Labour Codes

This section explores the 4 labour codes viz. the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health & Working Conditions Code, 2020; that have been proposed by the Indian government to consolidate and simplify over 20 of the existing labour legislations in the country.

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30 October 2023


Code on Wages, 2019

The Code on Wages, 2019 (“Wage Code”) was passed in 2019 consolidating the laws pertaining wages, bonus, and equal remuneration. 3 other labour codes were passed in 2020 dealing with social security, industrial relations, and operational safety.


The Wage Code subsumes and repeals four separate legislations, namely:


i.   the Equal Remuneration Act;

ii.  the Minimum Wages Act;

iii. the Payment of Wages Act; and

iv. the Payment of Bonus Act.


The stated objective of the Wage Code is to amend and consolidate the laws relating to wages, bonus and related matters. The Wage Code received the President’s assent nearly 2 years back and it is expected that the enactment will be implemented along with the other 3 labour codes. It is pertinent to note that the Government is empowered to notify different provisions on different dates.


Salient Features


Definition of Wages 


The legislations that are proposed to be repealed by the Wage Code have variations in the definition of wages. This has led to disputes and litigation on the question as to what forms part of wages and what components are to be excluded. 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 in (i) to (iii) above would still be considered while computing wages for equal remuneration between all genders and not limited to male and female.


Applicability of Payment of Wages Provisions 


The Payment of Wages Act is applicable to employees who earn wages less than ₹ 24,000. Under the Wage Code, there is no threshold for its applicability thereby it 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.




Under the Wage Code, the definition of the term, ‘employer’ has been expanded to specifically include contractors.


Minimum Wages 


Under the Minimum Wages Act, minimum wages in India are notified for scheduled employments by the relevant Governments. The Wage Code now introduces the concept of floor wage to be notified by the Central Government. The State Governments are obligated to not to fix minimum wages in their sphere below the floor wage so notified.


Disqualification of Bonus 


While there are no significant changes to the provisions concerning payment of bonus, the Wage Code specifically adds sexual harassment as a ground for disqualification.




The Wage Code and the remaining 3 labour codes emphasise more on facilitating compliance than penalising the non-compliant employers. Under the Wage Code, employers can be penalised only for a second or subsequent offence in a period of 5 years.  The Wage Code specifically provides the employees to file a single application in respect of any number of employees employed in an establishment, subject to any prescribed rules. The Wage Code clarifies that a claim can be filed within a period of 3 years from the date on which the claim arises.