1. Key Sections & Features
The Code consolidates the Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act into one framework.
- Applicability
- Applies to all employees in organised and unorganised sectors. Covers factories, shops, IT/ITES, service sector and gig workers.
- Chapter II: Minimum Wages
- Sets a National Floor Wage. States cannot set wages below this floor. Must be reviewed every 5 years.
- Chapter III: Payment of Wages
- Wages must be paid by the 7th of the following month. Deductions are strictly limited.
- Overtime
- Overtime must be paid at double the ordinary wage rate.
2. Offences and Penalties
Warning: Penalties have increased by 100x compared to old Acts.
-
Non-payment of Minimum Wages
1st Offence: Fine up to ₹50,000.
Repeat Offence: Fine up to ₹1 Lakh and/or Imprisonment up to 3 months. - Improper Deductions / Non-Payment of Dues Fine up to ₹20,000 (1st Offence). Up to ₹40,000 + Imprisonment (Repeat).
- Missing Registers or Wage Slips Fine up to ₹10,000 - ₹20,000.
Compounding: First-time procedural offences can be compounded (settled) by paying 50% of the maximum fine. Repeat offences cannot be compounded.
3. Practical Guidance & Checklist
- Review Wage Structures: Ensure Basic Pay + DA constitutes at least 50% of CTC. Rework components immediately.
- Shram Suvidha Registration: Submit Form II to obtain a Single Labour ID (LIN).
- Statutory Registers: Switch to the new formats: Form I (Fines), Form IV (Deductions), Form VI (Employees), Form VII (Master).
- Wage Slips: Issue slips in Form V every pay period (mandatory).
- Equal Remuneration: Audit pay practices to ensure no gender-based discrimination (now includes transgender employees).
4. Separation & Full-and-Final (FnF)
CRITICAL UPDATE The "T+2" Settlement Rule
Under Section 17(2) of the Code on Wages, when an employee is dismissed, retrenched, removed, or voluntarily resigns, the employer must settle all wages and dues within two working days of the last working day.
Compliance Checklist (FnF):
- Document Exits: Capture resignation/termination dates immediately.
- Automate Computation: Configure payroll to calc dues up to last working day instantly.
- Payment Workflow: Align Finance/HR to release payment within 48 hours.
- Do Not Delay: Do not hold settlement for asset handover. Pay dues first; recover assets separately.
5. Frequently Asked Questions
What is the 50% rule in the Code on Wages 2019? ▼
The 50% rule mandates that excluded allowances (like HRA, Conveyance, etc.) cannot exceed 50% of the total remuneration. If they do, the excess amount is added back to the 'Wages' for calculating PF and Gratuity.
When must FnF settlement be paid? ▼
Under Section 17(2), all wages and dues must be paid within two working days of the employee's resignation, dismissal, or removal.