Code on Wages, 2019

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Code on Wages, 2019

April 10, 2020



The Code on Wages, 2019 (“Code”) aims at the consolidation of four major labour enactments which deal with the payment of wages and bonus to the employees and ensures the avoidance of discrimination with regard to payment of wages and  recruitment for employment. This Code also focuses on making the provisions with regard to minimum wages universal and ensures the timely payment of wages to workers and employees. The consolidation of the Equal Remuneration Act, 1976, the Minimum Wages Act, 1948, the Payment of Wages Act, 1936 and the Payment of Bonus Act, 1965 under this Code, is purely to ensure that uniformity would be brought about in the legal framework, for easy and effective implementation.


The Code consolidates the following labour acts:

1.The Equal Remuneration Act, 1976:

The Equal Remuneration Act, 1976 deals with the payment of equal remuneration to men and women workers for the work of similar nature and deals with no discrimination to be made while recruiting men and women. Conversely, the Code has widened the scope by providing for no-discrimination among all the employees with respect to the payment of remuneration and for the purpose of recruitment of employees.

2.The Minimum Wages Act, 1948:

The Minimum Wages Act, 1948 applies to every employer who employs one or more employees in a scheduled employment in respect of whom minimum rates of wages have been fixed under the act. The act makes it obligatory on the part of employers to pay at least the minimum rates of wages as fixed by the respective State Governments. On the other hand, the Code applies to all the employees and to all the establishments. The employees include skilled, unskilled, operational, supervisory, manual, administrative, managerial, clerical and technical. The unorganized sector workers have been brought under the purview of the Code. The Code also specifies that the rates of wages shall be revised every 5 years.

3.The Payment of Wages Act, 1936:

The Payment of Wages Act, 1936 applies to the payment of wages to persons employed in any factory and to persons employed in an industrial or other establishment. However, the Code has widened the scope by making it applicable to all the establishments. The timelines with respect to the payment of wages for resignation were not provided in this act. The Code states the payment of wages to the employees within two working days, upon tendering of their resignation. The Code has removed the wage limits set forth by the act for the purpose of its applicability. The act specified different timelines for the payment of wages, such as within 7 days from the date of completion of a wage period and within 10 days from the date of completion of a wage period, depending on the size of the establishment, but the Code has made it mandatory for the payment of wages to an employee within 7 days from the date of completion of a wage period, regardless of the size.

4.The Payment of Bonus Act, 1965:

The Payment of Bonus Act, 1965 provides for the payment of annual bonus to the employees, employed in every establishment in which twenty or more persons are employed on any day during an accounting year. The bonus is to be paid regardless of whether the employer has made a profit or loss in the accounting year in which the bonus is payable. However, bonus is not payable by a new establishment in the first five accounting years if there is no profit.

The Code focuses on the transformation of the obsolete laws, few of which have been enacted prior to independence. The Code is yet to be notified and shall come into force on the date specified by the Central Government through a notification in the Official Gazette.


This Code is applicable to all the employees employed in both the organized and the unorganized sector. While the Central Government shall look into wages for the employment of workers in railways, mines, oilfields etc., the State Government shall have the power to make decisions with respect to the wages for the employment in other establishments, which are inclusive of private establishments. The Code extends to all the employees, and does not consider the wage ceilings which have been set forth under the Payment of Wages Act, 1936 or scheduled employments as mentioned by the Minimum Wages Act, 1948.

1. Definition of Wages:

The Code has provided one particular definition for wages, as opposed to different definitions provided under the Minimum Wages Act and the Payment of Wages Act. Section 2 (y) of the Code defines the term wages which is inclusive of the salaries, allowances or other components which are expressed in monetary terms. The travel allowances, house rent allowances etc, have been excluded from the purview of wages under the Code. However, such excluded components from the definition of wages, shall not exceed one half of the remuneration which becomes payable to the employee.

a. Fixation of Floor Wages:

The Code makes provisions for fixation of a floor wage by the Central Government taking into consideration, the living standards of the workers. Different floor wages may be set based on geographical areas. However, the fixing of floor wage by the Central Government must follow the obtaining of the Central Advisory Board’s Advice and consultation with the State Governments. The rates of wages as may be prescribed by the State Governments shall not be less than the rate of floor wage as fixed by the Central Government. However, in the event, the minimum wages, which have already been determined by the State Governments are higher than the floor wage as may be prescribed by the Central Government, such minimum wages shall not be reduced, to be in line with the floor wages which have been set.

b. Wage Payments:

The employer can pay wages by way of coins, currency notes, by crediting to the bank accounts, or through any electronic mode. Such modes of payment shall be done in all the establishments, except those industrial establishments, in which the mode of payment shall be in accordance with the notification of the appropriate government. The Code provides for the employer to fix wage periods either daily, weekly, fortnightly or on a monthly basis. The Code also mentions that if an employee resigns, or his employment has been terminated or the employee has been retrenched, because of the closure of the establishment, such employee shall be paid wages within 2 working days.

c. Deductions:

In accordance with the Code, the employer shall be entitled to make authorized deductions from the wages of an employee, when, an employee absents himself from duty without authorization from the employer, the employer can also impose fines on the employee and such fines can be deducted from the wages which are payable to the employee. The employer can make deductions for accommodation, if any, provided to the employee, from the wages paid to the employee. In the event of any advances, taken by an employee, from the employer, such deductions can be made by the employer, in lieu of the advances, from the wages payable to the employee. It shall be ensured that these deductions shall not exceed 50% of the total wage which is payable to the employee.

2. Employee and Worker:

The Code clearly defines employee under Section 2(k) and worker under Section 2(z) of the Code respectively. Section 2(k) reads as follows: “employee” means, any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union. Section 2(z) reads as follows: “worker” means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied.

a. Hours of Work:

The appropriate government, being either the Central Government or the State Government, shall fix the number of working hours for a normal working day. However, in the event, an employee works for a time period, over and above the normal working hours prescribed by the appropriate government, the employee shall be entitled to an overtime wage, which shall be double the normal wage rate, which is payable to such an employee.

3. No Gender Discrimination:

In pursuance with the Equal Remuneration Act, 1976, the Code, ensures that there should not be any discrimination on the grounds of gender with respect to the payment of wages to the employees, by the same employer in respect of same work or work of similar nature which is performed by an employee. There shall not be reduction of wages of the employees for the work of similar nature performed by them. The Code ensures that the employer shall not discriminate during the recruitment, on the grounds of gender, except when the same has been prohibited or restricted by or under any law.

4. Bonus Payments:

Pursuant to the chapter which deals with the payment of bonus under the Code, the Code enshrines that the payment of bonus, shall be paid only when an establishment has employed at least 20 employees or 20 employees were employed in such establishment in the preceding 12 months. When the wages of an employee do not exceed a certain specified limit, as specified by the state government or the central government, such employees shall be paid a bonus at the rate of 8.33% of his/her wages or an amount of Rs. 100/-, whichever would be considered higher, upon such calculation. The maximum bonus, which an employee shall be entitled to receive from the employer shall not exceed 20% of such employee’s annual wage. However, an employee shall be disqualified from bonus payments, if the employee has been dismissed from his services on the ground of fraud, violent behavior on the premises, theft, misappropriation of property or has been convicted for sexual harassment.

5. Records and Returns:

As per the provisions of the Code, all the employers are mandated to maintain registers mentioning the details of the employees, the wages payable to the employees, muster rolls and any such other details as prescribed by the rules. However, the rules have not been introduced by the government.

6. Opportunity of Being Heard:

An inspection shall be conducted by inspector-cum-facilitator as may be decided by the government. If, on the completion of inspection by the inspector-cum-facilitator, it has been deduced that the employer has contravened the provisions of the Code, the employer shall be given an opportunity of being heard before the initiation of any such action by the inspector-cum-facilitator. The employer shall be allowed to remedy such contravention. In the event, it is found that the employer has repeated the contravention, within 5 years from the date of such first contravention of the provisions of the Code, the employer will not be provided with the opportunity of being heard and the inspector-cum-facilitator shall have the right to initiate an action, as it may deem fit, against the employer. The penalties for the offences vary depending on case to case. But however, the maximum penalty under the Code is imprisonment for a period up to 3 months and/or a fine up to Rs.1,00,000/-.


The Code is to be viewed as one of the significant approaches of the Indian Government during this term, towards ensuring the simplification of the labour laws dealing with wage payments and the provision of equal opportunities and remuneration. This Code has consolidated the four major labour laws with the view of promoting simplicity and the ease of doing any form of business, has reduced multiplicity of legislations, inspection has been made easier, has brought unorganized labour under its purview, aims at the reduction in disputes and has introduced the use of technology to bring about transparency. When there is an ease of compliance with legislations, the same would facilitate a boost in the employment in the country. Considering the consolidation of the 4 acts as a positive step towards the ease of doing business, it shall also be considered crucial for the employers to be familiar with the Code, as it would come in handy, once the Code has been notified.

Authors: Anita Dugar, Senior Associate; Kriti Sanghi, Associate.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. For any queries, the authors can be reached at (i) (ii)

Updated as on April 09, 2020

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