Code 1 of 4 · 2019

Code on Wages 2019

Code on Wages 2019 Explained

Consolidates 4 wage-related acts into a single code. Universal floor wage, uniform wage definition, and equal remuneration for every Indian employer. Backed by factoHR.

4

Acts Replaced

100%

Workforce Coverage

50%

Basic Wage Rule

Direct Answer

The Code on Wages 2019 merges four laws - Minimum Wages, Payment of Wages, Bonus, and Equal Remuneration Acts - into one. Key changes: a universal National Floor Wage, a uniform wage definition (allowances capped at 50%), and minimum-wage cover for the unorganised sector.

Acts Consolidated

4 central acts replaced by the Code on Wages 2019

01

Minimum Wages Act 1948

Empowered states to notify minimum wages for scheduled employments by skill level and zone.

02

Payment of Wages Act 1936

Regulated wage payment timelines, permissible deductions, and protection from wage delays.

03

Payment of Bonus Act 1965

Mandated statutory bonus between 8.33% and 20% for eligible employees of covered establishments.

04

Equal Remuneration Act 1976

Required equal pay for equal work between men and women employees in same role.

Key Changes

6 changes employers must prepare for

Universal Floor Wage

Central government sets a national floor wage. No state can notify rates below this floor.

Uniform Wage Definition

Wages = Basic + DA + retaining allowance. Allowances cannot exceed 50% of total remuneration.

Unorganised Sector Coverage

Minimum wage coverage extended to unorganised workers for the first time in Indian law.

Equal Remuneration

Equal pay for equal work across gender consolidated into a single code without separate act.

Bonus Provisions Unified

Statutory bonus rules subsumed under the wage code. Min 8.33%, max 20% of annual wages.

5-Year Revision

Mandatory review of minimum wages by states at least once every five years.

Impact on Employers

What changes for HR and payroll teams

01 CTC restructure: redesign salary breakup so allowances stay at or below 50% of total remuneration.
02 PF + gratuity rises: higher basic wage means higher EPF contribution and gratuity liability.
03 Cash-in-hand drop: take-home may reduce for employees with high allowance components.
04 Unorganised workforce mapping: identify contract, gig, and seasonal workers now covered.
05 Single wage register: maintain one consolidated wage register under the new code.
06 Audit your bonus pool: realign Payment of Bonus calculations under the new framework.
Code-ready HRMS

Reconfigure CTC for the Code on Wages

factoHR India configures the new wage definition, 50% allowance rule, and revised PF and gratuity liability for every payroll cycle.

Book a Free Demo

New wage definition

50% allowance rule

PF + gratuity refresh

Bonus pool audit

Other Codes

Explore the other 3 Labour Codes

Social Security 2020

PF, ESI, Gratuity, gig coverage unified.

Open

Industrial Relations 2020

Fixed-term, standing orders, trade unions.

Open

OSH Code 2020

Workplace safety, hours, contract labour.

Open
FAQs

Code on Wages 2019: common questions

What is the Code on Wages 2019?

The Code on Wages 2019 is a central labour code that consolidates four wage-related acts: Minimum Wages Act 1948, Payment of Wages Act 1936, Payment of Bonus Act 1965, and Equal Remuneration Act 1976. It introduces a universal national floor wage, a uniform wage definition, and extends coverage to the unorganised sector.

What is the new wage definition under the Code?

Wages under the Code include Basic + Dearness Allowance + retaining allowance. The Code mandates that excluded allowances cannot exceed 50% of total remuneration. If they do, the excess is treated as wages, raising the base for PF and gratuity calculations.

How does the 50% basic wage rule affect CTC?

Many Indian CTC structures have low Basic (30-40%) and high allowances (HRA, special allowance). Under the Code, allowances must drop or Basic must rise so allowances stay at or below 50%. This typically increases EPF contributions and gratuity liability.

When does the Code on Wages 2019 take effect?

The Code was notified for effect in 2025 with state rules being progressively notified. States like Madhya Pradesh, Jammu and Kashmir, and Uttar Pradesh notified rules earlier. Full nationwide implementation continues in phases.

Does the Code on Wages apply to contract and gig workers?

Yes. The Code extends minimum wage coverage to unorganised sector workers including contract labour for the first time in Indian law. Employers must now ensure minimum wage compliance for contract and platform workers within scope.

Ready for the new wage definition?

factoHR India auto-configures the 50% allowance rule, PF and gratuity refresh, and bonus pool audit for every Indian employer.

Book a Free Demo All 4 Labour Codes