New Wage Code 2025: 15 Must-Read FAQs For Employees

Employees, HR professionals, and employers are all very curious and confused about the government's implementation of the Wage Code, 2019, which went into force on November 21, 2025. Pratik Vaidya, Chief Vision Officer and Managing Director of Karma Management Global Consulting Solutions Pvt. Ltd., has provided a comprehensive set of Wage Code FAQs to make the transition easier.

These FAQs outline the most significant changes regarding minimum wages, the 50% basic rule, full-and-final (FnF) settlement timelines, wage slips, deductions, overtime, and equal remuneration. The article provides all the details you want in one place, and these FAQs provide clear and useful answers to the most important questions.

Q1. What does the Code on Wages, 2019 actually do?

The Code on Wages, 2019 (Act 29 of 2019) consolidates four earlier central laws into one framework:

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

It creates a single, uniform regime for:

• Definition of wages
• Minimum wages and floor wage
• Payment of wages, including full-and-final (FnF)
• Bonus
• Equal remuneration and non-discrimination on grounds of gender.

These four Acts stand repealed from the effective date, subject to savings for existing rules/notifications until replaced.

Q2. From when is the Wage Code in force, and what changed on 21 November 2025?

Through a series of notifications dated 21 November 2025, the Government of India has brought the Code on Wages, 2019 into effect, along with the other three Labour Codes.

Key Wage Code chapters now operative (central domain):

• Definitions, including "wages" (Section 2(y))
• Minimum wages & floor wage (Sections 3-9, 12)
• Payment of wages (Sections 15-21), including FnF timelines under Section 17
• Bonus (Sections 26-42)
• Equal remuneration & gender non-discrimination (Section 3, read with definition of "same work or work of a similar nature")
• Authorities, inspector-cum-facilitators, offences, penalties & compounding, repeal & savings.

Old central statutes are repealed, but their rules and notifications continue as "saved law" so long as they do not conflict with the Code, until Code-based rules fully take over.

Q3. How are wage payment and full-and-final settlement timelines fixed now?

Section 17 of the Wage Code standardises wage timelines:

• Daily-rated: by the end of the shift / the same day
• Weekly-rated: before the weekly rest day
• Fortnightly-rated: within 2 days of the end of the wage period
• Monthly-rated: within 7 days of the end of the month Full-and-final (FnF) settlement - Section 17(2):

Where an employee is:

• removed or dismissed from service, or
• retrenched, or
• has resigned, or
• becomes unemployed due to closure of the establishment,

"the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation.
The Government's own PIB note summarises this as:

"On termination or resignation; wages must be paid within two working days."

Recent commentary (ET Wealth, leading law firms) interprets this as requiring complete FnF wages within two working days of exit, with longer timelines only for certain statutory payouts (e.g. gratuity) where a different law prescribes a separate window.

Practical reading for HR/payroll:

• Salary and all wage-linked components that fall under the Wage Code must be settled within two working days of last working day.
• Items governed by separate statutes (e.g. gratuity under the Payment of Gratuity Act
• / Social Security Code, PF settlement by EPFO) may follow their own statutory timelines - but operationally, most organisations will move to a near-complete FnF within two days and reconcile residual statutory items as they close.
• Where State Shops & Establishments Acts prescribe even tighter timelines, follow the stricter standard.

Q4. What exactly is the new definition of "wages" and what is the 50% rule?

Section 2(y) gives a three-part structure:

1.Core wages (always included)

• Basic pay
• Dearness allowance
• Retaining allowance (if any)

2.Specified exclusions (a) to (k) - broadly:

• Statutory bonus, value of housing/some amenities, employer's PF/pension contribution & interest, conveyance allowance or value of travel concession, HRA, certain reimbursements, overtime, commission, gratuity, retrenchment compensation and similar terminal or ex-gratia payments.

3. Provision - the 50% cap on exclusions

• If the total of exclusions (a)-(i) paid to the employee in a wage period exceeds 50% of total remuneration,
• The excess over 50% must be added back into "wages".

So, structurally:

"Wages" must be at least 50% of true remuneration. You cannot park 70-80% of the package in allowances and keep Basic+DA artificially low.
Government communication (ET interview, PIB and media explainers) explicitly summarises it as:

The definition of wage is basic plus dearness allowance, and if allowances exceed 50% of total compensation, the excess is added back to wages; this pushes up gratuity and maternity benefits.

Q5. Does this 50% wage rule automatically change PF and ESI contributions today?

Not automatically on Day 1.

• EPF and ESIC currently rely on their own wage definitions under their existing Acts and schemes.
• The Code on Social Security, 2020 will eventually realign PF and ESI contributions to the Wage Code definition, but detailed schemes/rules are still being phased in.

Current practical position:

• For now, PF/ESI may continue on existing definitions until corresponding social security provisions and schemes are fully notified and clarified.
• However, compensation design must start respecting the 50% rule, because the direction of law is clear: over time, social security contributions will likely be tied to this stronger wage base, increasing PF, gratuity and other wage-linked benefits.

Q6. What are the new rules of the game on minimum wages and floor wage?

Key shifts:

1.Universal minimum wage

• Section 5 creates a statutory right to minimum wages for all employees, not just "scheduled employments".
• This especially benefits casual, daily-wage, migrant and unorganised workers.

2.National floor wage

• The Central Government will set a national floor wage.
• States cannot fix minimum wages below this floor but may go higher.

3.Objective methodology

• Rules (central and state) adopt a data-based approach (consumption units, housing cost, calorie intake, etc.) to fix minimum wages rather than ad hoc numbers.

Until a new floor wage and fresh state minimum wage notifications are in place:
Existing state minimum wage notifications continue, subject to:

-the universal coverage principle; and
-the "no below floor wage" rule once the new floor is notified.

Q7. What does the Wage Code say about deductions from wages?

Sections 18-21 sharply ring-fence deductions:

General principle (Section 18):

No deductions except those authorised by the Code (e.g., fines, absence, house accommodation, recovery of advances/loans, statutory deductions such as tax, PF, ESI, co-operative dues).

Cap on total deductions:
Rules generally retain the old cap - total deductions cannot exceed 50% of wages in a wage period (higher cap up to 75% only in specified cases, e.g. including deductions for co-operative societies, subject to rules).

Absence from duty (Section 20):
Deductions for absence must be proportionate to the period of absence.

Recovery of advances/loans (Section 21):

Advance recovery must comply with prescribed conditions and instalment limits.
Practical implication: payroll must revisit all deduction heads (canteen, uniforms, fines, recoveries, etc.) and ensure:

• They fall under a permitted category;
• Combined deductions respect the overall cap per wage period.

Q8. What does the Code say about wage slips and record-keeping?

The Government's PIB note on the Wage Code highlights:

Section 50(3) read with rules - employers must issue wage slips (physical or electronic) on or before wage payment.

New Wage Rules reduce registers and forms drastically:

• Rules reduced from 163 to 58;
• Forms from 20 to 6;
• Registers from 24 to 2 (combined employee + wage registers).

This is a strong push towards:

• Standardised, digital record-keeping, and
• Uniform wage slips across categories, including contract and unorganised workers.

In practice, employers should:

• Move to single consolidated registers and standard wage slip templates once the applicable central/state Wage Rules are final,
• Ensure wage slips clearly reflect core wages, allowances, statutory deductions, overtime, and net payable for each wage period.

Q9. How are overtime and piece-rate wages treated?

PIB and Code provisions emphasise:

1.Overtime - Section 14

• For work beyond prescribed hours, overtime must be paid at no less than twice the normal rate of wages.
• This is meant to: discourage excessive overtime; and ensure that when it happens, it is paid fairly.

2.Piece-rate employees - Section 12

Where a minimum time rate is fixed for a category of work, piece-workers must receive at least that minimum time-rate equivalent, even if their per- piece earnings would otherwise fall short.

Operationally, this means:

• Timekeeping and overtime capture must be accurate and auditable, including for contract/outsourced staff.
• Piece-rate structures must be benchmarked periodically to ensure no one earns below the applicable minimum time rate.

Q10. How does the Wage Code deal with equal remuneration and transgender inclusion?

The Wage Code carries forward and expands the equal remuneration regime:

Section 3 - No discrimination on ground of gender

• Prohibits discrimination on gender in wages for same work or work of a similar nature.
• Bars discrimination on sex in recruitment for the same/similar work (except where law restricts employment of certain genders for specified work).

Government clarification & PIB

• The official PIB note states that there shall be no discrimination "on the basis of gender, including transgender identity" in recruitment, wages, and conditions for same/similar work.
• ET interview with the Labour Secretary also stresses that equal wages explicitly include transgender persons.

Takeaway: equal remuneration obligations now clearly protect men, women and transgender persons - any pay gap at the same grade for same or similar work needs a defensible, non-gender basis (skill, effort, responsibility, working conditions).

Q11. What about appointment letters - are they now mandatory under the Wage Code?

The broader Labour Code package, as communicated by the Government and media, makes formal appointment letters mandatory for workers, including in sectors where such letters were not standard earlier.

While the formal requirement is spread across the Codes and rules, in the wages context it means:

• Every employee should have documented terms specifying:
• Wages and components (Basic, DA, allowances),
• Wage period and payment mode,
• Applicable deductions, benefits and category,
• Conditions that affect overtime, variable pay, incentives, etc.

This ties directly to wage disputes: appointment letters are now a core evidentiary document for enforcement of minimum wages, equal remuneration and timely payment.

Q12. What is the limitation period for wage/bonus claims?

The Wage Code extends the limitation for filing claims:

• Earlier regime: 6 months to 2 years (depending on statute) for various wage/bonus claims.
• Wage Code: uniform limitation of 3 years for claims relating to wages, bonus, etc.

This gives employees more time to:

• collect documentation,
• seek advice, and
• file claims through the designated authorities.
• For employers, it means:
• Wage-related records must be retained and accessible for at least 3 years, and
• Old underpayment issues can be raised for a longer look-back period.

Q13. What are the key offences, penalties and compounding provisions?

Broadly:

• Underpayment of wages/minimum wages/bonus - fines up to prescribed maxima (e.g. Rs 50,000 for first offence; higher and/or imprisonment for repeat or aggravated cases).
• Failure to maintain records, provide wage slips, or obstruct inspector-cum-facilitator - lower fine ranges.
• Repeat offences within a five-year window attract higher penalties and possible imprisonment.

Compounding - Section 56:

• Certain offences punishable with fine only can be compounded by paying 50% of the maximum fine to an authorised officer, avoiding a full criminal trial.
• Generally, not available for repeat offenders within 5 years.
• Compounding does not wipe out civil liability; arrears of wages/bonus must still be paid.

Q14. What is this "inspector-cum-facilitator" concept?

The Code replaces the old "Inspector Raj" image with Inspector-cum-Facilitators (Section 51).

They have a dual role:

• Enforcement - inspect records, investigate complaints, initiate action where serious violations exist.
• Facilitation - guide employers and employees, promote compliance, and support digital filing systems.

Inspections are intended to be more technology-driven, risk-based and transparent, with a focus on self-compliance plus targeted enforcement.

Q15. What should employers do immediately on Wage Code implementation, especially around FnF?

Immediate action list (Wage Code only):

1.FnF process redesign

• Hard-code a process to ensure all wage dues (including variable pay that has become determinable) are settled within 2 working days of exit, except where another statute prescribes a different timeline.

2.Salary structure review

• Map each role's CTC against Section 2(y).
• Move towards Basic+DA ≈ 50% of total remuneration to pre-empt future social-security alignment shocks.

3.Minimum wage compliance

• Refresh mapping of all roles (including outsourced/contract workforce) to current state minimum wages and prepare for floor wage-driven revisions.

4.Deductions and wage slips

• Audit all wage deductions and ensure they are permitted and within caps.
• Standardise wage slip content and frequency across all employee categories.

5.Equal pay and gender inclusion

• Review pay bands and practices to eliminate unjustified gaps across men, women and transgender employees doing same/similar work.

6.Record-keeping and digital readiness

• Prepare to migrate to reduced, consolidated registers and digital formats as central/state Wage Rules are finalised.

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