Code of Wages is nice effort of legislature to compile the four labour law Acts into one single piece of legislation. The Code of Wages being a first code in labour laws received its assent on 8th of August, 2019. With this new legislation, there are some obligations of the every employer arises, which needs to know for smooth running of business. The Code is very wide in its nature, so it applies to all the industries, employer and employees. Here are some compliances for every employer under the Code:

Gender discrimination is prohibited:

It is prohibited for employer to make discrimination on gender in the matters related to wages in respect to same work or work of similar nature done by any employee. The same rule is applied on the recruitment process by the employer. Exception is provided in those cases, where employment of women in such work is prohibited by law.

How to pay the wages to the employees?

The Code provides the procedure to pay the wages to the employee by the employer. Employer can pay the wages through coin, currency notes, by cheque, by crediting into a bank account or by electronic mode. It is mandatory for employer to fix wage period of employee on daily, weekly, fortnightly or monthly and stipulates the time limit under each wage period. Time limit for payment of wages is given below:

  • Daily basis: At the end of the shift
  • Weekly basis: At the end of last working day of the week
  • Fortnightly basis: Within 2 days after end of fortnight
  • Monthly basis: Within 7 days of succeeding month

In case of removal, dismissal, retrenchment, resignation from services or in the case of unemployment due to closure of the establishment, the employer shall pay the payable wages to the employee within 2 working days. If employee worked for overtime, then employer shall pay him double of his/her normal wages.

What deductions employer can make from wages?

The employer can deduct the wages of his employee for reasons provided under the Code. These reasons include the fines, absence from duty, damage or loss of goods entrusted to the employee, house-accommodation if provided by the employer, amenities and services, recovery of advances (travelling or conveyance allowance), loans, income tax or any other statutory levy if court or any competent authority ordered the same, social security fund (Provident fund, pension, health insurance). It is condition under this code, that such deduction made by the employer shall not exceed 50% of the wages of the employee.

What is the procedure to pay bonus?

Every employer has to pay bonus to its employees if the employee strength of his establishment is 20 or more. Under the Payment of Bonus Act, such strength could be removed by the State Govt. However, under the Code there is no mentioning of power to reduce such strength. Now bonus can be paid only by crediting the amount in the bank account of concerned employee within a period of 8 months from closing of the accounting year. However the Govt. can extend such period upto 2 years for sufficient reason on application made by the employer.

When employer can make deductions from bonus?

Employer can deduct certain amount from bonus of the employee if due to the misconduct of such employee financial loss caused to the employer.

What kind of records have to be maintained by the employer?

It is mandatory for the employer under this Code to maintain a register containing the details of his employees, muster rolls and wages. A notice must be displayed at a prominent place of establishment containing the abstract of Code, category- wise wage rates of employees, wage period, day or time of payment of wages, and the name and address of the Inspector-cum-Facilitator who has the jurisdiction.

It is an obligation of the employer to issue salary slips to his employees. However, these provisions are not applicable on the employer who has less than 5 employees for agricultural or domestic purpose. But on demand of Inspector-cum-Facilitator, such employer has to show the proof of the payment of wages of persons so employed by him.

What are the penalties for employer?

The Code provides the enhancement of penalties in various offences under this piece of legislation. In case of non-payment of wages/less payment of wages the employer has to pay the fine upto Rs. 50,000/-, on repetition of the offence within 5 years the fine may extend to Rs. 1 lac and imprisonment upto 3 months. If any employer contravenes any other provision of this Code then such employer has to pay the fine upto Rs. 20,000/- and in case of repetition within 5 years it may extend to Rs. 40,000/- and imprisonment upto 1 month.

However the Inspector-cum-facilitator shall provide an opportunity to the employer to comply with the provisions of this Code within a certain period. If the employer violates the provisions of this Code within 5 year from date of first violation of similar nature, then he will lose the right of opportunity given by the Inspector-cum-facilitator.

On non-maintenance or improper maintenance of records in the establishment, the employer shall be punished with the fine upto Rs. 10,000/-. If offence is committed by company then every person who was incharge that may a director, manager, secretary or other officers of such company shall also be deemed to be guilty of that offence.

The offences under the Code can be compounded by a Gazetted Officer or Govt. before or after the institution of prosecution on receipt of 50 % of the maximum fine provided for such offence. Such compromise can be affected on the application made by the accused person. These provisions are not applicable if the employer committed the offence for second time within 5 year from commission of similar offence which was compromised or convicted earlier.


The Code on wages intends to balance the interests of the employers and employees according to the need of hour. The Code contains the maximum portion of the repealed Act in simple terms, and makes a decent effort to replace the outdated provisions. The Code encourages digitalization in matters related to payment of wages, inspection procedure which is a nice effort of legislature to keep pace with time.

-Kiranpreet Kaur

Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali