FAQs on India's New Labour Codes

The Code on Wages, 2019 is a central law that replaced four old Acts at one go. Those four were the Minimum Wages Act of 1948, the Payment of Wages Act of 1936, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976. Instead of four different sets of rules, forms, inspectors and filing deadlines, businesses now deal with just one. The Code applies to every employer in India, every employee, and every establishment without any industry or sector exception. It came into full force on 21 November 2025.

Four wage laws were running simultaneously in India, each with its own language, forms, inspectors and penalties. Employers with offices in multiple states had to comply with different schedules and deadlines under each. Millions of workers in the informal economy had no minimum wage protection because their type of work was not on any government list. The Code on Wages fixed all of this. One law, one definition of wages, minimum wage protection for every worker in India regardless of industry, and one compliance system for all employers.

The four Acts merged into the Code on Wages are the Minimum Wages Act of 1948, the Payment of Wages Act of 1936, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976. All four were repealed on 21 November 2025 when the Code came into force. Any reference to these old Acts in employment contracts or court orders is now automatically read as a reference to the corresponding provision in the Code on Wages.

The Code on Wages was passed by Parliament in August 2019 and received the President's assent on 8 August 2019. It did not come into operation immediately. States needed time to draft and notify their own rules. The central government notified 21 November 2025 as the commencement date. All four Labour Codes came into force on the same day. Businesses and employees have been bound by the Code from 21 November 2025.

Yes. The Code on Wages applies to every state and union territory in India including Jammu and Kashmir. Several of the old Acts had geographic limitations or needed separate state adoption. The Code sets a national floor wage that applies everywhere. No state can set minimum wages below that floor. States can set higher minimum wages for their workers but cannot go lower.

The Code on Wages has nine chapters and 69 sections. Chapter one covers definitions. Chapter two deals with minimum wages. Chapter three covers payment of wages. Chapter four deals with deductions from wages. Chapter five covers bonus. Chapter six covers equal remuneration. Chapter seven sets up the advisory boards. Chapter eight covers the Inspector cum Facilitator and enforcement. Chapter nine contains miscellaneous and transitional provisions.

The Second National Commission on Labour recommended in 2002 that India consolidate its labour laws. The process included Parliamentary Standing Committee reviews, submissions from trade unions and employer organisations, and consultations with state governments. The Bill was revised based on these inputs before Parliament passed it in 2019. The process from the Labour Commission recommendation to final enactment took approximately seventeen years.

The Code on Wages replaced four central Acts. It did not repeal state level labour laws directly. Each state must frame its own rules under the Code for establishments under state jurisdiction. Rajasthan notified its Code on Wages rules in January 2026. Karnataka released a draft in early 2026. States that have not yet notified their rules operate under the central rules as a default. The key constraint is that no state minimum wage can fall below the central floor wage.

The Code on Wages has four core objectives. First, every worker in India must receive at least a minimum wage regardless of industry. Second, wages must be paid on time and in the correct manner. Third, men and women doing the same work must receive equal pay. Fourth, eligible employees must receive an annual bonus. All four objectives from the four old Acts are preserved in one unified law.

Santosh Kumar Gangwar, Union Minister of State for Labour and Employment, introduced the Code on Wages Bill in the Lok Sabha. The Lok Sabha passed it on 30 July 2019. The Rajya Sabha passed it on 2 August 2019. President Ram Nath Kovind gave his assent on 8 August 2019. It was published in the Official Gazette the same day.

The Code on Wages applies to every employer and every employee in India. The definition of employee covers persons doing manual, skilled, unskilled, technical, operational, clerical, supervisory, managerial and administrative work. There is no minimum number of employees that must be crossed before the Code applies. A business with one employee has the same obligations as a business with ten thousand. Central and state government establishments are also covered.

Yes. The old Minimum Wages Act protected only workers in scheduled employments, a defined list of industries. Workers outside that list had no minimum wage protection. The Code on Wages removed that restriction entirely. Every worker in India is now entitled to at least the minimum wage. This includes workers in fields, construction sites, shops, homes, and all other informal settings. The unorganised sector is fully inside the scope of the Code.

Gig workers are not explicitly excluded from the Code on Wages. Whether a gig worker qualifies as an employee depends on whether their arrangement with the platform is legally an employment relationship. Most platforms structure contracts to treat workers as independent service providers, which places them outside the Code on Wages for now. Gig workers receive more specific and dedicated coverage under the Code on Social Security, 2020, which defines them separately and creates dedicated welfare frameworks for them.

Yes. The definition of employee in the Code on Wages includes persons working in managerial, supervisory and administrative roles. There is no salary ceiling that excludes higher earning employees from coverage. A senior manager and a factory worker are both covered by the same Code. The timely payment of wages, equal remuneration, and wage slip obligations apply to all employees regardless of designation or salary level.

A contractor is the primary employer of the workers they deploy. The contractor must pay minimum wages, pay on time, issue wage slips and follow all obligations under the Code. The principal employer, the company that hired the contractor, carries secondary liability. If the contractor fails to pay workers correctly, the principal employer can be held responsible. No company can use a contractor arrangement to avoid wage compliance for workers on its premises.

The Code on Wages does not exclude domestic workers. Minimum wage protection extends to them in principle. Coverage in practice depends on whether the state government has notified a minimum wage for domestic work. Maharashtra, Karnataka and Delhi had notified minimum wages for domestic workers under the old Minimum Wages Act. Those obligations carry forward under the Code. The Code's universal minimum wage intent gives domestic workers stronger grounds for wage protection than the old law provided.

Yes. There is no startup exemption and no small business exemption from the Code on Wages. A company incorporated last month with two employees has the same obligations as a twenty year old company with two thousand. Pay minimum wages. Pay on time. Issue wage slips. Maintain records. The Code has not created any special class of employers that are exempt from these obligations.

Apprentices registered under the Apprentices Act of 1961 are not employees under the Code on Wages. They receive a stipend and are governed by the Apprentices Act. However, this exception applies only to properly registered apprentices. If a business engages a person as a trainee without registering them under the Apprentices Act, that person is treated as a regular employee. They are then entitled to minimum wages and all other protections under the Code.

Yes. Central government establishments are covered by the Code on Wages. For these, the central government is the appropriate government. This includes central public sector units and businesses in industries such as railways, banking, insurance, telecommunications, airlines, major ports, mines and oilfields. The central government notifies minimum wages for these establishments and appoints the enforcement officers.

The state government is the appropriate government for most private sector businesses. This includes factories, shops and commercial establishments, IT companies, construction firms, hotels, hospitals, educational institutions and logistics companies. For these establishments, the state government notifies minimum wages, appoints Inspector cum Facilitators and handles enforcement. Any typical private limited company operating within a state falls under that state government's jurisdiction under the Code.

Yes. Fixed term employees have the same rights as permanent employees under the Code on Wages. They are entitled to minimum wages, timely payment, equal remuneration and bonus on the same basis. An employer cannot pay a fixed term employee less than a permanent employee doing the same work because the contract has an end date. The Code does not allow employment type to be used as a basis for different wage treatment.

Yes. Part time workers are entitled to minimum wages proportionate to the time they work. If the minimum wage is notified on an hourly basis, the part time worker receives that rate for every hour worked. If it is notified on a daily basis, a part time worker doing half a day receives half the daily minimum wage. Employers cannot apply a lower per hour rate to part time workers doing the same work as full time workers.

Wages under the Code means three things: basic pay, dearness allowance and retaining allowance. These three form the wage base for all statutory calculations including EPF, ESIC, gratuity and overtime. Everything else on a salary slip, including HRA, special allowance, conveyance, overtime pay, bonus and employer PF contribution, falls outside this definition. However, if all excluded components together exceed 50 per cent of total pay, the portion above 50 per cent is pulled back into wages. This stops companies from keeping basic pay artificially low to reduce statutory costs.

The 50 per cent rule says that components excluded from wages cannot together exceed half of the total pay package. If an employee earns Rs. 50,000 total with Rs. 10,000 as basic and Rs. 40,000 as allowances, the allowances are 80 per cent of total pay. The permitted excluded amount is 50 per cent of Rs. 50,000, which is Rs. 25,000. The excess is Rs. 15,000. That Rs. 15,000 is added to wages. Wages become Rs. 25,000 instead of Rs. 10,000. EPF, ESIC and gratuity are all recalculated on Rs. 25,000. This is the 50 per cent rule in practice.

Only three components are included in wages under the Code on Wages. Basic pay, dearness allowance and retaining allowance. These form the wage base. Dearness allowance is the inflation adjustment component. Retaining allowance is paid by some seasonal establishments to retain workers during the off season. If a salary structure does not have a separate DA or retaining allowance, wages is simply the basic pay amount, subject to the 50 per cent rule on excluded components.

The following are excluded from wages: HRA, conveyance allowance, special allowance, overtime wages, annual bonus, employer contribution to PF, gratuity payable on termination, retrenchment compensation, contributions to social security schemes, travel allowance, meal allowance, entertainment allowance and commission. All of these are outside wages. However, when their combined value exceeds 50 per cent of total pay, the excess is added back into wages. The exclusion is conditional, not absolute.

Yes. The Ministry of Labour and Employment confirmed in its FAQ released in March 2026 that overtime pay counts among the excluded components when testing the 50 per cent cap. Overtime wages are excluded from the definition of wages. But they are part of the excluded pool. If overtime payments push total excluded components beyond 50 per cent of total pay, the excess flows back into wages. This directly affects EPF, ESIC and gratuity for workers with regular overtime.

No. Performance incentives and bonuses are excluded from the definition of wages. They go into the excluded components pool. If a company pays regular performance incentives and those incentives push excluded components beyond 50 per cent of total pay, the excess is added back into wages. The incentives themselves do not become wages, but they push the excluded total higher and can trigger the adjustment.

Gratuity payable on termination is an excluded component under the wage definition. It is counted in the excluded pool when testing the 50 per cent cap. Most payroll teams handle monthly gratuity provisioning as an accounting entry rather than a salary slip line item. For a fully accurate 50 per cent test, the monthly gratuity provision for each employee should be included in the excluded components total.

Yes. The employer's PF contribution is an excluded component and is included in the excluded pool when testing the 50 per cent cap. Many payroll teams run the 50 per cent test only on salary slip items and miss the employer PF contribution. This leads to an underestimate of the excluded total and can produce an incorrect wage base. The employer PF amount must be added to the excluded components bucket for the test to be accurate.

The new definition of wages applies from 21 November 2025. There is no backdated application. Employers do not need to recalculate EPF, ESIC or gratuity for periods before that date using the new definition. From 21 November 2025 all statutory calculations must use the wage definition under the Code. The EPF transition has a one year adjustment window running until November 2026 for certain scheme details, but the wage definition itself has been in force from November 2025.

Remuneration in kind means benefits given to an employee as goods or services instead of cash. Examples include company accommodation, subsidized meals and vehicles for personal use. Under the Code, remuneration in kind counts as wages up to a limit of 15 per cent of total wages. Any value above 15 per cent must be paid in cash. An employer cannot substitute most of an employee's wages with free housing or free meals and call it wage payment.

No. Wages is the term defined in the Code referring to what an employee actually earns, comprising basic pay, DA and retaining allowance. Minimum wages is the government notified floor below which wages cannot fall. An employer can pay more than minimum wages and most do. The minimum wage is the legal floor. Wages is the actual amount paid. Both concepts coexist and each serves a different purpose under the Code.

Two employees doing the same work can be paid different wages if the difference is based on a legitimate reason such as seniority, experience or performance. What is not permitted is a pay difference based on gender. The Code prohibits gender based wage discrimination for the same work or work of a similar nature. Any pay difference must be justifiable on merit based grounds that have nothing to do with the gender of the employee.

No. Leave encashment is not part of wages under the Code on Wages. It is a payment made in lieu of accumulated leave not taken. It does not fall under basic pay, dearness allowance or retaining allowance. It also does not go into the excluded components pool for the 50 per cent cap test because it is not a recurring monthly component of the salary structure.

Minimum wages under the Code operate at two levels. The central government sets a floor wage, which is the national minimum no state can go below. State governments then set their own minimum wages for different worker categories, skill levels and geographic zones. State rates must always be at or above the central floor. The actual amount varies by state, skill category and zone. Employers must check the latest gazette notification from their state government to find the current rate for their location and workforce category.

The floor wage is the national minimum set by the central government. No state can notify a minimum wage below this floor. The minimum wage is the actual rate a state notifies for a specific worker category in a specific zone. The minimum wage is always equal to or higher than the floor. The floor is the national basement. The state minimum wage is where the state sets its own floor above that basement. Employers always pay the applicable state minimum wage, which is never less than the central floor.

The base minimum wage must be revised at intervals not exceeding five years. The dearness allowance component of the minimum wage, which adjusts for cost of living, is revised more frequently, typically every six months or annually. Workers may see the minimum wage amount increase annually because the DA portion is revised even when the base rate stays the same. Employers must track both the base revision and the DA revision to stay current with the correct minimum wage.

No. Minimum wages cannot be waived by any agreement between employer and employee. Any contract setting wages below the minimum wage is void and unenforceable from the start. The fact that the employee agreed to a lower rate does not protect the employer. The employer is still liable to pay the full minimum wage plus penalties. Paying below minimum wage is an offence under the Code even if the employee raises no objection at the time.

The higher state rate applies. The floor wage is a national minimum, not a ceiling. When a state notifies minimum wages above the central floor, employers in that state must pay the state rate. They cannot fall back to the lower floor wage. In Maharashtra, Karnataka and Delhi, state minimum wages are significantly above the central floor. Employers in those states must pay the applicable state rate for each worker category and zone.

Minimum wages can be notified on a time basis, a piece rate basis or a combined basis. Time rate means a fixed amount per hour, per day or per month. Piece rate means a fixed amount per unit of output or per task completed. A combined rate uses both. For most formal employment, the time rate applies. Piece rate minimum wages are common in construction and some manufacturing categories. For piece rate workers, total earnings divided by hours worked must not fall below the hourly time rate minimum.

The Code on Wages retains a schedule of employments but its role has changed. Under the old Minimum Wages Act, minimum wage protection applied only to scheduled employments. Workers in unscheduled industries had no statutory minimum wage. The Code changed this. Minimum wages now apply to all employees regardless of whether their industry is scheduled. The schedule now organises minimum wage notifications by industry rather than restricting coverage.

Yes. State governments can divide their territory into zones and notify different minimum wages for each zone. The typical breakdown is metropolitan, urban, semi urban and rural zones. The same worker category can have different minimum wages in different zones of the same state. A company with offices in multiple locations within one state must check the applicable zone for each location and pay the correct rate for that zone.

Yes. States classify workers into skill categories when notifying minimum wages. The standard categories are unskilled, semi skilled, skilled and highly skilled. Each category has its own minimum wage for each zone. The unskilled category has the lowest rate in any zone but that rate must still be at or above the central floor wage. An employer cannot pay unskilled workers any amount they choose. The notified minimum for the unskilled category in the relevant zone is the legal floor.

Yes. Data entry operators and office clerical staff are covered under minimum wages. The Code on Wages has no exemption for office based or white collar roles. These workers typically fall in the semi skilled or skilled category under state notifications for commercial establishments. An IT company, a BPO or any office employing data entry staff must pay at least the minimum wage notified for that skill category and zone. The nature of the work being desk based does not change the obligation.

An employer can provide benefits in kind as part of wages but only up to 15 per cent of total wages. The rest must be paid in cash or by bank transfer. If the minimum wage is Rs. 15,000 per month, the employer can provide food and accommodation worth up to Rs. 2,250 and must pay at least Rs. 12,750 in cash. Providing the bulk of wages as free meals or accommodation and paying little cash is a violation of the Code.

Minimum wages are fixed with input from advisory boards set up under the Code on Wages. The Central Advisory Board advises the central government. State Advisory Boards advise state governments. These boards have three categories of members: employer representatives, worker representatives and independent members. At least one third of the total membership must be women. Before fixing or revising minimum wages, the government publishes a notice, invites objections, considers board advice and then issues the final notification.

The Central Advisory Board is a statutory body constituted by the central government under the Code on Wages. It advises the central government on the floor wage, on coordination between central and state advisory boards and on any wage related matter referred to it. The law mandates that at least one third of the total membership must be women. The Board's recommendations are advisory but form the basis for central government minimum wage decisions.

Yes. Every provision of the Code applies regardless of wage level. Paying above minimum wage satisfies one requirement. The Code also requires wages to be paid by specified deadlines. It requires wage slips in the prescribed format. It requires records to be maintained for five years. It requires the 50 per cent rule to be respected for statutory calculations. It requires bonus to be paid to eligible employees. It requires equal pay for men and women. Compliance with minimum wages does not replace compliance with any other provision.

For establishments employing fewer than 1,000 workers, wages must be paid by the 7th of the following month. For establishments employing 1,000 or more workers, the deadline is the 10th of the following month. For daily wage workers or workers on shorter wage cycles, payment must be made on the scheduled payday. There is no grace period. Employers must ensure wages are credited to employee accounts by these dates, not merely initiated by these dates.

When an employee is terminated, all final wages must be paid within two working days of the termination date. This is a firm legal deadline. For resignation and retirement, final wages must be paid by the next regular wage payment date. The two working day rule for terminated employees catches many companies off guard. Holding back wages while preparing the full and final settlement is a violation. Wages must clear within two working days. Other settlement amounts can be resolved separately.

Wages can be paid in cash, by cheque or by bank transfer through electronic modes such as NEFT or IMPS. The appropriate government can direct that wages for specific types of establishments be paid through a particular mode. Several states have already made bank transfer mandatory for establishments above certain sizes. For very small employers and workers without bank accounts, cash payment remains permissible. The overall direction of policy is toward digital payment.

Deductions are permitted but only those the Code specifically authorises. Permitted deductions include deductions for absence from duty, damage or loss caused by the employee's own negligence, employer provided accommodation or facilities, EPF and ESIC employee contributions, advance wages and loan repayments, and income tax under TDS. Any deduction not on the authorised list is illegal. Regardless of how many deductions apply, total deductions cannot exceed 50 per cent of wages in any single wage period.

Fines can only be imposed for acts or omissions the employer has specified in writing and that have been approved by the appropriate government. Total fines deducted in any single wage period cannot exceed 3 per cent of wages for that period. No fine can be imposed on any person under 15 years of age. Every fine must be recorded in a register of fines. Fines cannot be imposed in instalments or after 90 days from the act that triggered them.

No. Wages must be paid by the deadline regardless of any dispute between employer and employee. Pending disputes, complaints or allegations against an employee do not justify withholding wages. The only amounts that can lawfully be withheld are those that qualify as permitted deductions under the Code. Using wages as a tool in a dispute is illegal under the Code on Wages.

Yes. The old Payment of Wages Act limited timely payment protection to employees earning below a specified salary ceiling. Employees above that ceiling had no statutory right to be paid on time. The Code on Wages removed that ceiling entirely. Every employee regardless of salary level now has a statutory right to wages by the prescribed deadline. A software engineer earning Rs. 5 lakh a month and a factory worker earning Rs. 15,000 a month have the same right under the Code.

Yes. A wage slip must be issued to every employee on or before the day of wage payment each month. It must show all wage components, all deductions and the net amount paid. The prescribed format under the Social Security Central Rules 2026 is Form V. Failure to issue a wage slip is a violation even if the correct amount is being paid on time. The wage slip is the employee's legal record of payment and is essential for any future wage claim.

Employers must maintain a register of employees, an attendance register, a wage register showing calculation and payment details, a register of deductions and a register of fines where applicable. These must be kept at the workplace or within three kilometers of it. All records must be preserved for a minimum of five years from the date of the last entry. The Inspector cum Facilitator can call for these records during any inspection and the employer must produce them immediately.

The Code sets a maximum deadline by which wages must be paid. It does not prohibit earlier payment. Wages can be paid before the end of the wage period. What is not permissible is paying after the prescribed deadline. Advance payments must be properly documented in the wage register to avoid disputes about whether wages were paid for a given period.

The overtime wage rate under the Code on Wages is double the ordinary rate of wages. Every hour worked beyond the normal working hours must be compensated at twice the regular hourly wage. The normal working hours beyond which overtime applies are governed by the Occupational Safety, Health and Working Conditions Code, 2020. The Code on Wages fixes the rate. The OSHWC Code fixes the hours. Both must be read together.

An employee can file a claim before the authority designated under the Code on Wages. If wages were not paid or delayed without reasonable cause, the authority can order payment of the unpaid wages plus compensation of up to ten times the unpaid amount. For willful or repeated non payment, prosecution is available. Conviction can result in imprisonment up to three months, a fine, or both. The ten times compensation multiplier applies per employee and becomes a very large number when multiple workers are affected.

An employee is entitled to a bonus if they have worked in the establishment for at least 30 days during the accounting year, if their wages do not exceed Rs. 21,000 per month, and if the establishment has been operating for at least five years. For establishments in their first five years, bonus is due only if the establishment made a profit that year. Employees dismissed for fraud, violent conduct, theft, misappropriation or deliberate damage to employer property are not entitled to bonus for that year.

The minimum bonus is 8.33 per cent of wages earned during the accounting year or Rs. 100, whichever is higher. This minimum must be paid even if the establishment made no profit in the current year, as long as it has been operating for five or more years and had an allocable surplus in any of the previous five accounting years. For any worker earning at or above minimum wage levels, 8.33 per cent of annual wages far exceeds Rs. 100.

The maximum statutory bonus obligation under the Code on Wages is 20 per cent of annual wages per eligible employee. Employers can pay more as a discretionary or contractual bonus. The statutory obligation under the Code caps at 20 per cent. Whether the employer pays between the 8.33 per cent minimum and the 20 per cent maximum depends on the allocable surplus calculated from the establishment's profits for the year.

Bonus must be paid within eight months of the close of the accounting year. For an April to March accounting year the deadline is 30 November. If the deadline is missed, simple interest accrues on the unpaid bonus at the rate notified by the appropriate government. The interest runs from the due date until the bonus is actually paid. Delaying bonus payment for cash flow reasons results in interest being paid on top of the principal bonus amount.

No. A new establishment does not have to pay bonus for the first five accounting years unless it makes a profit in a particular year. If it makes a profit in year two but not year one, bonus is due for year two only. Once the establishment has completed five years of operation and earned an allocable surplus in at least one of those years, the regular bonus rules apply going forward, including the minimum bonus obligation in subsequent loss years.

Yes. Only employees whose wages do not exceed Rs. 21,000 per month are eligible for statutory bonus. Employees earning above Rs. 21,000 are not entitled to statutory bonus under the Code. Employers can choose to pay a discretionary bonus to higher earning employees but there is no legal obligation to do so. There is a separate calculation ceiling of Rs. 7,000 per month that determines the amount of bonus payable, which is different from the Rs. 21,000 eligibility ceiling.

The allocable surplus is the portion of establishment profits set aside for bonus payments. It is calculated as 60 per cent of the available surplus for most establishments and 67 per cent for banking companies. The available surplus is derived from gross profit after deducting items specified in the Code. If the allocable surplus is enough to pay 20 per cent bonus, employees must receive 20 per cent. If it covers only 10 per cent, that is what is paid above the minimum. If it falls below 8.33 per cent, the minimum is still paid from the employer's own funds where the five year rule applies.

Bonus is calculated on a notional wage ceiling, not on actual wages. The calculation ceiling is Rs. 7,000 per month. Even if an employee earns Rs. 20,000 per month, bonus is calculated as a percentage of Rs. 7,000 per month, not Rs. 20,000. The eligibility ceiling of Rs. 21,000 and the calculation ceiling of Rs. 7,000 are separate and both apply simultaneously. Bonus eligibility is tested against Rs. 21,000. The actual bonus amount is computed on Rs. 7,000.

Yes. Minimum bonus must still be paid if the establishment has been operating for five or more years and had an allocable surplus in any of the previous five accounting years. A current year loss does not remove the obligation. The minimum 8.33 per cent must be paid from the employer's own funds. Only if the establishment has never generated an allocable surplus across the entire preceding five year period is there a basis to claim that the minimum bonus obligation does not apply.

An employer can withhold bonus for a year in which the employee was dismissed for fraud, riotous or violent conduct on the employer's premises, theft, misappropriation of employer property or deliberate sabotage of employer property. The misconduct must be serious and result in actual dismissal. Minor disciplinary actions, warnings and absenteeism deductions do not justify a total denial of bonus. Absenteeism reduces bonus proportionally based on days worked but does not result in complete forfeiture.

Yes, if they have worked for at least 30 days in the accounting year before resigning. The bonus is proportionate to the days worked. An employee who worked for 90 days and then resigned is entitled to bonus calculated on wages for those 90 days. Resignation before the accounting year ends does not forfeit the right. Employers who refuse to pay bonus to employees who resign before year close are in violation of the Code. The employee can file a bonus claim even after leaving.

Contract workers employed by a contractor are entitled to bonus from the contractor. The contractor is the employer for bonus purposes. The conditions are the same: at least 30 days of work in the accounting year and wages within the Rs. 21,000 ceiling. The principal employer is not directly liable for the contract worker's bonus. If the contractor fails to pay, the principal employer may carry secondary liability depending on the contract terms and applicable state rules.

Equal remuneration means every employer must pay the same wages to men and women doing the same work or work of a similar nature. Work of a similar nature means work requiring the same skill, effort and responsibility under similar conditions. The obligation covers not just wages but also recruitment, training, transfers and promotions. An employer cannot offer a female candidate a lower starting salary than a male candidate for the same role. The obligation begins at the point of hiring.

Yes. The Code on Wages uses the term gender in its equal remuneration provisions. The Transgender Persons (Protection of Rights) Act, 2019 recognizes transgender persons as a third gender under Indian law. The equal remuneration provisions extend to transgender employees. An employer who pays a transgender person less than other employees doing the same work on the basis of gender identity is in violation of the Code.

Yes, if the difference is based on a genuine and verifiable merit based reason. Higher experience, greater seniority or superior qualifications relevant to the role are valid grounds. What the Code prohibits is a pay difference based on gender. The test is straightforward. If the same pay gap would exist between two employees of the same gender with the same qualification difference, it is permissible. If the gap exists because one employee is a woman, it is discrimination under the Code.

Yes. The Code on Wages explicitly extends equal remuneration to recruitment. An employer cannot discriminate on the basis of gender when selecting candidates for a position. An employer cannot offer a lower wage to a candidate of one gender compared to another for the same role. The obligation starts at the point of hiring. This is not limited to salary. It extends to all conditions of employment including transfers, training and promotions.

Yes. An employee receiving lower wages than a colleague of a different gender for the same work can file a complaint before the authority designated under the Code on Wages. The complaint must be filed within three years of the discrimination occurring. The authority can investigate, direct correction of the pay disparity and order payment of the shortfall owed. The employer also faces penalties for the violation. The employee does not need to go to a civil court. The claims authority handles this.

No. Different shifts or locations cannot justify lower base wages for women doing the same work as men. If a shift or location carries a specific allowance, that allowance must be available to all employees in that shift or location regardless of gender. The underlying wage rate for the same work must be equal. Structuring compensation so that women are placed on lower paying shifts or locations while men receive higher base wages for the same work is gender based wage discrimination under the Code.

Yes. The Code on Wages mandates that at least one third of the total membership of both the Central Advisory Board and each State Advisory Board must be women. This applies across all three categories of members: employer representatives, worker representatives and independent members. Women must constitute at least one third of the total combined membership. This is a statutory requirement, not a guideline.

The Equal Remuneration Act of 1976 required employers to pay equal wages to men and women for the same work. It also prohibited gender discrimination in recruitment, transfers, promotions and training. It was repealed on 21 November 2025 when the Code on Wages came into force. All its protections were absorbed into the Code. The substance is identical. The difference is that equal remuneration is now one chapter within one unified law rather than a standalone Act with a separate enforcement system.

The Code on Wages is enforced by officers called Inspector cum Facilitators. The central government appoints them for establishments under central jurisdiction. State governments appoint them for establishments under state jurisdiction. These officers have authority to enter premises, inspect records, examine wage registers, question employers and employees, take copies of documents and take action for violations. The Inspector cum Facilitator is required to advise employers on compliance before escalating to enforcement action.

No. The facilitating role means minor lapses get a chance to be corrected without immediate prosecution. It does not mean violations are overlooked. Workers can approach the Inspector cum Facilitator to report minimum wage violations, unpaid wages or delayed wages. The officer can receive worker complaints, investigate them and take action against employers who are not paying correctly. The model reduces harassment of compliant businesses. It does not shield non compliant employers from accountability.

Inspections under the Code are planned and risk based in most cases. The web based inspection system selects establishments based on compliance risk criteria. In most cases, advance notice is given before an inspection. However, the Inspector cum Facilitator retains the power to inspect without notice when there is credible information of ongoing violations or when evidence might be tampered with if notice is given. Employers whose records are always up to date have no reason to fear an unannounced inspection.

Claims for unpaid wages or bonus must be filed within three years from the date the wages or bonus were due. If wages due on 7 November 2025 were not paid, the deadline to file a claim is 7 November 2028. After three years the claim is time barred. The claims authority cannot consider it regardless of how valid the claim is. Workers have three full years to identify unpaid amounts and file their claim.

An employer who pays below minimum wages can be ordered by the authority to pay the shortfall plus compensation of up to ten times the shortfall per affected employee. For prosecution, a first offence carries a fine of up to Rs. 50,000. Repeat offences carry imprisonment of up to three months or a fine or both. When multiple employees are underpaid, the ten times compensation applies to each one separately. The total exposure across a workforce can be very significant.

Late or unpaid wages result in the authority ordering payment of the delayed amount plus compensation of up to ten times that amount. For wilful non payment or repeated delays, prosecution carries imprisonment up to three months or a fine or both. If an employer delayed Rs. 20,000 in wages to one employee, the total ordered by the authority could reach Rs. 2,20,000. Across multiple employees the amount multiplies quickly.

Yes. The Code gives the claims authority the power to award compensation above and beyond unpaid wages. The compensation ceiling is ten times the unpaid amount per employee. Where the employer had no reasonable cause for non payment, the authority must consider awarding this compensation. Both the unpaid wages and the compensation are recovered through the same claims process before the designated authority. The employee does not need to file a separate suit.

Yes. The claims authority under the Code on Wages is an administrative body. An employee files a claim. The authority summons the employer, hears both sides, reviews records and passes an order. There is no formal civil or criminal court case required. Orders of the claims authority are executed like civil court decrees. If the employer does not comply, recovery proceedings follow as for any court judgment. The process is faster and far less expensive than civil litigation.

An employer who fails to comply with wage structure rules faces several consequences simultaneously. The claims authority can order payment of the wage shortfall plus compensation of up to ten times per affected employee. Unpaid wages become a first charge on the company's assets, taking priority over most other business debts in recovery. Individual directors and managers personally responsible can be prosecuted alongside the company. In any business acquisition, the buyer inherits joint liability for existing underpaid wage obligations of the company being purchased.

Yes. The Code on Wages provides for compounding of certain offences. Compounding allows an employer to settle a violation by paying a prescribed fee rather than going through criminal prosecution. This is available for procedural violations and minor lapses. It is not available for serious violations such as wilful non payment of minimum wages to multiple employees. For employers who made genuine errors and want to regularise their compliance position, compounding is a practical option where the offence qualifies.

Yes. The 50 per cent rule has made the old practice of paying very low basic salaries and loading the rest into special allowances legally untenable. Companies across manufacturing, retail, logistics, IT and services have been restructuring salary packages since November 2025. Basic pay and DA must now be at least half of total CTC. The direct consequences are higher EPF contributions, higher ESIC contributions for employees within the coverage threshold and significantly larger gratuity provisions across the board.

Yes, for employees whose basic pay was below 50 per cent of total CTC. EPF is a percentage of wages. A higher wage base means higher employee and employer EPF contributions. An employee whose wages increase from Rs. 12,000 to Rs. 30,000 because of the 50 per cent correction sees monthly EPF contributions rise from Rs. 1,440 to Rs. 3,600 on the employee side. The employer contribution rises by the same amount. Across a large workforce, the cumulative monthly impact is substantial.

Yes, significantly. The gratuity formula uses last drawn wages. Under the Code, wages must be at least 50 per cent of total CTC. For employees who previously had low basic salaries, the last drawn wages figure is now materially higher. A company provisioning gratuity on Rs. 12,000 basic for an employee earning Rs. 60,000 total must now provision on at least Rs. 30,000. Over ten years of service the difference in the eventual payout is substantial. Companies that have not recalculated their gratuity liability are carrying an underprovisioned obligation on their books.

Six actions are required right now. First, audit every salary structure and correct those where basic pay plus DA is below 50 per cent of total CTC. Second, recalculate EPF, ESIC and gratuity for every employee using the corrected wage base. Third, issue wage slips in Form V format to every employee on or before pay day. Fourth, verify that all registers are being maintained in the correct format at the workplace. Fifth, ensure wages reach employee accounts by the 7th or 10th as applicable. Sixth, confirm the annual bonus calculation and payment are completed within eight months of the accounting year close.

For employees with low basic pay and high allowance structures, the salary correction increases EPF deductions from the employee's side. A higher wage base means a higher employee EPF contribution and less cash in hand each month. The total CTC does not change. The split within the CTC changes. The employee accumulates more in their PF account and earns a larger gratuity payout. Monthly take home reduces. Long term retirement savings and gratuity entitlement increase by more than the monthly reduction.

Yes. Paying above minimum wage and complying with the 50 per cent rule are two separate requirements. A company paying Rs. 80,000 per month but with only Rs. 12,000 as basic pay is not complying with the 50 per cent rule even though it is well above minimum wage. The rule is about the internal structure of the salary. Basic pay plus DA must be at least half of total CTC. The total amount paid is irrelevant to this test. High paying companies with low basic structures are still in violation.

Exemptions are limited and conditional. The appropriate government has discretionary power to exempt specific classes of employers from certain provisions for a defined period and on stated conditions. New establishments get limited relief from bonus obligations for the first five years. There is no exemption from minimum wage payment. There is no exemption from timely payment of wages. There is no exemption from equal remuneration. Any exemption granted is temporary, conditional and specific. It does not cover all provisions of the Code.

Official guidance is available on the Ministry of Labour and Employment website at labour.gov.in. It carries the text of the Code, the central rules, all gazette notifications and official FAQs. The Shram Suvidha portal is where employers register and file compliance submissions. State labour department websites publish state specific minimum wage notifications and rules. Praans Consultech provides expert assistance with salary structure audits, EPF and ESIC recalculations, registration, compliance audits and legal advisory on the Code on Wages. Write to us at info@praansconsultech.com or visit www.praansconsultech.com.