New wage code

New Wage Code – Expected to implement from the New Financial year – (April 1st, 2021)

Mandatory to look at and compare existing wage structure which may be needed to revise as per new wage rules.

The new Wage code subsumes four Acts

Minimum Wages

Payment of Wages Act

Payment Of Bonus Act

Equal Remuneration Act.

Here I am analyzing and talking about a definition of wages which defines in the notified Gazette under “y”

By this definition employers and employees, would be affected.

Though those employees’ take-home pay will be reduced as compared to existing still they would be more benefited in long term compared to the existing salary structure.

Another side, Now employers have to take care mandatory that employee’s basic + da never less than 50% of the total CTC

Also, Now for all the statutory benefits calculation base wages would apply according to this definition for like PF, Gratuity, Bonus etc.

As per the New wage code Definition


(y) “wages” means all remuneration whether, by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes —

(i) basic pay;

(ii) dearness allowance; and

(iii) retaining allowance, if any,

but does not include––

(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;

(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;

(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(d) any conveyance allowance or the value of any travelling concession;

(e) any sum paid to the employed person to defray special expenses entaile don him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;

(h) any overtime allowance;

(i) any commission payable to the employee;

(j) any gratuity payable on the termination of employment;

(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of all remuneration calculated under this clause, the amount which exceeds such14 of 1947. 42 of 2005. one-half, or the per cent.

so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause: Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f),(g)and(h) shall be taken for computation of wage.

Explanation.––Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;


In Conclusion

Wages means

  1. Basic + DA and retaining allowance if any
  2. All other allowances whether Special allowance, other allowance etc.

Will be considered part of salary/wages which not mentioned a to i

( i.e Bonus, HRA, PF and pension employer share, Conveyance allowance, overtime, commission or incentive)

  • If exclusions total (( i.e Bonus, HRA, PF and pension employer share, Conveyance allowance, overtime , commission or incentive) exceeds 50% of Basic + DA then exceeds part would be consider part of wages and need to be modify in salary structure.

Understand by an Examples:

ParticularsExisting StructureRevised Structure
Medical Allowance  
Internet & Telephone Allowance5000
Conveyance Allowance30002850
Other Allowance5000
Bonus advance583583
ESI Employer Share00
Pf employer share13801380
Gross Salary1525015250
Total of exclusions87138563
Total CTC1721317213
Take home1387013870
Exclusion 8713 more than 50% of CTC
also Basic less than 50% of total CTC

*For a few cases may be employees’ take-home will be reduced. This will vary from case to case. Need to keep scrutinising and revising case to case.

Subscribe For Latest Updates

Sign up to best of HR news and updates, informed new job openings matters to you.

Invalid email address
We promise not to spam you. You can unsubscribe at any time.