Code on Wages, 2019 vs Existing Labour Laws: A Complete Comparison
India’s labour laws have long been known for their complexity and fragmentation. For decades, employers, HR professionals, and compliance officers have struggled to manage wage-related obligations due to multiple overlapping laws. The Code on Wages, 2019 represents a major step forward in modernizing India’s labour legislation. It integrates four important wage regulations into one streamlined code.
In this blog, we will explore how the Code on Wages differs from the earlier laws, what changes it brings, and how businesses can stay compliant with the new legal framework.
What is the Code on Wages, 2019?
The Code on Wages, 2019 is a key component of the government’s initiative to unify and modernize labour legislation in India. It was passed by the Parliament in August 2019. This Code merges four major legislations related to wages, payments, and equal remuneration:
The Minimum Wages Act, 1948
The Payment of Wages Act, 1936
The Payment of Bonus Act, 1965
The Equal Remuneration Act, 1976
The Code on Wages replaces these separate laws to create consistency in wage definitions and compliance procedures across industries and states.
Why Was the Code on Wages Introduced?
Before the implementation of the wage code, each labour law had different definitions of “wages,” applicability criteria, record-keeping requirements, and compliance formats. This created confusion, increased litigation, and made it difficult for businesses—especially those operating across multiple states—to remain compliant.
Outlined below are the main purposes of the Code on Wages:
To simplify wage-related compliance
To bring consistency to wage definitions across sectors
To extend wage-related protections to all workers, including unorganised sector workers
To promote gender equality in payment of wages
To implement digital inspections and record maintenance
Comparison: Old Labour Laws vs Code on Wages, 2019
Let’s compare the key elements of the earlier labour laws with the Code on Wages to understand what has changed:
Aspect | Earlier Laws | Code on Wages, 2019 |
Number of Laws | 4 separate Acts for wages, bonuses, and gender equality | 1 comprehensive Code |
Applicability | Minimum Wages Act applied only to scheduled employments | Applies to all industries and establishments, including unorganised sectors |
Definition of Wages | Different in each Act (e.g., basic pay in one, includes allowances in another) | Single uniform definition used for all purposes (PF, ESI, bonus, etc.) |
Minimum Wages | States notified minimum wages for specific scheduled jobs | Minimum wages to be notified for all employees, based on skill level and region |
National Floor Wage | No provision existed | It is within the Central Government’s jurisdiction to define the national floor wage |
Gender Equality | Covered separately under the Equal Remuneration Act | Gender neutrality embedded in the Code itself |
Payment of Wages Timeline | Monthly/weekly payments with separate rules under each Act | Standardized wage payment timelines based on nature of employment |
Bonus Eligibility | Applicable to establishments with 20 or more employees | Thresholds and applicability will be notified by the appropriate government |
Compliance System | Multiple registers and returns for different Acts | Digital registers and online submissions to reduce administrative burden |
Inspection System | Inspectors with punitive powers | Inspector-cum-Facilitator model to promote guidance and ease of compliance |
Penalties and Prosecution | Vary from Act to Act | Rationalized and uniform penalties for violations, with provision for compounding of offences |
Important Reforms Under the Code on Wages
The Code on Wages is designed to improve transparency, accountability, and ease of doing business. The following are some of its key highlights:
Uniform Definition of Wages
One of the most critical reforms is the introduction of a single definition of “wages” applicable for all components of labour laws, including gratuity, PF, ESI, and bonus. This helps avoid manipulation and legal disputes around wage structures.
Universal Minimum Wages
Unlike the old regime where only workers in scheduled employments were entitled to minimum wages, the Code ensures minimum wage protection for all employees in the organized and unorganized sectors.
National Floor Wage
The central government may fix a national floor wage below which no state can set its minimum wage. This helps bring consistency across states and ensures a basic income threshold.
Gender-Neutral Pay Structure
The Code prohibits gender-based discrimination in salary for equivalent work. The provision of equal remuneration for men and women is directly embedded in the new Code.
Timely Payment of Wages
Under the new Code, wage disbursement must follow clear timelines:
Daily wagers: end of the shift
Weekly employees: within 7 days
Monthly employees: before the 7th of the next month
Simplified Compliance
The Code provides for the digitization of compliance, including maintenance of records, returns, and inspection reports. This helps cut down on paperwork and streamlines administrative processes.
Who Needs to Comply with the Code?
All employers—whether running a small shop, large factory, IT company, or even a start-up—must comply with the provisions of the Code on Wages if they have employees on payroll. It applies to:
Private sector companies
Public sector undertakings
Government departments
Contractors and gig platforms
Shops, hotels, and establishments
Even establishments in the unorganised sector must comply with minimum wage and payment timelines.
Action Points for Employers
To comply with the Code on Wages, employers should:
Review and restructure salary components to align with the new wage definition.
Ensure that the minimum wages being paid are at or above the prescribed national floor wage.
Update employment contracts and offer letters.
Digitise payroll and record maintenance for audit readiness.
Train HR and compliance teams about the new wage norms.
Implement fair and non-discriminatory pay practices across gender lines.
Frequently Asked Questions (FAQs)
1. Is the Code on Wages applicable to small businesses?
Yes, the Code is applicable to all establishments, regardless of size, if they have employees.
2. Does the Code replace the Payment of Bonus Act?
Yes, the Code incorporates all provisions related to bonus payments under one framework.
3. What happens if a business does not comply?
Penalties include monetary fines and in some cases, imprisonment. However, the Code also allows for the compounding of certain offences.
4. Are contractors covered under this Code?
Yes. Contractors and manpower agencies are also required to follow the provisions of the Code on Wages.
Conclusion: A Step Toward Modern Labour Compliance
The Code on Wages, 2019 is a progressive law that aims to simplify wage compliance and ensure fair wages for every worker in India. By replacing outdated, fragmented laws, it brings clarity, consistency, and digital transparency to wage management.
For employers, this is the right time to upgrade payroll systems, revise HR policies, and stay informed about state-level wage notifications. Non-compliance can result in serious penalties, but with proper guidance, the transition can be smooth and beneficial for all stakeholders.
Need Help With Wage Compliance?
We at Praans Consultech specialize in labour law registration, compliance audits, wage restructuring, and smart compliance software to manage multi-location and pan-India operations.
Reach out to us today for expert guidance on the Code on Wages and more.
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