Business Laws and Ethics · The Code on Wages, 2019

Authorities, Claims, Offences and Penalties under the Code on Wages, 2019

Updated 10 October 2026 · Fact-checked

The Code on Wages, 2019 sets up Advisory Boards, Inspector-cum-Facilitators and claim authorities, and punishes employers who underpay or break the Code. To solve questions, identify the authority or offence, apply the exact limit (fine, compensation, time) and check whether a compliance opportunity or repeat-offence rule applies.

Understand Authorities, Claims, Offences and Penalties

Think of this topic as four layers: who advises, who inspects, who decides claims, and who punishes. Each layer has its own section in the Code, and exam questions usually test one layer with exact limits.

Advisory Boards (Section 42). The Central Government constitutes a Central Advisory Board; every State Government constitutes a State Advisory Board. They advise on fixing or revising minimum wages, on increasing employment opportunities for women, on the extent women may be employed in specified establishments, and on other matters under the Code. Employer and employee members must be equal in number. Independent persons cannot exceed one-third of the total. One-third of the members must be women. An independent member is appointed Chairperson. The Central Board also has five representatives of State Governments.

Inspector-cum-Facilitator (Section 51). The appropriate Government appoints them by notification. They advise employers and workers on compliance and inspect establishments assigned to them. They may examine persons believed to be workers, require names and addresses, and search, seize or copy registers, wage records or notices relevant to an offence. They are deemed public servants. The Government may lay down an inspection scheme, including web-based inspection and randomised selection.

Claims (Section 45). The appropriate Government appoints an authority not below the rank of a Gazetted Officer to hear and decide claims. The authority may order compensation in addition to the claim, up to ten times the claim determined, and should try to decide within three months. A claim application can be filed by the employee, a registered Trade Union of which the employee is a member, or the Inspector-cum-Facilitator. It must be filed within three years of the claim arising, and a late application can be entertained on sufficient cause. If the employer does not pay, a recovery certificate goes to the Collector or District Magistrate, who recovers it as arrears of land revenue. The claim authority and the appellate authority (Section 49(1)) have civil court powers for evidence, witnesses and documents.

Offences (Sections 50, 52, 54). Section 50 requires registers, notice display and wage slips. Section 54 sets fines and imprisonment, and Section 52 says who can start a prosecution and which courts try it. A key feature is the chance to comply before prosecution for lesser offences.

Key rules to remember

Underpayment (first offence): Section 54(1)(a): fine up to ₹50,000; Applies when an employer pays an employee less than the amount due under the Code.
Underpayment (repeat): Section 54(1)(b): imprisonment up to 3 months, or fine up to ₹1,00,000, or both; Applies on second and later offence within five years of the first or subsequent offence, after a conviction under clause (a).
Other contraventions (first): Section 54(1)(c): fine up to ₹20,000; Covers contravention of any other provision, rule or order.
Other contraventions (repeat): Section 54(1)(d): imprisonment up to 1 month, or fine up to ₹40,000, or both; Second and later offence within five years, after conviction under clause (c).
Records offences: Section 54(2): fine up to ₹10,000; For non-maintenance or improper maintenance of records.
Opportunity to comply: Section 54(3): written direction with time limit before prosecution under 54(1)(c) or 54(2); If the employer complies in time, no prosecution. No such opportunity if the same type of violation is repeated within five years of the first violation.
Compensation on claims: Section 45(2): compensation up to 10 × claim determined; In addition to the claim. Authority should try to decide within three months.
Limitation for claims: Section 45(6): 3 years from when the claim arises; Late application allowed on sufficient cause.
Who may apply for a claim: Section 45(4): employee, registered Trade Union (of which employee is a member), or Inspector-cum-Facilitator; Section 45(5) allows a single application for any number of employees of an establishment, subject to rules.
Cognizance and trial: Section 52: complaint by or under authority of Government or authorised officer, an employee, a registered Trade Union, or an Inspector-cum-Facilitator; trial by Metropolitan Magistrate or Judicial Magistrate of first class; No lower court may try the offence.

How to solve Authorities, Claims, Offences and Penalties questions

Use this method for any scenario or theory question on authorities, claims and penalties.

1Identify the layer being tested: Advisory Board, Inspector-cum-Facilitator, claim authority, or offence and penalty.
2Pick out the facts that matter: amount underpaid, who is applying, how many years since the claim arose, whether it is a first or repeat offence.
3State the rule with its section number and the exact limit, such as fine up to ₹50,000 or compensation up to ten times.
4For offences, decide the clause: underpayment (54(1)(a)/(b)), other contravention (54(1)(c)/(d)) or records (54(2)).
5Check for repeat conduct within five years and whether a written compliance direction under Section 54(3) must come first.
6Check procedure: who can file the claim or complaint, the time limit, and the court that can try the offence.
7Apply to the facts and write a one-line conclusion.

Quickest way: Clause-and-number shortcut

When to use it: In MCQs and short-answer questions where you must pick a fine, time limit or person fast.

Remember the fine ladder: 50,000 (underpay), 20,000 (other), 10,000 (records).
Repeat offences: underpay gives 3 months or ₹1,00,000; other gives 1 month or ₹40,000.
Remember three: claim limit 3 years, decision target 3 months, compensation up to 10 times.
Tag each fact: 'less than due' means 54(1)(a); 'registers or slips' means records.
Eliminate options that say fine 'shall be' exactly; the Code says 'may extend to'.

Common mistakes in Authorities, Claims, Offences and Penalties

Stating the fine as a fixed amount instead of a maximum.
Students memorise numbers and drop the words 'may extend to'.
Fix: Write 'fine which may extend to' every time. In MCQs, treat these as ceilings.
Mixing up the penalty for underpayment with that for other contraventions.
Both have first and repeat versions with similar structure.
Fix: Underpayment: ₹50,000 and ₹1,00,000 with 3 months. Other: ₹20,000 and ₹40,000 with 1 month.
Saying every offence gets a chance to comply before prosecution.
Students remember the compliance opportunity but not its scope.
Fix: Section 54(3) covers clause (c) of 54(1) and sub-section (2) only, not underpayment. It is also denied if the same type of violation repeats within five years of the first.
Saying compensation can be ten times the claim in all cases, or that it replaces the claim.
Loose reading of Section 45(2).
Fix: Compensation is in addition to the claim determined, up to ten times the claim determined, and is at the authority's discretion.
Forgetting that the Inspector-cum-Facilitator can file claims and complaints, or thinking only the employee can.
Focusing on the employee as the aggrieved person.
Fix: Remember the three applicants in 45(4) and the complainants in Section 52.
Getting Advisory Board composition wrong, such as making women one-half or independent members one-half.
Fractions blur together.
Fix: Employers and employees equal; independents not more than one-third; women one-third; Chairperson from independent members.

Worked examples

Example 1

Sundaram Textiles Pvt. Ltd. paid its worker Meena ₹4,000 less than the wages due under the Code. The employer was convicted. Three years later it again underpaid another worker. What is the maximum punishment on the second offence?

Show the solution

Underpaying an employee is covered by Section 54(1)(a); the first offence carries a fine up to ₹50,000.
The second offence is under 54(1)(b). It applies if the employer is again found guilty of a similar offence within five years from the commission of the first or subsequent offence.
Three years is within five years, so the repeat provision applies.
The punishment may be imprisonment up to three months, or a fine up to ₹1,00,000, or both.

Answer: Imprisonment up to three months, or fine up to ₹1,00,000, or both, under Section 54(1)(b).

Example 2

Ravi Traders did not display the notice of wage rates and wage period at its shop. The Inspector-cum-Facilitator found this on inspection. Can he straight away launch prosecution? What penalty applies?

Show the solution

Displaying the notice is a duty under Section 50(2). Failing to do it is a contravention of another provision of the Code, so Section 54(1)(c) applies, with a fine up to ₹20,000.
Section 54(3) says that before prosecution under clause (c) or sub-section (2), the Inspector-cum-Facilitator must give the employer a written direction with a time period for compliance.
If the employer complies within that time, no prosecution is started.
The opportunity is not given if the same kind of violation is repeated within five years from the first violation; then prosecution proceeds.
If the offence is tried, only a Metropolitan Magistrate or Judicial Magistrate of the first class can try it (Section 52(2)).

Answer: No. He must first give a written direction with a compliance period. If Ravi Traders complies, there is no prosecution. Otherwise the fine may extend to ₹20,000.

Exam tips

Learn the penalty numbers as a table: 50,000/1,00,000, 20,000/40,000, 10,000. Examiners love one-line number questions.
In scenario questions, name the section and clause. It earns step marks even if the final figure is slightly off.
For claims, always cover who can apply, the three-year limit, the compensation cap and the recovery route through the Collector.
Write 'may extend to' for fines and compensation. MCQ options often change this to a fixed figure.
Revise Section 42 composition in fractions: equal employers and employees, independents up to one-third, women one-third.

Practice questions from The Code on Wages, 2019

Authorities, Claims, Offences and Penalties in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Authorities, Claims, Offences and Penalties: frequently asked questions

What is the penalty for paying less than the wages due under the Code on Wages, 2019?

For a first offence, the fine may extend to ₹50,000 under Section 54(1)(a). For a repeat offence within five years, the punishment may be imprisonment up to three months, or fine up to ₹1,00,000, or both.

What can an Inspector-cum-Facilitator do under the Code on Wages?

The Inspector-cum-Facilitator advises employers and workers on compliance and inspects assigned establishments. He may examine persons believed to be workers, require names and addresses, and search, seize or copy relevant registers and records. He can also file claim applications and complaints.

Within what time must a wage claim be filed?

An application must be filed within three years of the date the claim arises. The authority may accept a late application if sufficient cause is shown. The authority should try to decide the claim within three months.

Who can be on the Advisory Board under the Code on Wages?

Representatives of employers and an equal number of employees, plus independent persons not exceeding one-third of the total. One-third of the members must be women. The Central Board also includes five State Government representatives.