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The Code on Wages, 2019 has been passed by both Houses of the Parliament and is passed by the President and waiting for the publication in the Official Gazette.

The code on wages aims to transform old and obsolete Labour laws, Some of which were enacted in the pre-independence era and meant primarily for factories and industrial est, into a more accountable and transparent law.


  • Consolidate
  • Amalgamate
  • Simplify
  • Rationalize the laws

The code comprises 9 chapters

  • Applicability, Coverage, definitions and provision mandating equal remuneration
  • Payment of minimum Wage
  • Payment of wages
  • Payment of Bonus
  • Constitution of Advisory Board
  • Raising claims under code on wages
  • Appointment of Inspector cum Facilitator
  • Offences and Penalties
  • Miscellaneous Provisions

The Code on wages, 2019

India begins codification of its labour laws  –  a long awaited and much needed reform. The Code on wages 2019 is to regulate the payments of Wages and bonus.

The code replaces following four laws.

The payment of wages act 1936
The Minimum Wages Act 1948
The Minimum Wages Act 1948
The Equal Remuneration Act 1946

Preliminary aspects

  • It extends to the whole India
  • Accounting year- Commencing on the 1st day of April
  • Advisory board – Central Advisory Board or, as the case may be the State Advisory Board
  • Company –
  • Contractor –
  • Contract Labour – Worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or connection with such work by or through a contractor, which or without the knowledge of principal employer.

Few important terms as defined by the Code of Wages 2019

  • Definition Employer / Employee
  • Wages
  • Minimum Wages
  • Floor Wages
  • Over Time
  • Fixation of wage period
  • Deductions
  • Bonus
  • Central and state Advisory board
  • Gender discrimination
  • Inspector cum facilitator
  • Working hours
  • Criteria for fixing minimum wage
  • Offences and penalties
  • Employee – Any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do 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
  • “employer” means a person who employs, whether directly or through any person, or on his behalf or on behalf of any person, one or more employees in his establishment and where the establishment is carried on by any department of the Central Government or the State Government, the authority specified, by the head of such department, in this behalf or where no authority, is so specified the head of the department and in relation to an establishment carried on by a local authority, the chief executive of that authority,.
  • Wages – All remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would , if terms of employment, express or implied, were fulfilled, be payable to a person in respect of his employment or of work done in such work and includes
    -Basic Pay
    -Dearness allowance
    -Retaining Allowance, if any, But does not include any bonus payable under any law, the value of house accommodation or of the supply of light, water, medical attendance or other amenity or any service excluded from commutation of wages by a general or special order of the appropriate Government Any contribution paid by employer to any pension or PF and the interest which may have accrued on them Any conveyance allowance, House rent allowance, Overtime allowance, gratuity payable on the termination of employment
  • Minimum Wages – No employer shall pay to any employee wage less than the minimum rate of wages notified by the appropriate Government
    Appropriate Government shall fix minimum wage for time work or for piece work
  • Coverage – Apply to all employees.
  • Floor Wage – The central govt fix floor wage( a new concept), taking into account living standards of workers. Floor wage may change depending on different geographical areas. The minimum wage fixed by central govt must not less than floor wage. If the minimum wage fixed by state or central are higher than floor wage, they cannot reduce such minimum wage.Before fixing floor wage central Govt may obtain advise of central advisory borard and also consult state Govt.
  • Fixing Minimum Wage – The code prohibits employers from paying less than minimum wage. While fixing minimum wage the Central or State Govt may take into account factors such as skill of workers and difficulty of work.

Overtime – Central or state govt may fix the number of hours that constitute a normal working day. IF the employee working excess of a normal working day, they will entitled to OT wage which must be at least twice the normal rate of wage.

Fixation of Wage period – The wage period to be fixed by the employer as either daily, Weekly, fortnightly or monthly.
If the wages paying on monthly basis payment should be before expiry of 7th day of following month. Its also specifies the time of payment for employees dismissed,retrenched,resigned or become unemployed due to closure of an establishment , the wages shall be paid within two working days.

If an employee is dismissed or retrenched or resigned or on closure wages to be paid within two days.

Deductions– Deductions from the wages of an employee shall be made in accordance with the provisions of this code, and which should be included in the Wage code. Under the code the deductions shall not exceed 50% of the employees total remuneration.
No deduction from wages otherwise authorised by law

  • No fine shall be imposed on any employee except in respect of those acts and omissions with the previous approval of the appropriate authority
  • A notice of such acts to be exhibited
  • Show cause notice to be issued.
  • Fine shall not exceed 3% of monthly wage in wage period.
  • Fine shall not recovered after 90 days and also required to be registered in the register.
  • Deduction for damage or loss shall not exceed the amount of actual loss or damage.

Bonus – Minimum 8.33% and maximum 20% of his/her annual wages. Bonus payment under the code on wages shall apply to only those establishments employing 20 employees or at least 20 employees have been employed on any day in the accounting year. Also its aplicable for all employees worked at least 30 days in a year In addition employer will distribute part of their gross profit amongest the employees. This will be distributed in proportion of annual wages of the employee

  • Also an employee shall be disqualified from receiving bonus under this code if he is dismissed from service for
  • Fraud
  • Riotous or violent behavious while on premises of the establishment
  • Theft, misappropriation or sabotage of any property of the establishment
  • Conviction for sequal harasment

All amounts payable to an employee by way of bonus under this Code shall be paid by crediting it in the bank account of employee by his employer within a period of eight months from the close of the accounting year.

Central / State Advisory board

  1. Central Advisory Board shall from time to time advise Central Government on reference of issues relating to –
  2. fixation or revision of minimum wage and other connected matters.
  3. providing increasing employment opportunities for women
  4. the extent to which women may be employed in such establishment or employment as the Central Government may, by notification, specify in this behalf.
  5. any other matter relating to this code.

    1. Gender Descrimination – Consistent with the ERA, the code prohibits gender discrimination amongest employees in matters related to wages and recruitment for the same work or work of similar nature.


      • As per existing system the competent authority who are authorized to do inspections are inspectors. In order to overcome anomalies, the arbitrariness and malpractices of existing system and monopoly approach of inspectors the current law will appoint inspector cum facilitator to carry out inspection.
      • Employer and facilitator will be educated with regard to executing the laws
      • They advise to employers and worker relating to compliance with the provision of this code
      • Inspect the establishment as assigned to him by appropriate government.

      Criteria for fixing minimum wage

      • The standard working class family of a spouse and two children apart from earning worker an equivalent of 3 adult consumption unit.
      • 2700 calories per day per unit
      • 66 Meter cloth per year per family
      • House rent – 10% of food & Clothing expenditure
      • Fuel electricity and other items 20%
      • Children education, recreation and expenditure 25%

      • When the rate of wage for a day is fixed
      • Such amount shall be divided by 8 and multiplied by 26 to get a month salary

      Working Hours

      • 9 hours a day including lunch break
      • Employee shall be allowed a day of rest in every week
      • Any change in rest day must be notified to employees
      • Employer should provide a rest day with in 5 days immediately before or after rest day
      • If employee works on rest day and given substitute rest day then he shall be paid wages for rest day at the over time rate and wages for substituted rest day.

      Offenses & Penalties

      The code specifies stringent penalties for the contravention of any of the provisions of the code. No court inferior to the Metropolitan Magistrate or Judicial Magistrate shall try the offences under this code.

      • Pays less than the amount due to an employee under the provisions of this code – Upto Rs.50,000/-
      • If the offense repeated within 5 years – imprisonment Upto 3 months and 1 Lakh fine
      • contravenes any other provision of this Code or any rule made or order
      • made or issued thereunder shall be punishable with – Rs.20,000/-
      • If repeated with in 5 years – imprisonment upto one month and fine upto Rs.40,000/-
      • non-maintenance or improper maintenance of records in the establishment – Rs.10,000/-
      • Right to be heard – if the employer violates provisions of the code on wages the inspector cum facilitator shall not intimate any action unless the employer has been given opportunity to rectify the non compliance within specific time period.


      • It has been a long standing agenda of the Central government to codify and consolidate labour laws in order to promote ease of doing business in India. Amongst several benefits, the codification of laws removes multiplicity of definitions and authorities, without compromising on the basic concepts of employee welfare and benefits.
      • Encouraging digitalization through introduction of web based inspection scheme calling of information electronically for inspection, composition of offences etc. may also become a model for other ministries when it comes to enforcement. This law is just a consolidation of laws rather than truly a transformation.
      • In this code, definition of wages be further simplified to reduce or hopefully eliminate any litigation surrounding a complex definition? Are DA and retaining allowance necessary in the context of wages? Should bonus be paid to all employees merely on basis of a salary threshold irrespective of their individual performance and/or contract etc.