The objective behind the new code is simple yet powerful to simplify, standardise, and strengthen wage-related regulations across the country. Till now, all the law related to the wages having its own applicability, compliance requirements and threshold that should be complied by employers. All these led to burden on administrative, confusion and inconsistency.

The Wages Code, 2019 brings together four important wage laws into one unified framework:

The Payment of Wages Act, 1936
The Minimum Wages Act, 1948
The Payment of Bonus Act, 1965
The Equal Remuneration Act, 1976

Why the Wage Code Was Needed

India’s wage-related laws dated back to the 1930s–1970s. Over time, different industries, states, and sectors developed widely varying interpretations. All this led to:

Different acts gives multiple definition of “wages”
Every state has specific “minimum wages”
Complexity process of registration and return
Duplicity in compliance
Uncertainty in allowance and wage structure

So all these challenges will be resolved by the Wage Code, Under one umbrella offering the unified framework for payment timelines, bonus, gender equality, record keeping and wages.

Key Features of the Wages Code, 2019

1. One Nation, One Definition of Wages

Earlier, different act has different definition of “wages”, which creates confusion and disputes. But now under the new code there is unified definition of wages:

Wages = Basic (Pay )+ DA (Dearness Allowance) + Retaining Allowance
Maximum allowance capped at 50% of total salary.
Any allowance above cap limit of 50%, will be part of wages.

All these led to the uniformity and fair salary structure across organisations.

2. 2-Day Full & Final Settlement Rule

All the dues should be paid within 2 working days in case of dismissal, removal, retrenchment and resignation.

This code is the most employees friendly and led to tighten their payroll processes.

3. Universal Applicability of Minimum Wages

The Code removes the concept of "scheduled employment". Now:

Minimum wages apply to all employees, across all industries
A National Floor Wage will serve as the benchmark for states
States cannot fix wages below this floor

This will reduce exploitation and create nationwide wage uniformity.

4. Gender-Neutral Equal Pay

The Equal Remuneration Act focused only on men and women. The new Code expands this to all genders, ensuring equal pay and removing discrimination in recruitment.

5. Standardised Payment Timelines

The Code establishes deadlines as

· Last working day of the week for weekly worker

· End of the shift of a day for daily workers

· By 7th of next month for Monthly workers

Timely wages is the mandatory requirement.

6. Simplified Record-Keeping

Multiple register is replaced with one master register, single return and simplified digital formats by this code, it led to relaxation in the administrative work for HR teams.

7. Digital and Transparent Inspection System

Through this code it introduces:

Inspection of notice online
Inspection criteria that is risk based
Digitalization of report

All these prevent the visits and corruption, led to more transparency to labour inspections.

8. Stricter Penalties

All the non-compliance was ignored in previous act but through this act it introduced more stricter penalty, prosecution for repeated violations and corporate accountability. By this it ensure the better compliance and protection for employees.

Comparison Between the New and Old Provisions of the Code on Wages, 2019 :

Impact on Employers and HR Teams

The new wage structure could require organisations to restructure CTC components, especially where allowances exceeded 60–70% of gross salary. Companies required to:

Recalculate ESIC, PF and gratuity
Updated software for payroll
Redesign of salary breakup
Training for HR teams on new compliance

It will be beneficial for both employee and employer led to more clarity and consistency. Even though it cost might increase, but it will beneficial for long term.

Impact on Employees

Employees get:

Improvement in social security.
Smooth and faster settlement on termination.
Protection from any disparity on the base of gender in pay.
Strict enforcement of rights
More predictable wage payments

By wage code, it improve and strengthen the employee welfare.

About Praans Consultech

Praans Consultech is one of India’s leading labour law compliance and regulatory advisory firms. Based on a strong foundation of legal expertise and technology-driven solutions, we support businesses across India with:

Labour law compliance management
End-to-end statutory registrations
Payroll and HR documentation
Compliance audits and risk assessment
Digital compliance software
Establishment and contractor compliances
Labour codes advisory and implementation

Our mission is to help organisations stay compliant at the lowest cost, with zero penalties, and with complete peace of mind.
Praans Consultech presence all over India, with client centric approach, we ensure smooth compliance under the social security code,, the OSH code, the Industrial relation code and wage code.

For support, visit: www.praansconsultech.com
Email: info@praansconsultech.com
Phone: 9050576838

FAQ'S

1. What do mean by Code on wages, 2019?

The code on wages is a unified wage law; it is replacing earlier four acts to simplify the wage regulation across India.

2. What are all the acts that merged under this Code?

Equal remuneration act, payment of wages, payment of bonus act, and minimum wages act are all the acts which are merged under this act.

3. Who does the Code apply to?

All employees in all industries—no salary or category restrictions.

4. Is the definition of wages changed?

Yes, a single uniform definition now applies.

5. What is the 50% wage rule?

Allowances cannot exceed 50% of total wages; basic must be at least 50%.

6. Does this affect PF and Gratuity?

Yes. A higher basic means higher PF, gratuity, and other statutory benefits.

7. What is the National Floor Wage?

A central minimum wage benchmark that states cannot go below.

8. When must wages be paid after termination?

Within 2 working days of resignation, dismissal, removal, or retrenchment.

9. What is the wage payment timeline for monthly employees?

Salary must be paid before the 7th of the following month.

10. Is minimum wage applicable to all employees?

Indeed, minimum wages that are schedule-based system is now removed.

11. Does equal pay applicable on only men and women?

No. It is applicable on all the gender now.

12. Are bonus rules the same?

Bonus eligibility remains but salary ceiling will be notified by the government.

13. Are employer penalties stricter now?

Yes. Heavy fines and prosecution for repeated violations.

14. How will be inspections conducted?

Through e-inspections and risk-based systems for transparency.

15. Are registers and records simplified?

Yes. One consolidated register replaces multiple old registers.

16. Can wages be paid digitally?

Yes. Digital payments are encouraged and widely accepted under the new Code.

17. Does the Code make payroll uniform across India?

Yes. All the definition of wages, obligations and timelines are standardized

18. Does overtime calculation change?

Yes. Overtime must be paid at twice the normal wage rate.

19. Does the new Code applicable on contract employees also?

Indeed, it covers all the employees, even including the contract and temporary employees also.

20. What are the obligations of employer?

The obligation of employers are revise CTC breakup, update HR policies, ensure digitalized compliance and to review salary structure.

Understanding the Wages Code, 2019: A Complete Guide with Old vs New Comparison

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