Code on Wages, 2019

The Code on Wages, 2019 is the single law that now decides how much workers must be paid, when they must be paid, what bonus they get, and that men and women must be paid equally for the same work. It replaced four older wage laws with one Code. Its biggest change is that every employee in every kind of work is now covered by the right to a minimum wage, not just workers in a government list of jobs.

Why was it needed?

Before the Code, wage rules were spread over four separate laws, each with different definitions of "wages", "employee" and "employer". An employer had to keep different registers and follow different rules for each law. Many workers fell through the gaps. For example, the old Minimum Wages Act covered only "scheduled employments", the jobs listed in its schedule. A worker in an unlisted job had no legal minimum wage at all. The Code was meant to simplify the law and widen protection.

Where did it come from?

The Second National Commission on Labour (2002), chaired by Ravindra Varma, recommended grouping India's many labour laws into a few broad codes. The Union government then merged 29 central labour laws into four Codes:

• the Code on Wages, 2019;
• the Industrial Relations Code, 2020;
• the Code on Social Security, 2020;
• the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020.

The Code on Wages was the first to be passed, receiving the President's assent on August 8, 2019. All four Codes were brought into force from November 21, 2025. Central and State rules are needed to make many provisions fully work.

Which laws did it replace?

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

How are minimum wages fixed?

The Code works in two layers:

• Floor wage (Section 9): The Central government fixes a national floor wage, based on the minimum living standards of a worker. It can set different floor wages for different geographical areas. Think of it like the lowest step of a staircase: no State can go below it.
• Minimum wage (Section 6): The "appropriate government" (the Centre for its own establishments, the State for most others) fixes the actual minimum wage. It must be at or above the floor wage. It can vary by skill (unskilled, semi-skilled, skilled, highly skilled), by geographical area and by the arduousness of work. If a State's existing minimum wage is already higher than the floor wage, it cannot be reduced.
• Minimum wages must be reviewed at least once every five years.

How is a "fair" minimum wage calculated?

Here the idea of a family unit matters. The 15th Indian Labour Conference (1957) laid down norms for a need-based minimum wage. It said the wage should support a standard working-class family of three consumption units for one earner (the worker, the spouse, and two children counted as fractions of an adult). It also set needs like 2,700 calories per adult a day, clothing and housing.

In Workmen v. Reptakos Brett & Co. (1991), the Supreme Court added another component: a further 25% of the wage for children's education, medical needs, festivals, old age and marriage. So when a State counts five family members instead of three, the cost of a family's needs rises, and so does the minimum wage.

What about bonus?

The Code carries forward the old bonus rules:

• an employee who has worked for at least 30 days in an accounting year is entitled to a bonus, subject to the wage limit the government notifies;
• the minimum bonus is 8.33% of wages (or ₹100, whichever is higher), and the maximum is 20%;
• the bonus is paid out of the "allocable surplus", which is a share of the employer's profit.

In August 2026, the Centre notified a monthly wage ceiling of ₹21,000 for bonus eligibility and a separate ceiling for calculating the bonus [Unverified]. So "wider eligibility for bonus" means bringing more workers inside these limits or the coverage net.

Other key features

• One definition of "wages": basic pay, dearness allowance and retaining allowance. If allowances (like HRA or overtime) are more than 50% of total pay, the extra amount is added back to wages. This stops employers from keeping basic pay artificially low.
• Equal pay: no discrimination on the ground of gender, including transgender persons, in pay or recruitment for the same or similar work.
• Timely payment: rules for when wages must be paid (daily, weekly, fortnightly or monthly), and limits on deductions.
• Inspector-cum-Facilitator: the old "inspector" now also guides employers on how to comply, not only punishes them.

India's position and Indian examples

Labour is in the Concurrent List of the Seventh Schedule (Entry 22: trade unions and industrial disputes; Entry 24: welfare of labour). So both Parliament and State legislatures can make laws on it, and States frame their own rules under the Codes. This is why Keralam is preparing its own rules. States like Keralam have traditionally had some of the highest minimum wages in India.

Commonly confused concepts

• Floor wage vs minimum wage: The floor wage is the national lowest limit, set only by the Centre. The minimum wage is the actual wage fixed by the appropriate government, which must be at or above the floor wage.
• Minimum wage vs living wage: A minimum wage covers basic needs. A living wage (Article 43, a Directive Principle) allows a decent life with education, health and some comfort. A fair wage lies between the two.
• Code on Wages vs Code on Social Security: The Code on Wages deals with pay and bonus. Provident fund, ESI, gratuity and maternity benefit are in the Code on Social Security, 2020.
• Article 43 vs Article 39(d): Article 43 asks the State to secure a living wage for all workers. Article 39(d) asks for equal pay for equal work for men and women.

Issues, criticism and the way forward

• Low floor wage: Trade unions argue that a low national floor wage could pull wages down in poorer States. The government's position is that States keep the power to fix higher wages.
• Enforcement: Most Indian workers are in the informal sector, where minimum wages are often not paid. Changing the law alone does not change ground reality.
• Federal tension: Because labour is a Concurrent subject, States differ in how they frame rules. Some States want more freedom to protect workers; others want more freedom to attract industry.
• Constitutional backing: In People's Union for Democratic Rights v. Union of India (1982) and Sanjit Roy v. State of Rajasthan (1983), the Supreme Court held that paying less than the minimum wage amounts to "forced labour" under Article 23. This makes minimum wages a matter of fundamental rights.
• Way forward: Experts suggest regular, data-based revision of minimum wages, digital wage payments to reduce cheating, and stronger inspection in the informal sector.

Concepts to Know

• Appropriate government: The government (Centre or State) that has the power to make rules for a particular establishment. For railways, mines and central public sector units it is usually the Centre; for most shops and factories it is the State.
• Consumption unit: A way of counting a family's needs. An adult man counts as 1 unit; a woman and children count as fractions of a unit, because they are assumed to eat a little less.
• Dearness allowance (DA): An extra amount added to pay to make up for rising prices (inflation).
• Allocable surplus: The part of a company's profit that is set aside to pay bonus to employees.
• Concurrent List: List III of the Seventh Schedule; subjects on which both Parliament and State legislatures can make laws. If they conflict, the central law generally prevails (Article 254).