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What constitutes 'wages' under the Code on Wages, 2019 (“Wage Code”)?

The Wage Code has now defined the term ‘wages’ to include all remuneration capable of being expressed in monetary terms except specific components that are to be omitted such as: 


i. house rent allowance,  

ii. conveyance allowance/ value of travel concession,  

iii. overtime allowance and any remuneration payable under any award or settlement between the parties or order of a court or tribunal, 

iv. any bonus paid in accordance with law or commission payable to the employee, 

v. sums paid to defray special expenses, 

vi. social security contributions and interest earned thereon, and value of certain amenities provided to employees, 

vii. gratuity, and 

viii. retrenchment compensation or retirement benefit or any other similar ex-gratia amount. 


The definition now clarifies that: (a) in the event the quantum of the exclusions mentioned under (i) and (vi) above is more than half or such other notified percentage (“Threshold”) of the remuneration paid to the employee, then the amount in excess of the Threshold will be deemed to be wages; and (b) if any part of the remuneration is given in kind then the value of the said remuneration, which does not exceed 15% of the total wages payable to the employee, will also form part of the employee’s wages.  


Further, the exclusions mentioned above would still be considered while computing wages for equal remuneration between all genders and not limited to male and female.  

There is no threshold for applicability thereby the Wage Code applies to all ‘employees’, including senior level employees. In case of removal, dismissal, retrenchment and resignation of an employee, it is provided that the wages must be paid within 2 working days. Under the Wage Code, monthly wages are to be paid within the 7th day of the succeeding month, as against the 10th day. Deductions in the form of income tax, loans, advances, contribution to trade union, recovery of losses, etc., cannot exceed 50% of the wages. 

Please refer to the answer to Question 1 above. 

Wages are currently structured by the employers to ensure minimal outgo under gratuity and provident fund contributions. In some cases, the exclusions are more than 50% of the total remuneration. Therefore, employers may be required to undertake wage restructuring to ensure compliance with the Wage Code, and this is dependent on the circumstances of employment in each establishment.

Exclusions like any conveyance allowance or the value of any travelling concession, house rent allowance, remuneration payable under any award or settlement between the parties or order of a court or Tribunal, and any overtime allowance shall be taken for computation of equal remuneration, in addition to the general inclusions under the Wage Code (as mentioned in the answer to Question 1 above).  

The Central Government is mandated to fix ‘floor wages’, for different geographical areas, considering the minimum living standards of a worker in such areas. The State Governments are obligated to not to fix minimum wages in their sphere below the floor wage so notified. 

Under the Payment of Wages Act, wages are required to be paid on or before the 10th day of the succeeding month. However, under the Wage Code, the settlement period for payment of monthly wages has been specified up to the 7th day of the succeeding month.  

Employees who have put in at least 30 days of work in an accounting year and who are drawing wages not exceeding such amount per month as determined by notification by the appropriate Government, are eligible to receive bonus. 

An employee shall be disqualified from the receiving bonus if he is dismissed from service on the grounds of fraud; riotous or violent behaviour while on the premises of the establishment; theft, misappropriation or sabotage of any property of the establishment; or conviction for sexual harassment. 

Minimum: Bonus calculated at the rate of 8.33% of the wages earned by the employee in an accounting year, or ₹ 100 whichever is higher. 


Maximum: Bonus calculated at the rate of 20% of the wages earned by the employee in an accounting year. 

All amounts payable to an employee by way of bonus are required to be paid to the employee within 8 months from the close of the accounting year. The time period for payment of bonus can be extended from 8 months to 2 years, by the appropriate Government on an application made by the employer for sufficient reasons.  

Contributions paid by the employer towards PF shall be at the rate of 10% of the wages payable to each employee, or 12% in case of any establishment or class of establishments specifically notified by the Central Government.  

The employer's contribution for a wage period shall be 3.25% of the wages payable to each employee, and the employee's contribution for a wage period shall be 0.75% of the wages payable by the employer. (The amount of wages payable is to be calculated considering the inclusions and exclusions mentioned in the answer to Question 1 above.) 

Gratuity payable in case of a monthly-rated employee shall be calculated at the rate of 15 days' wages for every completed year or part thereof in excess of 6 months of continuous service. 

Yes, in terms of the Code on Industrial Relations, 2020, fixed-term employees are eligible for gratuity upon completion of 1 year in service, however, even if they render their services for less than 1 year, they may be eligible for the gratuity calculated on a pro rata basis.