Wage Code Implementation: Key Provisions Employee - Employer Must Know Detailed

On 21 November 2025, the Central Government notified the implementation of parts of the Code on Wages, 2019 through a notification published in the Gazette of India.

The notification states that from this date, sections 1 to 41, 42(4)-(9), 43 to 66, selected provisions of section 67, as well as sections 68 and 69 of the Code come into effect.

This is an important and bold step toward modernising wage laws in India by replacing four earlier labour laws with one unified Code:

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

MEANING OF EMPLOYEE & EMPLOYER UNDER CODE OF WAGES, 2019

Employee

According to the provision, "employee" means, any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union.

From this meaning, we can understand that it is universal coverage. The Code applies to all employees, regardless of industry, skill level, salary, or type of work. However , the members of the armed forces of the union were removed.

Every worker in India, factory worker, shop employee, delivery worker, office staff, etc., now has legal protection for wages, minimum wages and timely payment.

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Employer

The term “employer” under the Code on Wages, 2019 is defined broadly to cover every person or authority that has control over the employment and management of workers. It includes not only private individuals but also government departments, local authorities and even contractors.

In simple terms, an employer is anyone who hires one or more employees either directly or through another person and is responsible for the organisation or the establishment where those employees work.

In government establishments, the authority specified by the department head (or the department head himself if no authority is designated) is considered the employer. For local authority establishments, the chief executive of that authority is treated as the employer.

The definition also clarifies category-wise employers:

• Factories: The occupier of the factory as defined in the Factories Act, 1948 is the employer, and if a manager has been officially appointed under that Act, that manager is also considered the employer.
• Other establishments: The person or authority having ultimate control over the business operations is the employer, if such control is delegated to a manager or managing director, they too become the employer.
• Contractors: A contractor supplying labour or undertaking work is also treated as an employer in relation to the workers engaged through him.
• Legal representatives: If an employer dies, their legal representative is considered the employer for obligations under the Code.

SECTION 3: GENDER NEUTRAL PAY

Section 3 brings two extremely important mandates:

1. No discrimination in wages on the basis of gender
2. No discrimination in recruitment or employment conditions based on gender

Impact on Women Workers

Women performing the same work or similar work as men must receive the same wages. Employers cannot pay women less for similar work responsibilities, skills, effort, and conditions. Also, The law prohibits discrimination at the hiring stage. So, women cannot be rejected, avoided, or discouraged just because they are women.

SECTION 4

Section 4 of the Code on Wages, 2019 says that if there is any dispute about whether two jobs are the same or similar for the purpose of equal wages, that dispute will be decided by an authority notified by the appropriate Government(Central or State). This provision is important because Section 3 prohibits gender-based wage discrimination only when the work is “same or similar in nature.”

Why does this provision matter?

Employers often claim that men and women are doing “different” work to justify unequal pay. Employees, on the other hand, may argue that the work is the same in terms of skill, effort, responsibility, and working conditions. Therefore, Section 4 ensures that employers cannot unilaterally decide this.

Impact of this provision on Employees

This provision strengthens the position of employees by protecting them from unfair job classification that employers may use to justify unequal wages. Employees, irrespective of gender, can now challenge claims such as “your job is different,” or “your work requires only fewer skills,” as the dispute will no longer be decided by the employer but by an impartial government-appointed authority.

This authority will look at the actual nature of the work performed, not merely the job title or designation. As a result, if the authority concludes that the work done is the same or similar, the employee becomes entitled to equal wages, equal allowances and equal working conditions. It will improve the access to wage equality and workplace fairness.

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Impact of this provision on Employers

As per the first reading itself, the provision places a huge responsibility on employers, requiring them to justify any wage differences with clear and objective reasoning. If different wages are being paid, employers must be able to demonstrate that the roles genuinely differ in terms of skill, effort, responsibility or working conditions, and can no longer rely on job titles or cosmetic designations to defend disparities.

This pushes employers to develop clear job descriptions, objective criteria for wage-setting, and properly documented assessments of skill and responsibility levels to avoid disputes. Moreover, any attempt to misclassify roles or manipulate job distinctions to deny equal wages can expose employers to serious legal consequences, including wage claims, compensation orders and penalties under the Code.

SECTION 5 - 14 - MINIMUM WAGES

These Sections lay down the framework for minimum wages. Section 5 prohibits employers from paying any employee less than the minimum wage notified by the appropriate government. Sections 6 to 14 specify how minimum wages must be fixed, revised, and enforced, covering different types of work, wage periods, skill levels, working conditions and overtime requirements.

According to the provision, minimum wages must be fixed for both time work and piece work, making sure that workers paid per piece still receive at least the minimum equivalent of time wages.

The wages may be fixed by the hour, day, or month, and must be calculated as prescribed. While setting minimum wages, governments must consider skill levels (unskilled, semi-skilled, skilled, highly skilled) and geographical differences, and may also factor in arduous or hazardous conditions such as extreme temperature, underground work or high-risk tasks.

The Code further provides that minimum wages may consist of a basic wage, cost-of-living allowance, and the cash value of concessions such as essential commodities provided at subsidised rates.

It also sets up a formal process for fixing and revising minimum wages through committees of employers, employees and independent members, or through the publication of draft proposals. State or Central Governments must review or revise minimum wages at least once every five years, and the Central Government must fix a national floor wage, below which no State may set its minimum wages.

The provisions also regulate working hours, rest days, and overtime. Where minimum wages are fixed, governments can define normal working hours, mandate weekly rest days and set the seal on that the overtime is paid at not less than twice the normal rate.

Coming to the impact, the provisions provide protection to piece-rate workers by guaranteeing them at least the minimum equivalent of time wages. With the inclusion of cost-of-living allowance, wages can periodically adjust to inflation, supporting better living standards for workers as prices rise. The requirement of overtime payment at not less than twice the normal rate discourages excessive working hours while ensuring fair compensation when extra work is performed.

SECTION 15 - 25 - PAYMENTS OF WAGES, TIMELINES OF PAYMENT & DEDUCTIONS

According to the new code, wages must be paid in currency notes, coins, cheque, bank transfer, or electronic mode. Also, the code has the provisio that the government can mandate that certain establishments pay wages only by cheque or bank transfer for transparency.

Timelines for Payment of Wages

Additionally, employers have to fix a wage period daily, weekly, fortnightly, or monthly but no wage period can exceed one month, ensuring regular income for workers. The code also details the time-line for providing wages:

Wages must be paid strictly within specified timelines:

• Daily workers- end of the shift
• Weekly workers- last working day of the week
• Fortnightly- within 2 days after the fortnight
• Monthly- before the 7th of the next month

In case of resignation, dismissal, retrenchment or closure, final wages must be paid within 2 working days, ensuring timely financial settlement.

Deductions (Section 18)

No deduction can be made unless explicitly permitted by the Code. Allowed deductions include:

• fines, absence from duty, loss/damage due to negligence
• house accommodation, authorised amenities
• recovery of advances/loans
• income tax or statutory levies
• PF, pensions, insurance contributions
• cooperative society dues
• trade union fees (with written consent)

The total deductions cannot exceed 50% of wages in any wage period. If there is any excess, it must be recovered in later periods. If an employer deducts but fails to deposit the amounts (e.g., PF), the worker cannot be held responsible.

Additionally, with regards to fines, the code says that fines can be imposed only for acts/omissions approved by the Government, and only after giving the employee an opportunity to defend.

Fines cannot exceed 3% of wages, cannot be recovered in installments after 90 days, and cannot be imposed on workers below 15 years. All fines must be recorded and used only for purposes beneficial to workers.

Additionally, in the case of absence-based deductions, it must be proportionate to the period of absence. In cases of mass absence without notice (e.g., sudden concerted leave), deductions up to 8 days' wages may be allowed as per rules. Employers may deduct only the actual loss caused by an employee’s negligence, and only after giving the employee a chance to explain. All such deductions must be recorded.

Also, the code states that the deductions for house accommodation or employer-provided services can be made only if the employee has accepted them and only up to the actual value of the service.

In addition, the recoveries of advances taken before employment must begin from the first wage payment. The recoveries of advances or unearned wages taken after employment must follow conditions prescribed by the Government. Loans for housing or other approved purposes must follow prescribed limits and interest rules.

Exemption to these Rules

As per Section 25, this chapter does not apply to the government establishments. The provisions reads that “The provisions of this Chapter shall not apply to the Government establishments 35 unless the appropriate Government, by notification, applies such provisions to the Government establishments specified in the said notification.” That is the government employees will not be benefited from the timelines provided in this chapter.

SECTION 43 -50 - PAYMENT OF DUES, CLAIMS & AUDIT

As per the code, every employer must pay all amounts due under the Code to their employees. If the employer fails, the company, firm, association, proprietor, or any person owning the establishment becomes responsible.

Also, if wages cannot be paid because the employee has died or cannot be located:

• The amount must be paid to the nominated person, or
• If no nomination exists, deposited with a prescribed authority. Once paid or deposited, the employer’s liability ends.

The code also mandated that the governments must appoint authorities (not below Gazetted rank) to decide claims under the Code. The Section 45 highlights of this provision is that

• The authority may award compensation up to 10 times the unpaid amount.
• Claims should be resolved within 3 months.
• If the employer does not pay the ordered amount, it will be recovered as arrears of land revenue through the District Magistrate.
• Claims may be filed by the employee, a trade union, or the Inspector-cum-Facilitator.
• Applications can be filed within 3 years, with condonation of delay possible.
• Authorities have full civil court powers.
• Claims may be filed by the employee, a trade union, or the Inspector-cum-Facilitator.
• Applications can be filed within 3 years, with condonation of delay possible.
• Authorities have full civil court powers.

According to Section 46, any dispute about:

• fixation of bonus,
• eligibility for bonus, or
• applicability of bonus to public sector establishments is treated as an industrial dispute, bringing the Industrial Disputes Act, 1947 into play.

If an audited balance sheet and profit & loss account of a company is produced before the authority or Tribunal:

• It is presumed accurate unless proven otherwise.
• Trade unions/workers may seek clarifications, which the authority can direct the company to provide. For non-corporate employers:
• The authority may order an audit if required.
• If the employer refuses, the authority may get accounts audited at the employer’s cost.

Section 49: Appeal Mechanism

An employer or worker aggrieved by an order under Section 45 can file an appeal within 90 days to a higher-ranked officer appointed as the appellate authority. The appeal should ideally be disposed of within 3 months. Dues under appeal orders are recovered like land revenue.

Further, as per Section 50 of the code, employers must maintain registers of employees, attendance and wages, display notices showing wage rates, wage periods, payment dates, and Inspector’s details and issue wage slips in the prescribed format. There is an exemption to this that the small employers with not more than five employees for agricultural or domestic work are exempt, but must produce proof of wage payment upon demand.

OFFENCES AND PENALTIES

As per Section 52 of the code, no court can take cognizance of an offence under the Code unless a complaint is made by:

• the appropriate Government,
• an authorised officer,
• an employee,
• a registered trade union, or
• an Inspector-cum-Facilitator.

Only a Metropolitan Magistrate or Judicial Magistrate First Class can try offences, making sure that wage offences are handled by courts with higher competence.

Also, for certain offences, the Government can appoint senior officers (not below Under Secretary rank) to conduct enquiries and impose penalties. These officers may summon persons, call for documents, examine evidence, and impose penalties directly after enquiry.

Penalty for Employers

The Code provides strict consequences for employers who violate wage-related provisions. In cases of underpayment of wages, the employer may face a fine of up to ₹50,000 for the first offence, while any repeat offence committed within five years can lead to imprisonment for up to three months, or a fine of up to ₹1 lakh, or both.

For violations of any other provision of the Code, the employer can be fined up to ₹20,000, and repeat violations within five years attract imprisonment of up to one month, or a fine of up to ₹40,000, or both.

In case if there is a failure to properly maintain the required records carries a separate fine that may extend to ₹10,000. Importantly, before initiating prosecution for record-related violations, the Inspector-cum-Facilitator must first give the employer a written opportunity to comply within a specified time.

However, this chance for rectification is not available if the employer repeats the same type of violation within five years, in which case prosecution proceeds directly.

Additionally, if a company commits an offence, every person in charge of the business at that time, as well as the company itself, is deemed guilty. However, they can avoid punishment by proving the offence occurred without their knowledge, or they took due diligence to prevent it.

If the offence was committed with consent, connivance, or negligence of a director, manager or officer, that person is also liable. The term “company” includes firms, LLPs and associations.

COMPOUNDING OFFENCES

The Code allows certain offences specifically those not punishable with imprisonment alone to be compounded, meaning they can be settled by paying a prescribed amount to a Gazetted Officer authorised by the Government.

The compounding amount is fixed at 50% of the maximum fine applicable to that offence, offering employers a quicker resolution mechanism. However, this benefit is not available for second or subsequent offences committed within a period of five years, making sure repeated violators do not escape stricter action.

When an offence is compounded before prosecution, no legal case will be initiated, and if it is compounded after the prosecution has begun, the court must discharge the offender upon receiving notice of the compounding.

Also, if an employer fails to comply with the compounding order, an additional penalty equal to 20% of the maximum fine becomes payable.

OVERALL IMPACT OF THE CODE

The code guarantees many things for the employees, who are working at different levels and wages. This protects the employees working at different positions of the same organisation. In contrast, this code creates a lot of complications for the organisations. The organisation has to make sure that they do not discriminate against the workers based on their gender and should not hesitate to pay them differently. If there is any dispute on the nature of work, then they can proceed to the dispute resolving the issue which is provided in the Section 4 of the code.

Also, the organisations have to make sure that they are paying their employees wages on time as agreed and through the mode prescribed. This has a big impact on both employees and employers in all sectors. Even though keeping records is not mandatory for the employer who hires workers for domestic purposes below 5, the code has clearly said that the details should be provided when it is demanded. Thus, it makes clear that the including small employers should be careful while hiring workers and paying them. The offences and penalties clarify that the companies or the establishments have to be more careful in future.

However, the impact of Section 25 of Chapter 3 is huge as it is a favourable act for the government. The chapter states about the payment of wages, the timelines..etc. Thus, in such a case, when the government itself exempts them from part 3, then it will affect the government employees negatively. They will find it difficult to settle disputes on the delay in payment of wages or other deductions.

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