Quick answer: The Code on Wages, 2019 is the Labour Code that governs how much you pay, when you pay it and on what base. It replaced the Payment of Wages, Minimum Wages, Payment of Bonus and Equal Remuneration Acts on 21 November 2025. Its single definition of “wages” caps excluded allowances at 50% of pay.
- Monthly wages must reach employees before the 7th of the following month.
- Leavers must receive final wages within two working days, whether they resigned, were dismissed or the unit closed.
- Total deductions cannot exceed 50% of wages in any wage period.
- Overtime is paid at no less than twice the normal rate, computed on “wages” and not on basic alone.
How does the 50% wage rule work?
Allowances above half of total pay are pulled back into “wages”. Only the excess moves. Taxmann’s note on section 2(y) reproduces the government’s own FAQ example.
| Component | Amount |
|---|---|
| Basic pay plus DA | ₹20,000 |
| Allowances such as HRA and conveyance | ₹40,000 |
| Gratuity and retrenchment compensation | ₹16,000 |
| Total remuneration | ₹76,000 |
| Half of total remuneration | ₹38,000 |
| Allowances above that half | ₹2,000 |
| Wages under the Code | ₹22,000 |
Gratuity and retrenchment pay sit in the total but outside the capped exclusions. Hence only ₹2,000 comes back. Small here.
Not small everywhere. A structure that leans on HRA, conveyance and other excluded items for more than half of pay sees “wages” rise, and with them PF, gratuity and overtime. Our page on the wage definition and 50% rule works through a full CTC.
What changed for bonus and minimum wages under the wage code?
Bonus ceilings arrived nine months late. On 25 August 2026 the Centre notified that employees earning up to ₹21,000 a month qualify, with bonus worked out on ₹7,000 or the minimum wage, whichever is higher.
Both apply retrospectively. Statutory bonus itself stays between 8.33% and 20% and needs 30 days’ work in the year.
The national floor wage is still only a promise. The Code lets the Centre set one that no state minimum may undercut, but no figure had been notified by October 2026.
So state rates govern. In practice that means the notified rate for your zone and skill band, revised twice a year. Pune’s minimum wage for skilled work in Maharashtra Zone I is ₹15,766 a month from July to December 2026.
How does an EOR apply the Code on Wages?
The EOR builds the salary structure, pays by the 7th, issues wage slips on or before payday and settles leavers inside two working days. Ask to see the 50% test applied to each offer before it goes out. Then check it again after every increment cycle, because a raise that lands mostly in allowances can tip the ratio.
Our guide to salary structure in India shows typical splits under the Code. For the exit clock, see full and final settlement.
How does Remunance build Code on Wages compliant pay for your team?
Remunance runs payroll, statutory bonus, EPF and full and final settlement for your India team on the Code’s definition of wages. Our fee starts at USD 99 per employee per month, while salary, employer PF and gratuity accrual pass through at cost. Model the numbers in our EOR cost calculator for India, then check your salary structures against the Code.
What else do people ask about the Code on Wages 2019?
When did the Code on Wages come into force?
On 21 November 2025, with the other three Labour Codes. Its central rules, now titled the Wages (Central) Rules, 2026, were notified on 8 May 2026.
What is the 50% rule in the Code on Wages?
If excluded items such as HRA, conveyance and employer PF exceed half of total pay, the excess counts as wages. That widens the base for PF, gratuity and overtime.
Is there a national minimum wage in India now?
Not yet. The Code provides for a national floor wage, but none had been notified by October 2026, so state minimum wages still apply.