The Code on Wages seeks to regulate wages and bonus payments in all employment where any activity of trade, business or manufacturing is carried out. The four labour legislations subsumed under the Code. It is a ray of hope for 195 million workers in India as it provides uniform provisions related payment of wages, bonus and minimum wages to the employees. There are certain things that are necessary to know for every employee employed in any establishment. These things are summarized as follows:

Who is an employee?

The Code provides the broader definition of employee as it covered all the persons who are doing any skilled, semi-skilled, unskilled, manual, supervisory, operational administrative, technical and clerical work. The employment terms can be oral or written, meaning thereby the employment bond may or may not be there. The persons who are employed in the Armed Forces Services are not employees under the Code.

Who is a worker?

The Code also provides the definition the worker which includes the persons who are doing any manual, skilled, unskilled, technical, operational, clerical or supervisory work. The Journalists, Sales Promotion Employees are worker under the Code.  It specifically excludes the persons who are working in a managerial or administrative capacity and supervisory capacity earning exceeding 15 thousand rupees per month. The persons who are employed in Armed Forces, Police or prison service also don’t come under the definition of worker.

Who are covered under the Code?

Previously the Payment of Wages Act was applicable to the employees who are earning the salary below INR 24,000/- per month. However the Code does not specified any salary limit and the provisions related to payment of wages in the Code will be applicable to all the employees.

What is covered under the wages?

There are numerous definitions of wages under the different legislations of labour laws which creates difficulty in its implementation. The Code provides the uniform definition of the wages applies in the case of payment of wages, bonus and minimum wages. According to the definition under Code, wages includes all the remuneration whether by salaries, allowances or otherwise. Basic pay, dearness allowance and retaining allowance are covered under the definition of wages.

But certain allowances don’t come under the wages for example bonus, value of house-accommodation, contribution to any pension and provident fund, conveyance or travelling allowance, house rent, overtime allowance and gratuity amount etc.

What employer will receive if he worked for more classes of work?

If any employee worked for two or more classes of work to which different minimum rate of wages applies, then he will be entitled for wages to each class of work according to the time occupied for such work. Such wages shall not below the minimum rate of wages.

What employee will receive on overtime work?

If minimum wages of any employee are fixed under this Code, and such employee worked for overtime on any day then he will be entitled for double of his normal wages for such period he worked for overtime.

Who is eligible for bonus?

Every employee who is getting salary as per specified by the Govt. through notification will be eligible for bonus. The second condition to become eligible is that the employee must have worked for at least 30 days in an accounting year.

 Who will become disqualified for bonus?

If any employee got dismissed from services for the following reasons then he will be disqualified for bonus:

  • Fraud.
  • Riotous or violent behaviour on the premises of establishment.
  • Theft, misappropriation or sabotage of any property of the establishment.
  • Conviction for sexual harassment.

The provisions related to payment of bonus shall not apply to the employees employed in the following establishments:

  • Life Insurance Corporation of India.
  • Seaman as defined under Merchant Shipping Act, 1958.
  • Employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948, and employed by registered or listed employers.
  • Establishment under the authority of any department of the Central govt. or State govt. or local authority.
  • Indian Red Cross Society or any other institution of a like nature including its branches.
  • Universities and other educational institutions.
  • Institutions including hospitals, chamber of commerce and social welfare institutions not for purpose of profit.
  • Reserve Bank of India.
  • Public sector financial institution other than a banking company, which the central govt. may, by notification, specify having regard to its capital structure, objectives and nature of its activities, the nature and extent of financial assistance or any concession given to it by the govt. and any other relevant factor.
  • Inland water transport establishments operating on routes passing through any other country.
  • Any other establishment which the appropriate govt. may exempt by notification.


The Code on Wages is an appreciable step to provide legal protection to the entire employees employed in organized or unorganized sectors. It provides uniform definitions to bring transparency and accountability to the implementation of the law. While the Code made a distinction between the employee and worker. But the separate definition of worker leaves room for confusion as the term worker is nowhere used in the Code except under the definition clause. Under all the provisions of the Code the word employee is used.

-Kiranpreet Kaur

Associate at Aggarwals & Associates, Mohali