caused by negligence
- •Deductions for house accommodation and amenities
- •Recovery of advances and loans
- •Income tax and statutory deductions
Bonus
Every employer shall pay to every employee an annual bonus.
- •Minimum bonus: 8.33% of wages or Rs. 100, whichever is higher
- •Maximum bonus: 20% of wages
- •Eligibility: employees drawing wages up to specified limit
- •Calculation based on allocable surplus
- •Set on and set off provisions for excess/shortfall
- •Payment timeline: Within 8 months of close of accounting year
Bonus Disqualification
NEWEmployee may be disqualified from bonus for specific misconduct.
- •Fraud
- •Violent behavior in establishment premises
- •Theft or sabotage of property
- •Sexual harassment (NEW ground added)
Claims and Limitation
NEWClaims for unpaid wages must be filed within specified period.
- •Limitation period: 3 years from date wages become due
- •Single application can cover multiple employees
- •Inspector-cum-Facilitator receives complaints
- •Simplified claim procedure introduced
Inspector-cum-Facilitators
CHANGEDAppointment of Inspector-cum-Facilitators to ensure compliance.
- •Dual role: enforcement AND advisory
- •Powers of inspection and examination
- •Web-based inspection scheme
- •Advisory role to help employers comply with provisions
- •Power to institute prosecutions
- •Philosophy: Compliance facilitation over penalization
Definitions
Wages
All remuneration capable of being expressed in terms of money, payable to a person employed in respect of his employment or work done.
Excludes: Bonus payable under any law; Value of house accommodation, supply of light, water, medical attendance, or other amenity excluded by government order; Employer's PF or pension contribution; Conveyance allowance or value of travelling concession; Sum paid to defray special expenses; House rent allowance; Remuneration payable under any award or settlement; Overtime allowance; Commission payable to employee; Gratuity on termination; Retrenchment compensation
Thresholds: If exclusions exceed 50% of total remuneration, the excess amount is added back to wages. Gratuity & Retrenchment compensation are not to be included while calculating the exclusion.
This 50% rule is critical - it prevents employers from structuring compensation to minimize wage-linked obligations
Employee
Any person employed on wages by an establishment to do any skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work.
Excludes: Apprentices engaged under the Apprentices Act, 1961
Unlike the old laws, there is no wage ceiling for coverage under the Code on Wages
Employer
Person who employs whether directly or through any person, one or more employees in his establishment. Includes contractors supplying workers.
Contractors are explicitly included as employers, making them directly liable for wage payments
Floor Wage
Minimum wage fixed by the Central Government below which no State Government can fix minimum wages.
Ensures national minimum living standards across all states
What Changed
| Aspect | Before | After |
|---|---|---|
| Coverage Threshold | Payment of Wages Act applied only to employees earning up to ₹24,000/month | No wage ceiling - applies to ALL employees regardless of wages |
| Wage Payment Timeline | Wages to be paid by 10th of succeeding month | Wages to be paid by 7th of succeeding month |
| Termination Wage Payment | No specific timeline for final settlement | Within 2 working days of termination/resignation |
| Deductions Cap | Various limits under different laws | Maximum 50% of wages can be deducted |
| Gender Equality | Equal Remuneration Act covered male and female | Covers 'all genders' including transgender persons |
| Payment Mode | Cash or cheque | Cash, cheque, or digital/electronic transfer |
| In-Kind Wages | Not clearly defined | Maximum 15% of wages can be paid in kind |
Practical Impact
Wage Restructuring Required
- •Review compensation structures to check 50% exclusion rule impact
- •Recalculate PF, ESI, gratuity bases if allowances exceed 50%
- •Consider impact on cost-to-company calculations
- •Update payroll software for new definitions
Payment Process Changes
- •Update payroll processing calendar (7th instead of 10th)
- •Implement 2-day full & final settlement process for wages
- •Set up digital payment infrastructure if not already present
- •Create documentation trail for all deductions
Compliance Documentation
- •Maintain records of wages paid for 3 years
- •Display wage rates in establishment
- •Issue wage slips to all employees
- •File returns with Inspector-cum-Facilitator
Compliance Checklist
- ☐Review all employment contracts for wage definition compliance
- ☐Audit current compensation structures against 50% exclusion rule
- ☐Update payroll cycle to meet 7th-day payment deadline
- ☐Implement 2-working-day final wage settlement process
- ☐Ensure equal pay audit across all genders for similar roles
- ☐Set up digital wage payment capability
- ☐Display floor wage and applicable minimum wages prominently
- ☐Train HR and payroll staff on new definitions
- ☐Update leave encashment calculations per new wage definition
- ☐Create deduction tracking system (50% cap verification)
- ☐File wage-related returns as per prescribed timelines
- ☐Maintain 3-year wage records for inspection
Penalties
Non-payment of wages or less than minimum wages
Fine up to ₹50,000 (1st offence); Imprisonment up to 3 months and/or fine up to ₹1 lakh (repeat offence within 5 years)
Penalties enhanced for repeat offenders only
Contravention of equal remuneration provisions
Fine up to ₹50,000 (1st offence); Imprisonment up to 3 months and/or fine up to ₹1 lakh (repeat offence)
Gender pay discrimination carries significant penalties
Contravention of bonus provisions
Imprisonment up to 6 months and/or fine up to ₹20,000
Specific timeline for bonus payment enforcement
Frequently Asked Questions
What is the floor wage and how does it work?
The floor wage is the minimum basic wage set by the Central Government below which no state government can fix its minimum wage. It ensures a national minimum standard of living for workers across all states. The floor wage may vary for different geographical areas.
How does the 50% rule affect wage calculations?
If allowances and exclusions (like HRA, conveyance, etc.) exceed 50% of total remuneration, the amount exceeding 50% is added back to 'wages'. This affects calculations for PF contributions, ESI, gratuity, and bonus. Employers must review compensation structures to ensure compliance.
What is the deadline for paying wages?
Monthly wages must be paid by the 7th of the succeeding month (changed from 10th earlier). On removal, dismissal, retrenchment or resignation, full and final settlement of wages must be completed within 2 working days.
What are the overtime provisions?
Workers are entitled to overtime pay with at least twice the normal rate of wages for hours worked beyond the normal working hours. The specific working hour limits are prescribed by the appropriate Government, and employee consent is required for overtime work.
What deductions can be made from wages?
Only specified deductions are permitted including fines for misconduct, deductions for unauthorized absence, recovery of advances, damage to employer's property due to negligence, income tax, and contributions to provident fund. Total deductions cannot exceed 50% of wages.
Who is eligible for bonus under the Code?
Employees drawing wages up to a specified threshold who have worked for at least 30 days in an accounting year are eligible. The bonus ranges from 8.33% (minimum) to 20% (maximum) of wages and must be paid within 8 months of the accounting year close.
What are the new grounds for bonus disqualification?
In addition to fraud, violence, and theft, sexual harassment has been added as a new ground for bonus disqualification. An employee found guilty of sexual harassment can be denied bonus for the relevant year.
How long can I claim unpaid wages?
Claims for unpaid wages must be filed within 3 years from the date wages become due. A single application can cover claims for multiple employees, simplifying the process for group claims.
Explore Other Codes
Industrial Relations Code
The Industrial Relations Code, 2020 consolidates three major labour laws governing trade unions, standing orders, and industrial disputes. It introduces the concept of fixed-term employment, provides for negotiating unions and councils, and establishes a framework for resolution of industrial disputes through conciliation, arbitration, and adjudication.
OSH Code
The Occupational Safety, Health and Working Conditions Code, 2020 consolidates 13 labour laws relating to safety, health and working conditions. It establishes a comprehensive framework for occupational safety standards, welfare facilities, and working conditions across factories, mines, plantations, construction sites, and other establishments.
Social Security Code
The Social Security Code, 2020 consolidates nine central labour enactments relating to social security. It extends social security coverage to gig workers, platform workers and unorganized workers for the first time. The Code provides for provident fund, employees' state insurance, gratuity, maternity benefits, and employee compensation.
- WagesState: Mizoram01/06/2026
Draft Code on Wages (Mizoram) Rules, 2026
Draft state rules published by the Government of Mizoram.
- WagesCentral08/05/2026
Code on Wages (Central) Rules, 2026 (Notified)
The Ministry of Labour and Employment has notified the Code on Wages (Central) Rules, 2026 under section 67 of the Code on Wages, 2019. The rules operationalise wage payment timelines, deductions, overtime, bonus calculations and registers, and come into force on the date of publication.
- WagesState: Haryana04/05/2026
Haryana Code on Wages Rules, 2026 (Revised Draft)
Revised draft Code on Wages (Haryana) Rules, 2026 published after central enforcement notification of 21 Nov 2025.
- WagesState: Ladakh30/04/2026
Ladakh Code on Wages Draft Rules, 2026
Draft Code on Wages rules for the Union Territory of Ladakh, inviting public comments.
- WagesState: Himachal Pradesh29/04/2026
Himachal Pradesh (Draft) Code on Wages Rules, 2026
Draft Code on Wages (Himachal Pradesh) Rules, 2026 published on 29 April 2026 in supersession of Payment of Wages Rules and Minimum Wages Rules.