Code on Wages Act 2019: Overview, Provisions, Benefits & Compliance

Code on wages act 2019

Edited By Ritika Jonwal | Updated on Jul 02, 2025 05:42 PM IST

The Code on Salaries Bill 2019, commonly known as the Wage Code, consolidates elements from four labour laws governing salaries and bonuses while ensuring that payments are paid on time for Indian workers. After several adjustments and amendments in the Indian Parliament, the new bill will take effect on April 1st, 2021.

This Story also Contains

Definition of ‘Employers’ and ‘Workers’
Understanding the Code on Wages act 2019
Key Features of the Code on Wages act 2019
Changes Brought By Code of Wages act 2019
Prohibition of Discrimination Based on Gender
Rules Applicable to the Code of Wages act 2019
Key Changes Made by The Act In Minimum Salary
Code of Wages act 2019 Summary

Code on wages act 2019

In an accounting year, an employee may get a bonus of up to 20% of his yearly salary. Employers must pay all dues to employees under the law. If the employer fails to do so, the business, firm, proprietor, or owner of the facility is liable for payment.

Definition of ‘Employers’ and ‘Workers’

Employee (Section 2k)

Section 2k defines workers as those who labour for wages in skilled, semi-skilled, unskilled, operational, or manual roles, including managers, supervisors, and administrative personnel. The word refers to those who have been officially recognised as employees by their respective governments. However, it excludes apprentices under the Apprentices Act of 1961 and Union Armed Forces members.

Worker (Section 2z)

Worker definition refers to someone hired in any industry to perform manual, unskilled, skilled, technical, operational, clerical, or supervisory labour for pay or reward. This Code applies to individuals who have been dismissed, discharged, retrenched, or terminated as a result of an industrial dispute, including "working journalists" and "sales promotion employees."

Understanding the Code on Wages act 2019

In 2015, the Indian government began contemplating a plan to condense the country's 44 labour laws into four codes in order to rationalise labour regulations and increase ease of doing business. The remaining three are the Occupational Safety, Health, and Working Conditions Code, the Industrial Relations Code, and the Social Security Code.

The Code on Wages Bill, in turn, will encompass four laws:

Minimum Wages Act (MWA)\
Payment of Wages Act (PWA
Payment of Bonus Act (PBA)
Equal Remuneration Act.(ERA)

The Code is made up of 69 (sixty-nine) parts organised into nine (nine) chapters. The bill was passed by the Rajya Sabha on August 2, 2019. President Ram Nath Kovind gave his assent to the law on August 8. The bill is a sequence of various labour reforms implemented by the Government of India.

The government had indicated that the regulations would go into effect or be adopted on April 1, 2021, however because to the ongoing COVID-19 epidemic, states have been unable to develop guidelines for all of them. As a result, no preliminary implementation date for the codes has been published.

Key Features of the Code on Wages act 2019

The Code on Wages Bill, 2019 has the following features:

Features of the Code on Wages Bill
Features	Description
Uniform Applicability	The Wage Code currently ensures that wages are paid on time and uniformly. Regardless of salary caps and various economic sectors, earlier regulations such as the Payment of Wages Act and the Minimum salary Act imposed restrictions. In Sections 2 (k) and (l), the Code broadens the definitions of "employer" and "employee" to include employees in both organised and unorganised sectors. Prior to this, the terms of the MWA and PWA only applied to workers earning earnings below a certain threshold and working solely in scheduled employment.
Uniform Definition of Wages	The concept of 'wages' varies somewhat between PWA, MWA, and PBA, resulting in several litigations. As a result, the Wage Code strives to offer a single, consistent definition of 'wages' for the purposes of calculating and paying wages to employees. According to the Wage Code, 'wages' refers to any payment stated in monetary terms, whether in the form of salaries, allowances, or otherwise, and includes basic pay, dearness allowance, and retention allowance, if applicable.
The distinction between Employee and Worker	The Wage Code has different definitions for 'worker' and 'employee'. 'Employee' has a broader meaning than 'worker'.
Equal Remuneration	The Wage Code bans companies from discriminating against employees based on their gender in terms of salaries or recruiting for the same or similar jobs.
Payment of Bonus	There is no notable change from the PBA, and the conditions governing bonus payout are similarly identical with the PBA regulations. Previously, the applicability was limited to employees with monthly salary of up to INR 21,000. Now, under the pay Code, the competent government can set the pay level for evaluating application.
Claims	The competent government shall designate one or more authorities to hear and decide claims brought under the Code. Depending on the circumstances surrounding the claims, the authority will make every effort to resolve them within three (three) months. Any individual who is dissatisfied with the order issued by such authority may file an appeal with an appellate authority within 90 (ninety) days after the order's date.
Penalty for offences	The amount of the penalty specified by the Code varies according on the nature of the crime. The maximum punishment under the Code is imprisonment for three (3) months and/or a fine of up to INR 1,00,000 (Indian rupees one lakh only).
Inspector-cum-facilitator	Chapter VII of the Code authorises the competent Government to appoint an Inspector-cum-facilitator ("Inspector"). The competent government may also establish an inspection scheme that allows for web-based inspection and electronic information requests. The Inspector shall be a public official and shall perform the following duties: Responsibilities include advising employers on Code Compliance and inspecting designated locations.

Changes Brought By Code of Wages act 2019

According to Labour Minister Santosh Kumar Gangwara, the new law would help around 50 crore workers across the country.

In addition, further updates will be available:

According to the measure, a council of trade unions, companies, and state governments would establish a minimum wage for workers across the country.
Employees' provident fund (PF), gratuity components, and take-home pay would all be impacted. The new definition of salaries limits allowances to 50% of total remuneration.
According to the new code, basic pay will account for 50% or more of total remuneration. Most workers' remuneration structures will alter as the non-allowance share is often less than 50%.
Provident funds (PF), which are based on basic income, will rise, lowering take-home pay.
Increased payments from provident funds will result in a bigger post-retirement payout.
Companies' costs will also climb as the payment to PF and gratuity increases.

Prohibition of Discrimination Based on Gender

Gender equality is a core principle of our Constitution. The Constitution ensures equal treatment under the law and prohibits discrimination based on religion, caste, or gender.
The Equal Remuneration Act of 1976 prevents firms from discriminating against workers based on gender, including wage payments and recruiting. The Code, which replaces the Equal Remuneration Act of 1976, prohibits salary discrimination based on gender.
The Equal Remuneration Act of 1976 aimed to safeguard women, but the Code now prohibits gender discrimination in salaries.
Sections 3 and 4 of the Code prohibit discrimination based on gender.

Rules Applicable to the Code of Wages act 2019

Code of Wages (Central) Rules, 2020 (Draft)

The Central Government's draft rules include the following major points:

Calculate the Minimum Wage: The pay estimate is based on the demands of a typical working family of four, with each member requiring 2700 calories per day and 66 metres of fabric per year to meet expenditures such as housing rent, fuel, electricity, children's education, and medical care.
Geographic Categorization: To calculate the minimum wage, geographical areas are separated into three categories: metropolitan, non-metropolitan, and rural.
Employee Skills Categorization: To determine wages, employees' vocations are divided into four categories: unskilled, semi-skilled, skilled, and highly skilled.
Working Hours: A typical working day consists of 8 hours of labour and one or more rest breaks totaling no more than one hour.
Night shifts: Employees working night shifts that last beyond midnight are entitled to a 24-hour rest day beginning at the end of their shift.
Wage deductions: If an employer deducts pay for an employee's absence, they must notify the Inspector-cum-Facilitator of the jurisdiction within 10 days.

Code of Wages (Central Advisory Board) Rules, 2021

In exercising its responsibilities under the Code on Wages, 2019, the Central Government established the Code on Wages (Central Advisory Board) Rules, 2021. The primary goal of establishing a Central Advisory Board is to advise the Central and State Governments on the fixing and modification of minimum wage rates, as well as other Code-related issues.

The Central Advisory Board Rules specify the following:

The Central Advisory Board's constitution
Certain job functions that the Central Advisory Board is required to perform
The quorum for conducting Central Advisory Board meetings
Disqualifications from membership in the Central Advisory Board
How the Central Advisory Board makes business decisions.

Key Changes Made by The Act In Minimum Salary

Floor Wages

Under the Minimum Wages Act of 1948, the federal government and state governments have the power to establish or modify the minimum wage rates for the occupations specified in the schedule. However, the new code changed the way minimum salaries were set.

Section 9 of the Code gives the central government the authority to set the minimum wage for all occupations in every area. The relevant government must determine the minimum wage, which cannot be less than the floor pay set by the central government.

Wages For Overtime Work

As per the Minimum Wages Act, an employer is required to pay an employee the overtime salary stipulated by the Act or the relevant government, whichever is higher, if the employee works beyond their regular working hours.

The code has standardized overtime compensation. Employers are required by Section 14 of the Code to pay overtime employees twice their regular rate of pay.

Increase in Penalty Amount

The Code increased the penalty for noncompliance with the Act's minimum wage provisions. If an employer pays less than what the Code requires, he could be fined up to $50,000 under Section 54.

If the employer is repeatedly found to have violated the Code's minimum wage rules, he faces a fine of one lakh rupees and a three-month jail sentence.

Despite being passed in 2019, the Code of Wages has not yet been put into effect. On December 18, 2020, the central government enforced some of the Code's provisions that pertain to the central government by publishing a notice in the official gazette.

Code of Wages act 2019 Summary

The Code on Wages, 2019, often known as the Wage Code, is an Act of the Parliament of India that consolidates the provisions of four labour laws governing wage and bonus payments and makes the rules for minimum wages and timely salary payment universal for all workers in India. It cannot be denied that simplifying labour laws and promoting e-governance would make conducting business easier, attract international investors, and provide more chances, while the measures for regulating floor wages for minimum wage will greatly help our labour-intensive economy. However, because the four repealed laws were originally passed to address distinct situations at different times in time, it may be difficult to combine these laws while keeping the intent of the legislation in mind.

Frequently Asked Questions (FAQs)

1. What is the 2019 Wages Act Code?

The Code on Wages strives to govern wages and bonus payments in all employments, regardless of industry, commerce, company, or industrial activity.

2. What are the four codes of wages?

The Code replaced the following four laws: (i) the Payment of Wages Act, 1936; (ii) the Minimum Wage Act, 1948; (iii) the Payment of Bonus Act, 1965; and (iv) the Equal Remuneration Act, 1976. Coverage: This Code will apply to all workers.

3. What is the New Wage Code?

With the adoption of the New Wage Code Bill 2022, CTC will be influenced by a rise in basic pay, and if an employee's basic salary is less than 50%, it should be raised. Allowances for leave, travel, overtime, and transportation shall be limited to the remaining percentage of the CTC.

4. Which acts are repealed by the Wage Code?

India Code: Section Details. (1) The Payment of Wages Act, 1936 (4 of 1936), the Minimum Wage Act, 1948 (11 of 1948), the Payment of Bonus Act, 1965 (21 of 1965), and the Equal Remuneration Act, 1976 (25 of 1976) are all abolished.

5. How does the wage code get calculated?

The daily salary must be computed based on the time spent in each such kind of job. The total salary paid must not be less than the minimum wage for the applicable classes. 7. Minimum time rate pay for piecework in the absence of a minimum piece rate.

6. How does the Code on Wages Act, 2019 differ from previous wage-related laws?

The Code on Wages Act, 2019 consolidates four previous laws: the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976. It simplifies compliance, extends coverage to all employees, and introduces a universal minimum wage.

7. Who is covered under the Code on Wages Act, 2019?

The Code on Wages Act, 2019 covers all employees in organized and unorganized sectors, including contract workers. It applies to both skilled and unskilled workers, regardless of their wage ceiling, making it more inclusive than previous laws.

8. How does the Code on Wages Act, 2019 simplify the wage structure?

The Act simplifies the wage structure by consolidating various allowances and bonuses into a single definition of "wages." This makes it easier for employers to calculate wages and for employees to understand their entitlements.

9. What is the concept of "floor wage" introduced in the Code on Wages Act, 2019?

The "floor wage" is a new concept introduced by the Act, which sets a minimum wage level below which states cannot fix their minimum wages. This aims to ensure a basic standard of living for workers across India, reducing regional disparities.

10. How does the Code on Wages Act, 2019 address the issue of minimum wage for different skill levels?

The Act provides for fixing minimum wages based on skills and geographical areas. It recognizes different categories of workers (unskilled, semi-skilled, skilled, and highly skilled) and allows for setting appropriate minimum wages for each category.

11. What is the main purpose of the Code on Wages Act, 2019?

The main purpose of the Code on Wages Act, 2019 is to consolidate and simplify multiple labor laws related to wages in India. It aims to ensure timely payment of wages, provide a minimum wage across all sectors, and promote gender equality in wages.

12. What is the significance of the "appropriate government" in the Code on Wages Act, 2019?

The "appropriate government" refers to either the Central or State government, depending on the sector and type of establishment. This concept allows for flexibility in implementation, recognizing the diverse economic conditions across different states and industries.

13. How does the Code on Wages Act, 2019 protect workers from unauthorized deductions?

The Act specifies permissible deductions (such as for provident fund or taxes) and prohibits unauthorized deductions. Employers must obtain written authorization from employees for any other deductions, protecting workers from unfair wage cuts.

14. What is the concept of "wage period" in the Code on Wages Act, 2019?

The "wage period" is the time frame for which wages are payable. The Act stipulates that the wage period can be hourly, daily, weekly, fortnightly, or monthly, but cannot exceed one month. This ensures regular and timely payment of wages.

15. How does the Code on Wages Act, 2019 handle the payment of wages in case of an employee's death?

In case of an employee's death, the Act mandates that all wages payable to the deceased worker should be paid to their nominated persons or legal heirs within 15 days from the date on which the wages became payable.

16. How does the Code on Wages Act, 2019 address gender discrimination in wages?

The Act prohibits gender discrimination in matters relating to wages and recruitment for the same work or work of similar nature. It also provides for equal opportunity for women in all matters of employment, including promotion and training.

17. What is the significance of the term "same work or work of a similar nature" in the Code on Wages Act, 2019?

This term is crucial in ensuring non-discrimination. The Act prohibits gender-based discrimination in wages for the same work or work of a similar nature, promoting equal pay for equal work regardless of gender.

18. How does the Code on Wages Act, 2019 address the issue of wage discrimination based on religion, caste, or region?

The Act prohibits discrimination in wages based on gender or religion, caste, region, or any other ground. This provision aims to ensure fair and equal treatment of all workers, promoting social justice and equality in the workplace.

19. What is the significance of the term "establishment" in the Code on Wages Act, 2019?

The term "establishment" in the Act refers to any place where any industry, trade, business, manufacture, or occupation is carried on. This broad definition ensures that the Act's provisions apply to a wide range of workplaces, including small businesses and the informal sector.

20. What is the role of trade unions under the Code on Wages Act, 2019?

While the Act doesn't explicitly mention trade unions, they play a crucial role in representing workers' interests, negotiating wages, and ensuring compliance with the Act's provisions. They can also assist workers in filing claims for unpaid or underpaid wages.

21. What are the components of wages under the Code on Wages Act, 2019?

Under the Act, wages include basic pay, dearness allowance, and retaining allowance. It excludes bonus payments, value of house accommodation, contribution to provident fund, conveyance allowance, and special expenses incurred due to the nature of work.

22. What penalties does the Code on Wages Act, 2019 impose for non-compliance?

The Act imposes fines ranging from ₹10,000 to ₹100,000 for first-time offenders. For subsequent offenses, the penalties can include imprisonment up to three months and/or fines up to ₹200,000. Repeat offenders may face imprisonment up to one year.

23. How does the Code on Wages Act, 2019 ensure timely payment of wages?

The Act mandates that wages must be paid within specific time limits: daily workers should be paid at the end of the shift, weekly workers on the last working day of the week, fortnightly workers on the second day after the end of the fortnight, and monthly workers before the seventh day of the next month.

24. What is the role of the Central Advisory Board under the Code on Wages Act, 2019?

The Central Advisory Board advises the Central Government on issues relating to minimum wages, including fixing and revising minimum wages, and increasing employment opportunities for women. It consists of representatives from employers, employees, and independent persons.

25. How does the Code on Wages Act, 2019 address the issue of overtime pay?

The Act mandates that employees working beyond normal working hours must be paid overtime wages, which should be at least twice the normal rate of wages. This applies to all categories of workers, ensuring fair compensation for extra work.

26. How does the Code on Wages Act, 2019 address the issue of contract labor?

The Act extends wage protection to contract laborers, ensuring they receive minimum wages and timely payments. It holds both the principal employer and the contractor responsible for compliance, enhancing protection for this vulnerable group of workers.

27. What is the significance of the "wage ceiling" in the Code on Wages Act, 2019?

Unlike previous laws, the Code on Wages Act, 2019 does not specify a wage ceiling for its applicability. This means that all employees, regardless of their wage level, are covered under the Act, ensuring broader protection and uniformity.

28. What is the concept of "living wage" in the Code on Wages Act, 2019?

While the Act doesn't explicitly define a "living wage," it introduces the concept of a "floor wage" which aims to ensure a basic standard of living. The floor wage serves as a step towards achieving a living wage that covers basic needs and some discretionary income.

29. How does the Code on Wages Act, 2019 address the issue of migrant workers?

While the Act doesn't have specific provisions for migrant workers, its universal application ensures that migrant workers are entitled to minimum wages and other protections, regardless of their place of origin or the nature of their employment.

30. How does the Code on Wages Act, 2019 handle the issue of piece-rate workers?

The Act recognizes piece-rate workers and mandates that their minimum wage should be fixed in a manner that a worker working for eight hours would earn at least the minimum time-rate wage fixed for that category of work.

31. What is the role of labor inspectors under the Code on Wages Act, 2019?

Labor inspectors are empowered to examine workplaces, take samples, seize relevant documents, and initiate prosecution for violations. They play a crucial role in ensuring compliance with the Act's provisions and protecting workers' rights.

32. How does the Code on Wages Act, 2019 address the issue of bonus payments?

The Act mandates the payment of an annual bonus to employees drawing wages up to a specified monthly amount. The bonus should be at least 8.33% of the wages or ₹100, whichever is higher, subject to a maximum of 20% of the annual wages.

33. What provisions does the Code on Wages Act, 2019 make for record-keeping by employers?

The Act requires employers to maintain registers containing details of employees, work performed, wages paid, and deductions made. These records must be preserved for three years and made available for inspection by labor inspectors.

34. How does the Code on Wages Act, 2019 handle wage disputes?

The Act provides for the appointment of authorities to hear and decide claims arising out of deductions from wages or delay in payment of wages. It also allows for an appellate authority to whom appeals against the decisions of the claim authority can be made.

35. What provisions does the Code on Wages Act, 2019 make for revision of minimum wages?

The Act mandates that minimum wages be reviewed and revised by the appropriate government at intervals not exceeding five years. This ensures that minimum wages keep pace with changing economic conditions and cost of living.

36. How does the Code on Wages Act, 2019 handle the issue of wages during suspension of an employee?

The Act stipulates that an employee under suspension is entitled to receive subsistence allowance during the period of suspension. The rate of subsistence allowance is determined by the rules framed under the Act.

37. What is the concept of "wages in kind" under the Code on Wages Act, 2019?

The Act allows for payment of wages partly in kind, but such payment should not exceed 15% of the total wages. This provision recognizes traditional practices in some sectors while ensuring that workers receive most of their wages in monetary form.

38. How does the Code on Wages Act, 2019 handle the issue of wages for probationary employees?

The Act doesn't distinguish between permanent and probationary employees for wage purposes. Probationary employees are entitled to the same minimum wage and other protections as regular employees performing similar work.

39. What provisions does the Code on Wages Act, 2019 make for digitalization of wage payments?

While not mandating digital payments, the Act allows for wages to be paid by cheque, crediting to bank account, or through electronic mode. This provision encourages financial inclusion and transparency in wage payments.

40. How does the Code on Wages Act, 2019 address the issue of wage theft?

The Act provides for severe penalties for wage theft, including fines and imprisonment. It also empowers employees to file claims for unpaid or underpaid wages, creating a deterrent against wage theft practices.

41. What is the concept of "appropriate government" in the Code on Wages Act, 2019?

The "appropriate government" refers to either the Central or State government, depending on the nature of the establishment. This concept allows for flexibility in implementation, recognizing the diverse economic conditions across different states and industries.

42. How does the Code on Wages Act, 2019 handle the issue of wages during natural calamities or emergencies?

While the Act doesn't specifically address this, the general provisions ensure that workers are entitled to wages for the work done. In cases of work stoppage due to natural calamities, specific government orders or court judgments would typically guide wage payments.

43. What provisions does the Code on Wages Act, 2019 make for wage protection in the gig economy?

The Act's broad definition of "employee" potentially includes gig workers, extending wage protections to this growing segment of the workforce. However, the specific application to gig workers may require further clarification through rules or judicial interpretation.

44. How does the Code on Wages Act, 2019 address the issue of wage disparity between regular and contract workers?

The Act aims to reduce wage disparity by ensuring that all workers, including contract workers, are entitled to minimum wages. It also prohibits discrimination in wages based on the nature of employment (regular or contract).

45. What is the role of state governments in implementing the Code on Wages Act, 2019?

State governments play a crucial role in implementing the Act. They are responsible for setting minimum wages for different categories of workers in their states, appointing inspectors, and ensuring compliance within their jurisdiction.

46. How does the Code on Wages Act, 2019 handle the issue of wages for part-time workers?

The Act doesn't distinguish between full-time and part-time workers. Part-time workers are entitled to minimum wages calculated on a pro-rata basis, ensuring fair compensation for the hours worked.

47. What provisions does the Code on Wages Act, 2019 make for wage protection in the informal sector?

The Act extends wage protection to the informal sector by covering all employees regardless of the nature of establishment. This is a significant step in ensuring fair wages and working conditions in a sector that was previously largely unregulated.

48. How does the Code on Wages Act, 2019 address the issue of wage deductions for damages or loss?

The Act allows for deductions from wages for damages or loss caused by an employee's neglect or default. However, such deductions require prior notice to the employee and cannot exceed 50% of the employee's total wages for that wage period.

49. What is the concept of "wages" under the Code on Wages Act, 2019?

The Act defines "wages" comprehensively, including basic pay, dearness allowance, and retaining allowance. It excludes certain components like bonus, value of housing, and overtime pay, providing clarity on what constitutes wages for various purposes under the Act.

50. How does the Code on Wages Act, 2019 handle the issue of wages during layoffs?

While the Act doesn't specifically address layoffs, it ensures that workers are paid for the work done. In case of layoffs, other labor laws like the Industrial Disputes Act would typically govern the payment of layoff compensation.

51. What provisions does the Code on Wages Act, 2019 make for transparency in wage calculations?

The Act mandates that employers provide wage slips to employees detailing the wages paid and deductions made. This promotes transparency and helps employees understand their wage calculations.

52. How does the Code on Wages Act, 2019 address the issue of wage protection for home-based workers?

The Act's broad coverage potentially includes home-based workers, ensuring they are entitled to minimum wages and other protections. However, the specific application may require further clarification through rules or judicial interpretation.

53. What is the significance of the term "wages due" in the Code on Wages Act, 2019?

"Wages due" refers to all remuneration, whether expressed in terms of money or capable of being so expressed, which would be payable to an employee if the terms of employment were fulfilled. This concept is crucial for calculating entitlements and settling disputes.

54. How does the Code on Wages Act, 2019 handle the issue of wages during training periods?

The Act doesn't specifically address training periods. However, if the training is part of employment, trainees would typically be entitled to at least the minimum wage. Specific arrangements may be governed by employment contracts or company policies.

55. What provisions does the Code on Wages Act, 2019 make for wage protection in cases of company mergers or acquisitions?

While not explicitly addressing mergers or acquisitions, the Act's provisions would continue to apply regardless of changes in company ownership. Employees' wage rights would be protected, and the new entity would be responsible for compliance with the Act.