Author: Kaushiki Dubey

Introduction and Background of the Act

Labour law in India has evolved as a response to changing economic conditions, industrial growth, and socio-political realities. During the colonial and early post-independence periods, legislation relating to labour welfare was enacted in a fragmented and sector-specific manner. While such enactments addressed immediate concerns, they resulted in overlapping statutory frameworks, inconsistent definitions, and uneven enforcement. Wage regulation, in particular, became one of the most complex and disjointed areas of labour law.

Prior to 2019, wage-related issues were governed by four major central legislations: the Payment of Wages Act, 1936, which regulated the manner and time of payment of wages; the Minimum Wages Act, 1948, which provided for fixation of minimum wages in scheduled employments; the Payment of Bonus Act, 1965, which ensured profit-linked bonus payments; and the Equal Remuneration Act, 1976, which addressed gender-based wage discrimination. Each of these statutes operated within limited spheres, applied to specific categories of establishments, and employed differing definitions of “wages.”

The result was a regulatory maze that often disadvantaged workers while imposing significant compliance burdens on employers. Employees in non-scheduled employments frequently fell outside the protection of minimum wage laws, while inconsistent interpretations of “wages” led to disputes and litigation.

The Code on Wages, 2019 was enacted to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto. It is the first of the four labour codes introduced as part of India’s comprehensive labour law reform agenda. The Code seeks not merely to consolidate existing statutes but to restructure wage regulation on principles of universality, equity, and simplicity.

Legislative Intent and Objectives

The legislative intent behind the Code on Wages can be understood through its structure, scope, and substantive provisions. The primary objectives of the Code include:

1. Universalisation of Wage Protection

 The Code removes the concept of scheduled employment and extends minimum wage protection to all employees, irrespective of sector or nature of work.

2. Uniform Definition of Wages

A single, comprehensive definition of “wages” reduces ambiguity and limits the scope for artificial wage structuring by employers.

3. Gender Equality in Remuneration

By incorporating the principle of equal pay for equal work into a general wage law, the Code strengthens enforcement against gender-based discrimination.

4. Timely Payment of Wages and Bonus

Strict timelines and defined modes of payment enhance wage security for employees.

5. Simplification of Compliance

The introduction of Inspector-cum-Facilitators and digital inspection mechanisms reflects a shift from punitive regulation to compliance facilitation.

The Code balances social justice considerations with the goal of improving India’s ease of doing business.

Scope and Applicability of the Code

 Territorial Applicability

The Code on Wages extends to the whole of India, including all States and Union Territories. This ensures uniformity in wage regulation across the country, subject to variations introduced by appropriate governments in fixing minimum wages.

Applicability to Establishments

The term establishment is defined broadly to include any place where any industry, trade, business, manufacture, or occupation is carried on, including government establishments. This expansive definition eliminates earlier exclusions and ensures comprehensive coverage.

Applicability to Employees

The Code defines an employee as any person employed on wages to perform skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work. Apprentices engaged under the Apprentices Act and members of the armed forces are excluded, but contract labour and inter-State migrant workers are expressly included.

This inclusive approach reflects the recognition that wage vulnerability is not limited to traditional industrial labour, but extends to modern forms of employment.

Concept and Definition of Wages

One of the most significant contributions of the Code is the standardised definition of “wages.” The Code defines wages to include:

• Basic pay,
• Dearness allowance, and
• Retaining allowance, if any.

At the same time, it excludes certain components such as bonus, house rent allowance, overtime allowance, gratuity, and retrenchment compensation. However, the Code introduces a crucial safeguard: if excluded components exceed a prescribed percentage of total remuneration, the excess is deemed to be wages.

This provision prevents employers from artificially bifurcating salary structures to reduce statutory liabilities.

Judicial relevance

In Manipal Academy of Higher Education v. Provident Fund Commissioner (2008), courts criticised artificial wage splitting to evade statutory contributions. The Code’s wage definition directly addresses such practices.

Prohibition of Gender-Based Discrimination (Section 3)

Section 3 of the Code prohibits discrimination on the ground of gender in matters relating to wages for the same work or work of a similar nature. It further prohibits discrimination in recruitment and conditions of employment.

A significant feature is the prohibition on reducing existing wages to achieve compliance, thereby preventing downward harmonisation.

Case Law:

In Mackinnon Mackenzie & Co. Ltd. v. Audrey D’Costa (1987), the Supreme Court held that the nature of duties performed is the determining factor for wage equality, not job titles. This functional approach aligns with Section 3 of the Code.

Minimum Wages under the Code

Payment of Minimum Wages (Section 5)

Section 5 prohibits employers from paying wages below the minimum rate notified by the appropriate government. This obligation applies universally.

Fixation and Revision of Minimum Wages (Sections 6–8)

The appropriate government is empowered to fix minimum wages based on:

• Skill level,
• Geographical area, and
• Nature of work.

Minimum wages may be fixed on an hourly, daily, or monthly basis, and periodic revision is mandated, ordinarily not exceeding five years.

Case Law:

In Unichoyi v. State of Kerala (1962), the Supreme Court held that minimum wages are a matter of social justice and are independent of the employer’s financial capacity.

Floor Wage (Section 9)

Section 9 empowers the Central Government to fix a floor wage, considering minimum living standards of workers. State governments cannot fix minimum wages below this floor wage.

This provision introduces a national wage baseline, addressing inter-State disparities and promoting a minimum standard of living.

Judicial philosophy:

In Workmen v. Reptakos Brett & Co. (1992), the Supreme Court emphasised that minimum wages must ensure subsistence, efficiency, and dignity. The floor wage concept reflects this philosophy.

Working Hours and Overtime

The Code empowers the appropriate government to fix:

• Normal working hours,
• Weekly rest days, and
• Overtime rates.

Overtime wages must be paid at not less than twice the normal rate.

This provision ensures fair compensation for excess work and discourages exploitative labour practices.

Payment of Wages

Mode of Payment

Wages may be paid in cash, by cheque, through bank transfer, or electronic mode. Governments may mandate digital payments for specific establishments.

Wage Periods and Time Limits

The Code prescribes strict timelines for wage payment based on wage periods. Delayed payment constitutes a statutory violation.

Case Law:

In D’Costa v. B.C. Patel (1955), the Supreme Court held that timely payment of wages is a statutory right, not a managerial discretion.

Deductions from Wages

The Code exhaustively lists permissible deductions and prohibits unauthorised deductions. Total deductions cannot exceed 50% of wages in any wage period.

This provision safeguards employees against arbitrary wage erosion.

Payment of Bonus

Eligibility and Quantum

Section 26 mandates payment of a minimum bonus of 8.33% of wages, irrespective of allocable surplus, subject to wage ceilings.

Set-On and Set-Off

The Code retains the concepts of set-on and set-off, balancing employee entitlements with employer sustainability.

Case Law:

In Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai (1976), the Supreme Court recognised bonus as a statutory right rather than a discretionary benefit.

Advisory Boards

The Code provides for Central and State Advisory Boards comprising representatives of employers, employees, and independent members, with mandatory women representation.

These Boards play a consultative role in wage fixation and gender employment issues.

Claims, Dispute Resolution, and Appeals

The Code provides a structured mechanism for:

• Filing wage claims,
• Grant of compensation up to ten times the claim amount,
• Appeals, and
• Recovery of dues as arrears of land revenue.

This strengthens access to justice for employees.

Inspector-cum-Facilitator: A Paradigm Shift

Section 51 introduces the Inspector-cum-Facilitator, reflecting a move from punitive inspections to compliance facilitation.

Digital inspections and transparency are central to this approach.

Offences and Penalties

The Code prescribes monetary penalties for violations, with enhanced penalties for repeat offences. Certain offences may be compounded, reflecting a balanced regulatory approach.

Practical Implications and Real-Life Scenarios

The Code has significant implications for:

• Informal sector workers,
• Contract labour,
• Women employees,
• Small and medium enterprises.

By universalising wage protection, it reduces exploitation and promotes wage certainty.

Common Myths/Mistakes

• Myth: The Code applies only to factories or industrial units

Reality: The Code applies to all establishments, including service sector entities and government establishments, unless specifically exempted.

• Myth: Minimum Wages apply only to blue-collar or unskilled workers

Reality: The Code does not differentiate between blue-collar and white-collar employees. Any employee covered under a notified wage category is entitled to minimum wages.

• Myth: Allowances are always excluded from wages

Reality: While certain allowances are excluded, the Code provides that excessive exclusions are deemed to be wages.

• Mistake: Treating bonus as profit-linked only

Reality: The Code mandates payment of minimum bonus of 8.33%, irrespective of profits, subject to wage ceilings.

• Mistake: Delayed payment due to administrative reasons is acceptable

Reality:The Code prescribes strict timelines for wage and bonus payment. Administrative delay does not excuse non-compliance.

• Myth: Inspector-cum-Facilitator means reduced enforcement

Reality: While the approach is facilitative, enforcement powers remain intact, and penalties continue to apply for violations.

• Mistake: Assuming the Code is not enforceable until all rules are notified

Reality: provisions come into force through notifications and are legally binding once notified, even if other parts remain pending.

• Compliance Risk: These misconceptions frequently lead to avoidable litigation, penalties and reputational harm for employers.

Recent Amendments and Landmark Cases

Status of Amendments

• The Code on Wages, 2019 has not yet undergone major substantive legislative amendments since its enactment.
• Its implementation, however, has been phased and notification-based, with Central and State Governments issuing rules and operational guidelines over time.
• These developments, though not formal amendments, significantly influence wage computation, inspection mechanisms, digital wage payments, and advisory board functioning.

Continuing Relevance of Pre-Code Jurisprudence

• Since the Code consolidates four earlier wage laws, courts are expected to rely heavily on pre-2019 judicial precedents while interpreting its provisions.
• This continuity ensures legal stability and prevents interpretative vacuum during the transition period.

Equal Remuneration and Gender Equality

• In Mackinnon Mackenzie & Co. Ltd. v. Audrey D’Costa (1987), the Supreme Court held that wage equality depends on the nature of duties performed, not job titles.
• This principle directly informs Section 3 of the Code, which prohibits gender-based discrimination for the same or similar work.

Minimum Wages as a Tool of Social Justice

• The decision in Unichoyi v. State of Kerala (1962) established that minimum wages are rooted in social justice, not employer affordability.
• This reasoning remains central to Sections 5–8 of the Code, reinforcing the mandatory nature of minimum wage payment.

Living Wage and Human Dignity

• In Workmen v. Reptakos Brett & Co. Ltd. (1992), the Supreme Court expanded the concept of minimum wages to include dignity, efficiency, and social participation.
• This judicial philosophy underpins the floor wage mechanism introduced under Section 9 of the Code.

Bonus as a Statutory Right

• The ruling in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai (1976) clarified that bonus is a statutory entitlement, not a discretionary payment.
• The Code retains this position by mandating a minimum bonus irrespective of allocable surplus.

Future Judicial Development

• As disputes arise directly under the Code, courts are expected to develop Code-specific jurisprudence, especially on wage computation, exclusions, and enforcement powers.

Conclusion: Why This Act Matters Today

The Code on Wages, 2019 holds particular significance in the present socio-economic context, where India’s labour market is undergoing rapid transformation. The rise of contractual employment, outsourcing, informal labour, and platform-based work has exposed structural weaknesses in traditional labour law frameworks. In this environment, the Code emerges as a foundational statute that seeks to restore balance between economic flexibility and labour protection.