The Code on Wages, 2019: formula sheet

Key formulas

Short title and extent (Section 1)

Code on Wages, 2019; extends to the whole of India

Say "whole of India" in every answer on extent.

Commencement (Section 1(3))

Date notified by the Central Government in the Official Gazette; different dates for different provisions

Commencement is by notification and can be staggered. The four Labour Codes are in force from 21 November 2025.

Laws subsumed

Payment of Wages Act 1936 + Minimum Wages Act 1948 + Payment of Bonus Act 1965 + Equal Remuneration Act 1976

Learn all four with their years.

Overriding effect (Section 61)

Code prevails over any inconsistent law, award, agreement, settlement or contract of service

Use this when a question says the contract or settlement offers less.

Size test in the chapter containing Section 41 (Section 41(2))

Applies where 20 or more persons are employed, or were employed on any day in an accounting year

One day in the year is enough. It is subject to the exclusions in Section 41(1). Section 30 links these provisions to bonus computation.

Exclusions (Section 41(1))

LIC; seamen; registered or listed dock workers; establishments under a Central/State Government department or local authority; Red Cross and like institutions; universities and educational institutions; non-profit hospitals, chambers of commerce and social welfare institutions; RBI; notified public sector financial institutions other than banking companies; inland water transport establishments operating on routes passing through any other country; other establishments exempted by notification

Group them to remember. Notified items (clauses (g) and (i)) need a notification.

Government establishments (Section 25)

Its Chapter does not apply to Government establishments unless the appropriate Government notifies the application

Notification is the key condition. Do not treat it as an extra bonus gate; for bonus, use Section 41(1)(d).

Departments and branches (Section 30)

Parts of one establishment for bonus; separate if a separate balance sheet and profit and loss account are kept for that year

The proviso has an exception: it does not apply if the unit was treated as part of the establishment immediately before that accounting year.

Mode of payment (Section 15)

Coin, currency notes, cheque, bank credit or electronic mode

The appropriate Government may notify establishments that must pay only by cheque or bank credit.

Records and notices (Section 50)

Register, notice board display, wage slips

Not applicable to an employer with not more than five persons for agriculture or domestic purpose. Such employer must still prove payment on demand.

Wages: inclusions

Wages = basic pay + dearness allowance + retaining allowance (if any)

Section 2(y). These are named inclusions within all remuneration in money terms.

Exclusion cap (one-half rule)

If payments under clauses (a) to (i) > 50% of total remuneration, excess = deemed wages

Percentage may be notified differently by the Central Government. Clauses (j) and (k), gratuity and termination payments, are not part of this test.

Wages for the 50% test

Wages = Total remuneration − excluded items (a) to (k) + excess over 50% of total remuneration

Excess = (sum of clauses (a) to (i)) − 50% × total remuneration, only if positive. Total remuneration is computed under the clause.

Remuneration in kind

Value of in-kind remuneration forms part of wages up to 15% of total wages payable

Applies where it is given in lieu of the whole or part of wages.

Worker: supervisory limit

Supervisor drawing wages > ₹15,000 per month is not a worker

Or such amount as the Central Government notifies. Persons mainly in managerial or administrative roles are also excluded.

Floor wage (section 9(1))

Central Government fixes floor wage, taking into account minimum living standards of a worker

Different floor wage may be fixed for different geographical areas.

Minimum wage vs floor wage (section 9(2))

Minimum rate of wages ≥ floor wage

If an earlier minimum rate is more than the floor wage, the appropriate Government shall not reduce it.

Consultation before floor wage (section 9(3))

Central Government may obtain advice of Central Advisory Board and consult State Governments

The word is 'may', so it is permissive, not mandatory.

Wage period (section 6(4))

Time-work minimum rate: by the hour, or by the day, or by the month

Rates may also be fixed for piece work, with a time-work equivalent under section 6(3).

Factors for fixation (section 6(6))

Primary: skill (unskilled, semi-skilled, skilled, highly-skilled) or geographical area, or both. Additional: arduousness of work

Arduousness covers difficult temperature or humidity, hazardous occupations or processes, and underground work, as prescribed. The number of minimum rates should be kept as few as possible (section 6(7)).

Procedure (section 8(1))

Either (a) appoint committees to enquire and recommend, or (b) publish proposals by notification with a date not less than two months away

The Government chooses one of the two routes.

Committee composition (section 8(2))

Employer representatives = employee representatives; independent persons ≤ one-third of total

Same pattern applies to the advisory boards under section 42.

Commencement (section 8(3))

Notification comes into force on expiry of three months from issue, unless it provides otherwise

If revising under the proposals route (clause (b)), the Government must also consult the Advisory Board under section 42.

Review period (section 8(4))

Review or revise minimum rates ordinarily at an interval not exceeding five years

The word 'ordinarily' allows some flexibility.

Section 12 rule

Wages payable ≥ minimum time rate (where only a minimum time rate is fixed for the piece work)

Applies when a minimum time rate, and not a minimum piece rate, has been fixed.

Top-up working

Top-up = (minimum time rate × time worked) − piece earnings, if this is positive

A working method, not a formula stated in the Code. Pay the higher of piece earnings and the minimum time-rate amount.

Piece earnings

Piece earnings = number of units × rate per unit

Compare this with the minimum time-rate amount for the same period.

General floor (Section 5)

No wages less than the notified minimum rate of wages

Employer cannot pay below it, even if the employee agrees.

Section 6(3)

Piece work minimum rate is fixed to secure a minimum rate of wages on a time work basis

Shows the purpose: parity with time workers.

Overtime rate (Section 14)

Overtime rate ≥ 2 × normal rate of wages

Twice is the floor. The employer may pay more but never less.

Overtime pay

Overtime pay = overtime hours (part hour counted as a full hour) × overtime rate

Section 14 says 'every hour or for part of an hour', so round up any part hour.

Overtime hours

Overtime hours = hours worked − hours in a normal working day

The normal working day is the number of hours fixed by the appropriate Government under Section 13.

Short-day wages (Section 10)

Wages = full normal day's wages, for a day-rated employee who worked fewer hours

Not payable if the failure to work is due to the employee's unwillingness, or in other prescribed cases.

Work on a rest day (Section 13(1)(c))

Rate for rest-day work ≥ overtime rate

This applies where the Government provides for payment for rest-day work.

Time limit for wages (section 17(1))

Daily: end of the shift | Weekly: last working day of the week, before the weekly holiday | Fortnightly: before end of the second day after the fortnight | Monthly: before expiry of the seventh day of the next month

Applies according to the basis on which the employee is engaged.

Wages on end of employment (section 17(2))

Within two working days of removal, dismissal, retrenchment or resignation

Also covers an employee who becomes unemployed due to closure of the establishment.

Cap on deductions (section 18(3))

Total deductions in a wage period ≤ 50% of wages

Subject to any other law. Under section 18(4), the excess may be recovered in the prescribed manner.

Minimum bonus (section 26(1))

Higher of 8⅓% of wages earned or ₹100

Payable if the employee has worked at least 30 days in the accounting year, even without allocable surplus. Applies to employees within the wage ceiling notified by the appropriate Government.

Maximum bonus (section 26(3) and (5))

Bonus ≤ 20% of wages earned in the accounting year

Higher bonus under section 26(3) needs allocable surplus above the minimum bonus. Production or productivity bonus under section 26(5) is by agreement or settlement, with the total still not above 20%.

Wage ceiling for calculation (section 26(2))

Bonus is calculated as if wages were the notified amount or the minimum wage, whichever is higher

Applies where the employee's wages exceed the notified amount per month.

Time limit for bonus (section 39(1))

Within 8 months from close of the accounting year, by credit to the bank account

Government may extend on employer's application for sufficient reasons; total extension not beyond two years.

Paying less than due

Fine up to ₹50,000 (first offence); repeat within 5 years: imprisonment up to 3 months or fine up to ₹1,00,000, or both

Section 54(1)(a) and (b). The repeat must be a similar offence under clause (a).

Other contraventions

Fine up to ₹20,000; repeat within 5 years: imprisonment up to 1 month or fine up to ₹40,000, or both

Section 54(1)(c) and (d).

Records offences

Non-maintenance or improper maintenance of records: fine up to ₹10,000

Section 54(2).

Opportunity to comply

Written direction with time limit before prosecution for clause (c) or record offences

Section 54(3). Not given if a violation of the same nature is repeated within 5 years of the first violation. It does not apply to underpayment under clause (a).

Claim compensation

Compensation up to 10 × claim determined

Section 45(2). Authority should try to decide within 3 months. Recovery as arrears of land revenue via Collector or District Magistrate.

Limitation for claim

3 years from the date the claim arises, extendable on sufficient cause

Section 45(6).

Compounding amount

50% of the maximum fine for the offence

Section 56(1). Not for offences punishable with imprisonment only, or imprisonment and fine. Not available for a second offence within 5 years of an earlier compounded or convicted similar offence.

Default on compounding order

Additional sum equal to 20% of the maximum fine

Section 56(7).

Cognizance and trial

Complaint by or under authority of Government, authorised officer, employee, registered trade union or Inspector-cum-Facilitator; trial by Metropolitan Magistrate or Judicial Magistrate of the first class

Section 52.

Quick revision

• Section 5: no employer shall pay less than the minimum rate of wages notified by the appropriate Government.
• Section 6: minimum rate can be fixed for time work or piece work, by the hour, day or month.
• Section 6(6): skill (unskilled, semi-skilled, skilled, highly skilled) or geographical area, or both, is primarily considered; arduousness may be added.
• Section 9: Central Government fixes the floor wage; different floor wages may be set for different geographical areas.
• Section 9(2): minimum rates cannot be below the floor wage, and an earlier higher minimum rate must not be reduced.
• Section 10: an employee paid by the day who works fewer hours gets a full day's wages, unless the failure is due to his own unwillingness or other prescribed cases.
• Section 11: for two or more classes of work, pay at not less than the minimum rate for each class for the time spent on it.
• Section 12: if only a minimum time rate is fixed for piece work, pay at not less than that time rate.
• Section 13: the appropriate Government may fix normal working day hours, a day of rest in every seven days, and pay for work on a rest day at not less than the overtime rate.
• Section 14: overtime is paid for every hour or part of an hour at not less than twice the normal rate of wages.
• Section 17: monthly wages before the expiry of the seventh day of the next month; on removal or resignation, within two working days.
• Section 67: the appropriate Government makes rules, with previous publication; Central rules are laid before Parliament, State rules before the State Legislature.

Common mistakes

• Listing only three or mixing the subsumed laws, for example adding the Payment of Gratuity Act. Fix: Remember the four: Wages 1936, Minimum Wages 1948, Bonus 1965, Equal Remuneration 1976. Gratuity, PF and ESI belong to the Code on Social Security.
• Saying the Code applies automatically to every establishment for every purpose. Fix: Say that the Code extends to the whole of India, but the bonus provisions are subject to the exclusions and size test in Section 41.
• Treating the exclusion list as absolute and ignoring the one-half rule. Fix: Always run the 50% test when a salary breakup is given. Excess over one-half is added back to wages.
• Including gratuity or retrenchment compensation in the 50% test. Fix: Exclude gratuity and termination payments entirely. Count only clauses (a) to (i) in the test.
• Saying the State Government fixes the floor wage. Fix: Remember section 9(1): the Central Government fixes the floor wage. The appropriate Government fixes minimum wages.
• Treating floor wage and minimum wage as the same thing. Fix: Floor wage is the base set by the Centre. Minimum wage is the actual rate fixed under section 6 and cannot fall below the floor wage.
• Saying the employer may pay only piece earnings, even if low. Fix: Remember Section 5 and Section 12: wages cannot fall below the notified minimum. Agreement does not override it.
• Applying Section 12 when a minimum piece rate has been fixed. Fix: Section 12 applies where a minimum time rate, and not a minimum piece rate, has been fixed. Read the facts for this.
• Paying overtime at 1.5 times or at the normal rate. Fix: Write 'not less than twice the normal rate' from Section 14 and use 2× in every calculation.
• Ignoring part of an hour. Fix: Section 14 covers 'every hour or for part of an hour'. Count any part hour as a full hour of overtime.

Exam tips

• Write section numbers beside each point: 1, 30, 41, 50, 61 and 15. ICSI answers reward the provision plus the conclusion.
• For "laws subsumed", write all four Acts with years in a short list.
• For facts-based questions, always test both the exclusion list and the twenty-person rule before concluding.
• Mention Section 61 whenever a contract, award or settlement is in conflict with the Code.
• Use the Code's own wording on commencement: notified by the Central Government, different dates for different provisions.
• Write the section reference (section 2(y) for wages, 2(k) for employee, 2(z) for worker) in the first line.
• For salary-breakup questions, show the 50% test clearly. Marks usually go for the method, not just the figure.
• In employee versus worker answers, give the exclusions of worker, especially managerial work and the ₹15,000 supervisory limit.