Code on Wages, 2019: Compliance-related changes; State Rules are at different stages of finalisation

Continuing our Series on the analysis of the Labour Codes and the recent notifications, this note covers the Code on Wages, 2019 (“Wage Code”) which also came into effect on 21^st November, 2025, For the Wage Code, till now, only Karnataka, Gujarat and Arunachal Pradesh has notified the Rules, while all other State Rules including the Central Rules are at different stages of drafting or finalisation. For the detailed status of all the Rules under the Labour Codes, please refer to the Labour Code Reckoner, 2025 on our website.

We are giving below a preliminary note in the form of comparative analysis of the compliances under the Wage Code with the compliances under existing labour laws. We will continue to carry out similar and detailed thorough checks on other Rules as and when they come into effect and will continue sharing further updates with you from time to time:

Major Compliance-related Changes under the Wage Code:

• Compliances pertaining to equal remuneration have become gender neutral and hence, your relevant function (usually Finance and / or HR team) must follow the principles of equal pay for equal work while preparing salary structure for any fresh hire from any gender.
• Instead of “Scheduled Employment”, the applicability of minimum wages under the Wage Code is for all employees, irrespective of the sector they work in or their employment type. Minimum wage will be fixed based on factors such as skill level, arduousness of work, and cost of living. Also, the amount of fine for the non-compliance, has been increased to Rs. 50 thousand without imprisonment for the first offence. Therefore, organisations should make sure they abide by the law by paying at par or higher of such minimum rates.
• While the erstwhile Minimum Wages Act, 1948 was silent on ‘rest day’ for an employee working in a shift job, the Wage Code has now added a provision that for an employee working on a shift which extends beyond midnight, ‘rest day’ means a period of 24 consecutive hours beginning from the time when his shift ends.
• Electronic transfer of funds and issuance of e-wage slips are now formally recognised.
• The Wage Code has consolidated multiple register and record maintenance requirement under the erstwhile laws (Equal Remuneration Act, 1975, Payment of Wages Act, 1936 and the Minimum Wages Rules, 1936) and now, the registers can be maintained electronically also.
• Payment of Bonus related compliances remains incomplete without the Central Rules gaining effect. To get update on the notification of such Central Rules, follow Lexplosion’s handle on Linkedin or find your way into our complimentary and coveted updates services’ distribution list.
• While there is no change in the Bonus provision, the threshold for paying statutory bonus will be revised by the Appropriate Government. To get update on such revised wage threshold, follow Lexplosion’s handle on Linkedin or find your way into our complimentary and coveted updates services’ distribution list.
• The principal employer has been made responsible to pay the minimum bonus on contractor’s failure to do so for the contract employee working in the premise of the principal employer. This is a new requirement and therefore, the organisations must ensure that the contractors pay statutory bonus to contract labourers stationed at their premises.
• Payment of wages through electronic mode has been recognised, in addition to bank transfer.
• Under the erstwhile Minimum Wages Act, 1948 and the Payment of Wages Act, 1936, only the ‘monthly’ wage period was recognised. Now, the Code allows employers to fix any of the following wage periods for their employees-

1. 1. Daily
   2. Weekly
   3. Fortnightly
   4. Monthly.

Timelines for the above payments:

> If wage period is Daily- At the end of the shift.

> If wage period is Weekly- On the last working day of the week (before the weekly holiday/s).

> If wage period is Fortnightly- Before the end of the second day after the end of the fortnight.

> If wage period is Monthly- Before the expiry of the seventh day of the successive month.

• Under the Wage Code, the timeline for processing payment of all dues to an employee is 2 days from the date of resignation, termination, removal due to closure of establishment or retrenchment of an employee. Earlier, this compliance was limited to cases of termination and removal due to closure of establishment only.

• The Code now allows electronic display of notice specifying acts and omission for imposing fines / deductions. And couple of newly introduced grounds for deductions in such display (electronic / otherwise):a. against services already rendered by employer; and
  b. for recovery of advances.
• Another new mandate for employers is to intimate the Labour Officer, via notice for making deductions more than the days of absence. This notice needs to be sent within 10 days from making such deductions.
• The Wage Code introduces a new category of deduction- Deductions from wages of employees for services already rendered by employer.
• The Wage Code now consolidates and standardises display requirements regarding-

1. notice containing the abstract of this Code,
2. category-wise wage rates of employees,
3. wage period,
4. day or date and time of payment of wages, and
5. the name and address of the Inspector-cum-Facilitator.

No specific format has been prescribed though, the Code only specifies the content that needs to be displayed.

• The Code has modified the payment requirement for the employee in case of death or if their whereabouts are not known. It has provided specific timelines for payment of undisbursed wages in situations where nominee is present and where nominee is not present.
• The return filing under both the Payment of Wages Act, 1936 and Minimum Wages, 1948 have been done away with under the present Wage Code.
• Changes in definitions incorporated in the Wage Code:

Under the definition of Wage, certain salary components [section 2 (y) (a) to (i)] which are bonus, HRA, value for house accommodation, conveyance allowance, special allowances, overtime, commission, employer PF contribution should not together exceed 50% (one-half) of the total salary. If these excluded components go above 50%, the extra amount must be added back to the employee’s wages (which includes Basic + DA + retaining allowance).

Example – An employee earning 20,000/- per month, where the break-up of the salary being –

• Basic – ₹4,000
• DA – ₹1,000
• Conveyance Allowance – ₹6,000
• Special Expense – ₹9,000

Total Salary = ₹20,000

The excluded components (Conveyance + Special Expense) add up to ₹15,000. As per Code on Wages, 2019 [section 2 (y) proviso], excluded components cannot exceed 50% of ₹20,000 = ₹10,000.

₹15,000 – ₹10,000 = ₹5,000 (This excess ₹5,000 must be added back to “wages.”)

Wage = Basic (4000/-) + DA (1,000/-) + excess of 50% (5,000/-) = 10,000/-

Also, the definition of establishment has been standardised under the Code. Under the Minimum Wages Act, 1948, establishment was not defined and scheduled employment was defined and the Payment of Wages Act, 1936 had a definition of industrial and other establishment, which allowed the appropriate government to issue specific notification to bring in applicability of the Act to specific establishments like: Shops and Establishments.

Standard definition of employee is covered under the Code, which is not restrictive to specific employments but for all industry / trade / business / manufacture or occupation. The Minimum Wages Act, 1948 defined employee for specific scheduled employment and Payment of Wages Act, 1936 defined employed person. There were varied definitions.

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Source: Ministry of Labour and Employment