The formal notification of the Four New Labour Codes marks a pivotal transformation in India’s regulatory landscape, designed to unify 29 erstwhile labour laws into a technology-enabled, compliance-oriented framework.
As your strategic compliance partner, MYND is launching a series to help businesses navigate these comprehensive regulatory shifts.
In this first post, we dive into one of the most significant changes affecting your bottom line: The New Definition of ‘Wages’ under The Code on Wages 2019.
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Redefining ‘Wages’ and the 50% Rule
The new definition of ‘wages’ fundamentally reshapes payroll architecture and statutory expectations.
1. Inclusions and Exclusions: The new definition of wages explicitly includes basic pay, dearness allowance, and retaining allowance. It excludes specific components like house rent allowance (HRA), conveyance allowance, employer contribution to provident funds, and gratuity payable upon termination.
2. The Critical 50% Condition: A key element of the new definition is the conditional inclusion threshold. If the aggregate of the specified exclusions (like HRA, conveyance allowance, commission, etc.) exceeds 50% (or another notified percentage) of the employee’s total remuneration, the amount exceeding this threshold shall be ‘deemed’ as remuneration and added back into the definition of wages.
3. Impact on Statutory Benefits: This new, broadened definition of ‘Wages’ will form the uniform basis for computing various statutory benefits, including provident fund (PF), gratuity, and leave encashment.
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Businesses must act now to ensure strategic readiness before the expected effective date (21st November 2025):
✅ Assess and Identify: Employers must immediately assess their existing salary structures and identify the components currently being used to calculate statutory benefits.
✅ Redesign Salary Structures: It is essential to redesign salary components to effectively manage PF, ESI, and Gratuity exposure under the new legal framework.
✅ Review Service Rules: Companies should review and revise Service rules, employment agreements, and F&F (Full & Final) policies in line with the new regulatory requirements. Mitigating measures could involve restructuring salaries or capping statutory benefits.
Stay confident. As your compliance partner, MYND will support you end-to-end in transitioning to the unified labour framework.
* Note: All information on this post is sourced from official documentation published by the Ministry of Labour & Employment, Government of India. For detailed legal text and official notifications, please refer to the complete Labour Code documentation.
