The Code on Wages, 2019


The Code on Wages was passed by Parliament on August 8, 2019. This law, along with three others – Occupational Safety, Health and Working Conditions Code, 2020; Industrial Relations Code, 2020; and Code on Social Security, 2020 – aim to combine India’s 29 labour laws into four codes.

The first Code mentioned here – the Code on Wages, 2019 – aims to amend and consolidate the laws relating to wages, bonuses and connected matters. 

The 29-page Code contains nine chapters: Preliminary (Chapter I); Minimum Wages (Chapter II); Payment of wages (Chapter III); Payment of bonus (Chapter IV); Advisory Board (Chapter V); Payment of dues, claims and audit (Chapter VI); Inspector-cum-Facilitator (Chapter VII); Offences and Penalties (Chapter VIII); and Miscellaneous (Chapter IX).


  1. Which Acts does the Code replace?

    The Code replaces four central laws: Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment of Bonus Act, 1965; and Equal Remuneration Act, 1976.

  2. How are ‘wages’, ‘worker’ and ‘employee’ defined under this Code?

    ‘Wages’ refer to all remuneration – which are expressed in terms of money or ‘capable of being so expressed’ – payable to an employed person if the terms of their employment are fulfilled. They include basic pay, as well as dearness and retaining allowance. Wages do not include any bonus not mentioned in the terms of employment; the value of accommodation, or of the supply of light, water, medical attendance or other amenity, unless prescribed by the ‘appropriate Government’ (centre or state); the employer’s contribution to any pension or provident fund; conveyance, overtime or house rent allowance; any sum the employer pays the employee for ‘special’ expenses; commission or gratuity payable to the employee; any retrenchment compensation or other retirement benefit payable to the employee; or remuneration payable under any award or settlement between parties on order of a court or Tribunal. 

    ‘Worker’ is described as any person – except an ‘apprentice’, as defined in the Apprentices Act, 1961 – employed in an industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, and also includes working journalists, as defined in the Working Journalists and other Newspaper Employees and Miscellaneous Provisions Act, 1955.

    An ‘employee’ is any person 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. An employee does not include an any member of the Armed Forces under the central government.

  3. What does the Code prescribe about minimum wages?

    Employers shall not pay any employee wages less than the minimum rate notified by the ‘appropriate Government’. The government may set the rate for ‘time work’ – based on hour, day or month – or ‘piece work’. The ‘appropriate Government’ shall fix a minimum wage rate based on time for those employed on a ‘piece work’ rate.

    For fixing the minimum rate of wages, the government shall take into account the geographical area of work, or the skills required for working under the unskilled, skilled, semi-skilled and highly-skilled categories, or both. It may also take into account the ‘arduousness of work’, such as temperature or humidity that is difficult to bear, hazardous occupations or processes and underground work. The ‘appropriate Government’ shall review or revise wage rates at least every five years.

    The fixed minimum rate of wages may consist of a basic wage rate and a ‘cost of living allowance’ as fixed by the ‘appropriate Government’; a basic wage rate – with or without a cost of living allowance – along with the cash value of concessions for essential commodities, ‘where so authorised’; a rate which encompasses the basic rate, cost of living allowance and cash value of the concessions, if any; or the cost of living allowance, along with the cash value of concessions for essential commodities at a rate fixed by the ‘appropriate Government’.

    An employee whose minimum wage rate has been fixed under this Code, shall be entitled to a full day’s wages even if they work for lesser hours than required of them on a normal working day. The employee shall not be entitled to a full day’s wages if their failure to work is due to unwillingness, and not because the employer has not provided work; and in other cases, as may be prescribed.

    If an employee does two or more classes of work, to which different minimum rates of wages are applicable, the employer shall pay them based on “…the time respectively occupied in each such class of work, wages at not less than the minimum rate in force in respect of each such class.”

    If, for any work, the minimum wage rate has been fixed based on time, and a person is employed for the same at a ‘piece work’ rate, they shall be paid wages at a rate not less than the minimum time rate.

    The ‘appropriate Government’ may fix the number of work hours which shall constitute a normal working day, inclusive of one or more specified intervals; provide for a day of rest every seven days, applicable to all or a specified class of employees; and provide for remuneration to be paid on the rest day, at a rate not less than the overtime rate.

  4. What are ‘floor wages’?

    The central government shall fix a floor wage for different geographical areas, taking into account the ‘minimum living standards’ of workers, as prescribed by the Code. The minimum rates of wages fixed by the ‘appropriate Government’ shall not be less than the floor wage. The ‘appropriate Government’ shall not reduce the fixed minimum wage rate, if the rate is more than the floor wage.

  5. What does the Code say about overtime work?

    If, on any day, an employee works in excess of the number of hours constituting a normal working day, the employer shall pay the worker at an overtime rate which is at least twice the normal rate of wages. 

  6. When can wages be deducted?

    The Code says that the wages of an employee shall only be deducted for reasons mentioned in the Code. The total deducted amount shall not exceed 50 per cent of the total wages in the wage period.

    Any payment made by an employee to their employer shall be deemed as a deduction from the employee’s wages. If an employee loses wages – if their increment or promotion is withheld, they are given a lower post or ‘time-scale’, or they are suspended – for a ‘good and sufficient cause’, it shall not be considered a deduction of wages under this Code, if the employer has made provisions for such purposes in a manner prescribed by the ‘appropriate Government’.

    Deductions from the wages of an employee shall be made for these purposes: fines imposed on them; absence from duty; for damage to, or loss of, goods expressly entrusted to the employee, where such damage or loss can be directly attributed to them; for housing accommodation provided by the employer or ‘appropriate Government’; for income-tax or any other statutory levy imposed by the central or state government, which is payable by the employee; among others.

  7. When, and at what rate, shall employees get bonuses?

    Every employer – as per Section 26(1) – shall provide employees with an annual minimum bonus at the rate of 8.3 per cent of their wages, or Rs. 100, whichever is higher, whether or not the employer has any ‘allocable surplus’ from the previous accounting year. This shall be the case if the employee draws monthly wages of an amount to be notified by the ‘appropriate Government’, and they have put in at least 30 days of work in an accounting year.

    If the monthly wages of an employee exceeds the amount notified by the ‘appropriate Government’, their bonus shall be equal to the minimum wage, or an amount calculated in a manner prescribed by the government, whichever is higher.

    If the allocable surplus exceeds the amount of the minimum bonus payable to employees under Section 26(1), the employer shall be bound to pay every employee a proportion – up to 20 per cent – of their wages that accounting year.

    Focus and Factoids by Sayani Rakshit. 


Ministry of Law and Justice


Government of India, New Delhi


08 Aug, 2019