The code on wages notes

7. Components of minimum wages

Section 7 of the Code on Wages, 2019 Act pertains to the components of

minimum wages. This section is crucial as it outlines the factors that should be
considered when setting or revising minimum wages in India.
1. Basic Rate of Wages: This is the primary component of minimum wages. It
is the basic pay that an employee is entitled to, irrespective of any other
allowances or benefits. This rate is set considering the skill level, arduousness
of work, and geographical location.
2. Cost of Living Allowance (Dearness Allowance): This component is
designed to offset the impact of inflation on the ability of workers to afford
basic necessities. It is adjusted periodically, usually annually or biannually,
based on the current Consumer Price Index.
3. Retaining Allowance: This allowance is provided to retain the services of an
employee. It is typically offered when there is a temporary halt in the work
process, but the employer wants to retain the employee for when work resumes.
4. Children Education Allowance: This allowance is provided to employees to
support the education of their children. It is an essential aspect of the minimum
wages, especially for low-income workers.
5. House Rent Allowance: This component is designed to help employees cover
the cost of housing. It is particularly important in urban areas, where housing
costs are typically high.
6. Medical Allowance: This allowance is provided to cover the cost of medical
expenses. It is a critical component of minimum wages, given the high cost of
healthcare.
7. Other Allowances: There may be other allowances as well, depending upon
the nature of the job and the specific needs of the employees. These might
include transportation allowance, meal allowance, etc.
The objective of Section 7 of the Code on Wages, 2019 is to ensure that
minimum wages are not just about covering the basic needs but also about
ensuring a measure of comfort and dignity for the workers. It is a step towards
ensuring fair wages and decent living standards for workers in India.

8 .Procedure for fixing and revising minimum wages.

According to Section 8, the appropriate government, which can be either the

central or state government, is responsible for fixing the minimum rate of
wages payable to employees.
This rate can be fixed per day, per week, or per month as the government
deems fit.
While fixing the minimum wages, the government takes into consideration
various factors such as the level of skill required, the arduousness of the work
assigned, the geographical location of the work, and other aspects that may be
relevant to the employment.
The minimum wages fixed by the government are subject to periodic revisions
at intervals not exceeding five years.
The aim of this revision is to adjust the wages to the cost of living and other
economic factors. However, the government can review and revise the
minimum wages before the said interval if it deems necessary.
The government may also fix the number of hours of work which shall
constitute a normal working day. This includes a day of rest in every period of
seven days and payment for work on a day of rest at a premium rate.
The Code on Wages Act 2019 also mandates that the minimum rate of wages
shall be fixed on the day basis even if it has been fixed on a monthly basis. This
is to ensure that the employees are paid for each day of work
1. Composition of Committee: According to the Act, the appropriate
government, either central or state, may appoint as many committees and sub-
committees as it deems necessary to hold inquiries and advise the government
in the process of fixing and revising minimum wages.
2. Representation: These committees must include equal representation from
employers and employees in the scheduled employments, and independent
persons not exceeding one-third of its total number of members. An
independent person should chair the committee.
3. Recommendations: The committee is tasked with recommending the
minimum rates of wages for all or any of the scheduled employments and for
different categories of work in the scheduled employments.
4. Factors Considered: In fixing or revising minimum wages, the appropriate
government must take into account factors like the standard of living, the cost
of living, and other economic factors. It may also base its decision on the
recommendations of the committee.
5. Frequency of Revision: The Act stipulates that the appropriate government
should review and, if necessary, revise the minimum rates of wages at intervals
not exceeding five years.
6. Publication: Any changes or revisions to the minimum wage must be
published by notification in the Official Gazette and unless specified otherwise,
will come into effect on the date of its issue.
7. Varied Minimum Wages: The Act allows for different minimum wages to be
set for different scheduled employments, different classes of work in the same
scheduled employment, adults, adolescents, children and apprentices, and
different localities.
This section of the Act serves as a crucial mechanism for ensuring wage justice
and fair compensation for workers. It also provides a systematic and
transparent process for determining and updating minimum wages.

13. Fixing hours of work for normal working day

Section 13 of the Code on Wages is a critical part of the legislation that focuses
on the payment of wages. This section is primarily concerned with the timely
and proper disbursement of wages to employees. It is a significant section that
ensures the protection of workers' rights and promotes fair labor practices.

1. Time Limit for Wage Payment: According to Section 13, employers are
obligated to pay wages to their employees within a specified time frame. For
establishments with less than 1,000 workers, wages must be paid before the
seventh day after the last day of the wage period. For establishments with
1,000 or more workers, the deadline is before the tenth day after the last day
of the wage period.

2. Wage Payment Method: Section 13 also stipulates the manner in which

wages should be paid. Wages can be paid either in coin or currency notes, or by
cheque or by crediting into the bank account of the employee. This provision
ensures that the payment process is transparent and traceable.

3. Exception to the Rule: In case the employment of any worker is terminated

by or on behalf of the employer, the wages earned by him shall be paid before
the second working day from the day his employment is terminated.

4. Penalty for Delayed Payment: Employers who fail to pay wages within the
stipulated time frame are liable to penalties as per the Code on Wages. This
serves as a deterrent to potential defaulters and underscores the importance
of timely wage payment.

5. Protection of Worker's Rights: Section 13 serves as a critical safeguard for

workers' rights. By ensuring timely payment of wages, it helps to protect
workers from potential exploitation and financial hardship.

6. Legal Recourse: In case of non-compliance with the provisions of Section 13,

workers have the right to lodge a complaint with the concerned authorities.
The Code on Wages provides for the establishment of a mechanism to address
such grievances.

In conclusion, Section 13 of the Code on Wages is a vital provision that ensures

the timely payment of wages to workers, thereby upholding their rights and
promoting fair labor practices. It is incumbent upon employers to strictly
adhere to these provisions to maintain a harmonious and legally compliant
work environment.

17. Time Limit For payment of wages

Section 17 of the Code on Wages pertains specifically to the time limit for the
payment of wages to employees. This section is instrumental in safeguarding
the employees' rights to timely wage payment and lays down the law related to
when and how payment should be made to employees.
According to the statute:
1. Wages are to be paid before the expiry of the seventh day following the last
day of the wage period where the employer has less than 1000 workers.

2. In situations where the organization employs more than 1000 workers, the
employer is obliged to disburse the payment before the expiry of the tenth day
after the last day of the wage period.

3. If the employee is dismissed or terminated from his services, the employer

must pay the outstanding wages before the second working day from the day
employment ended.

4. In case the work has been completed, the wage payment must be made
immediately.
These statutory rules are to be followed without derogation, and any
alteration, like postponement or delay, is regarded as a violation of the law and
can incur penalties.
Furthermore, compensation for overtime work should be paid at the same
time as normal wages. The time interval for payment for overtime for factories,
mines, or other establishments permitted under Section 59 (6) of the Factories
Act 1948, should not exceed two months.
These provisions aim to prevent exploitation and ensure that employees are
paid timely and appropriately. It should be noted that compliant organizations
and corporations aim to strictly abide by these guidelines to maintain a healthy
work environment and uphold the rights of their workers.
In conclusion, the content and spirit of Section 17 of the Code on Wages affirm
the rights of employees to timely payment of their due wages and deterring
possible exploitation.
Section 18 - Deductions and Fines:

1. Under Section 18 of the Code on Wages Act 2019, employers are prohibited
from imposing any fines on employees unless it is expressly conveyed to him.

2. The employee must also be given an opportunity to prove his innocence

before the fine is imposed

3. The total amount of fine imposed in this manner must not exceed 3% of the
wages in terms of money.

Section 19 - Deductions for the Damage or Loss:

1. Deductions can be made from an employee's wages for damages or loss

directly attributable to an employee.

2. However, the employee must be given fair notice and an opportunity to

explain his or her situation before the deduction is made.

Section 20 - Deductions for Services Rendered:

1. Deductions for services rendered can include accommodation and goods and
services provided, and must be mutually agreed on by the employee and
employer.

2. This does not include any tools or protections necessary for the completion
of the job, for which no deduction can be made.

Section 21 - Deductions for the Employee Benefits:

1. Any contributions to provident funds, pension funds, and other state-

sanctioned social security and insurance can be deducted.

2. Deductions for co-operative societies or employee contribution to any

insurance scheme under the Employees’ State Insurance Act, 1948, are also
permitted.

Section 22 - Deductions for Recovery of Advances:

1. Advances given to employees can only be recovered from those who have
been in continuous employment for a minimum of one year.

2. The total deduction must also not exceed 50% of the wages per wage period.
Section 23 - Deductions for Taxes and Court-ordered Payments:

1. An employer may deduct from an employee's wages any amount required by

law, court order, or tribunal, such as income tax.

Section 24 - Deductions for Absence from Duty:

1. An employer can make deductions if an employee is absent from work, but

no such deduction shall be made if the absence was due to a temporary illness
certified by a registered medical practitioner.

Section 25 - Payment of Wages During Suspension or Dismissal:

1. No deduction shall be made from the wages of an employee who is under

suspension due to arrest for an offence he is being investigated or tried for, or
who has been dismissed and is in the process of appealing his dismissal.

In conclusion, any deductions must be done lawfully and an employee should

have the opportunity to justify their actions before deductions are made. All
employers should be familiar with these sections of the Code on Wages Act
2019 to enable them to maintain best practice and stay compliant with the law.

Read about it thoroughly from bare act

Payment of bonus
26. Eligibility for bonus
tax code on wages in 2019, eligibility for bonuses typically depends on several
factors, including the specific provisions outlined in the tax laws of a particular
country or jurisdiction.
In the United States, for instance, bonuses are generally considered taxable
income and are subject to federal income tax withholding. However, the
eligibility for bonuses may vary depending on the terms set forth by the
employer, the type of bonus (e.g., performance-based, signing bonus, retention
bonus), and whether the bonus is classified as discretionary or
nondiscretionary.
1. Employer Policies: Employers may have specific policies regarding bonus
eligibility, such as performance criteria, tenure requirements, or meeting
certain company goals.
2. Contractual Agreements: In some cases, eligibility for bonuses may be
outlined in contractual agreements between the employer and
employee, specifying conditions under which bonuses are earned.
3. Discretionary vs. Nondiscretionary Bonuses: Discretionary bonuses are
those given at the discretion of the employer and may not be
guaranteed, while nondiscretionary bonuses are typically tied to
predetermined criteria, such as meeting sales targets or achieving
performance metrics.
4. Tax Implications: Understanding the tax implications of bonuses is
crucial. In the U.S., for example, bonuses are subject to federal income
tax withholding, Social Security tax, and Medicare tax. Additionally, state
and local taxes may also apply.
5. Exclusions or Deductions: Certain types of bonuses may be excluded
from taxable income or eligible for deductions under specific
circumstances. For instance, bonuses used to fund retirement accounts
like a 401(k) may be eligible for tax-deferred treatment.
6. Compliance with Labor Laws: Employers must ensure that bonus
policies comply with relevant labour laws and regulations, includinthose
related to minimum wage, overtime pay, and equal employment
opportunities.
It's essential for both employers and employees to understand the eligibility
criteria and tax implications associated with bonuses to avoid any
misunderstandings or compliance issues. Consulting with a tax professional or
legal advisor can provide further clarification based on individual circumstances
and the specific provisions of the tax code applicable in a given jurisdiction.

Here are some general points to consider regarding bonus eligibility under
labor laws in India, including the Code on Wages 2019:
1. Coverage: The Code on Wages typically applies to all establishments or
entities where any industry, trade, business, manufacturing, or
occupation is carried out, except those specifically exempted.
2. Employee Eligibility: Bonus eligibility usually depends on factors such as
the length of service, the amount of wages earned, and the company's
profitability.
3. Wage Limit: Employees earning wages below a certain threshold may be
entitled to a bonus, which is usually calculated as a percentage of their
wages.
4. Company Profitability: The payment of bonuses may also be contingent
upon the profitability of the company or establishment, with specific
criteria outlined in the legislation.
5. Calculation: The calculation of bonuses is typically specified in the law,
often as a percentage of the annual wages earned by the employee,
subject to certain limits.
6. Conditions and Exemptions: There may be certain conditions or
exemptions provided for specific industries or types of establishments.
It's essential to consult the specific provisions of the Code on Wages 2019 and
any relevant regulations or guidelines issued by the appropriate authorities to
determine the exact eligibility criteria for bonuses under the law. Additionally,
it's advisable to seek legal counsel or consult with HR professionals familiar
with labor laws in India for accurate guidance on bonus eligibility and
calculation.

27 Proportionate reduction in bonus in certain cases.

A proportionate reduction in bonuses in certain cases typically refers to
adjusting the amount of a bonus based on specific criteria or circumstances.
For example, if an employee's performance falls below expectations or if a
company's financial targets are not met, the bonus amount may be reduced
proportionately to reflect these factors. This approach aims to align bonus
payouts with individual or organizational performance and ensure fairness in
compensation practices.

28 Computation of number of working days.

The computation of the number of working days typically involves calculating
the total number of days within a specified time period (such as a month or a
year) excluding weekends, holidays, and any other non-working days.
Here's a general approach to compute the number of working days:
1. Identify the total number of days in the time period.
2. Exclude weekends (typically Saturday and Sunday) from the total count.
3. Exclude any public holidays or company-specific holidays within the time
period.
4. Optionally, exclude any additional non-working days specific to the
organization (e.g., vacation days, company-wide shutdowns).
5. The remaining days are considered working days.
6. If he has been laid off under an agreement or as permitted by standing
orders under the Industrial Employment (Standing Orders) Act, 1946, or
under any other law then the laid off period shouldn’t be considered
7. If he has been absent due to temporary disablement caused by accident
arising out of and in the course of his employment; and
8. If the employee has been on maternity leave with salary or wages,
during the accounting year

29. Disqualification for bonus.

Notwithstanding anything contained in this Code, an employee shall be
disqualified from receiving bonus under this Code, if he is dismissed from
service for ––
(a) fraud; or
 (b) riotous or violent behaviour while on the premises of the
establishment; or
(c) theft, misappropriation or sabotage of any property of the
establishment; or
(d) conviction for sexual harassment.

32 Computation of gross profits

The computation of gross profits, especially concerning the payment of

bonuses, typically involves several steps:

1. Revenue Calculation: Determine the total revenue earned by the

company during the accounting period. This includes sales revenue from
goods or services sold, as well as any other income generated by the
business.
2. Cost of Goods Sold (COGS): Calculate the cost of goods sold, which
includes all direct costs associated with producing or acquiring the goods
or services sold. This may include raw materials, labor costs directly
related to production, and manufacturing overhead.
3. Operating Expenses: Subtract operating expenses from the revenue.
Operating expenses include items such as salaries and wages (excluding
those already accounted for in COGS), rent, utilities, marketing expenses,
administrative costs, and other overhead expenses necessary to run the
business.
4. Depreciation and Amortization: Deduct depreciation and amortization
expenses from the operating profit. These are non-cash expenses that
represent the gradual loss in value of assets over time.
5. Interest and Taxes: Subtract any interest expenses and taxes from the
operating profit to arrive at the net profit before taxes.
6. Exceptional Items: Adjust for any exceptional or extraordinary items that
may have affected the company's profits during the accounting period.
 These could include one-time gains or losses, restructuring costs, or
other unusual items.
7. Net Profit: After adjusting for all expenses and exceptional items, you
arrive at the net profit or net income for the period.
8. Gross Profit Calculation: Gross profit is often calculated separately from
net profit. It represents the difference between revenue and the cost of
goods sold (COGS). Gross profit is a measure of a company's profitability
before accounting for certain expenses, such as operating expenses and
taxes.
It's essential to follow generally accepted accounting principles (GAAP) or any
applicable accounting standards specific to the jurisdiction to ensure accuracy
and consistency in computing gross profits. Additionally, the specific method
for calculating gross profits may vary depending on the industry and the
company's accounting policies

36.Set on and set off of allocable surplus.

Set on and set off of allocable surplus.