Understanding the Regulatory Framework

The Code on Wages applies universally to all employees across both organized and unorganized sectors, marking a significant departure from the previous regime where coverage was limited by wage ceilings and employment categories [2]. The Central Government retains jurisdiction over wage-related matters for establishments in railways, mines, oil fields, major ports, air transport services, telecommunications, banking, insurance, and public sector undertakings. State governments, meanwhile, govern wage determinations for all other establishments. This bifurcated approach ensures that wage regulation remains responsive to both national priorities and regional economic conditions.

One of the Code’s foundational elements is the concept of a “floor wage” to be fixed by the Central Government, taking into account the living standards of workers. This floor wage serves as a baseline below which no state government can set minimum wages, thereby addressing regional disparities while maintaining a minimum standard of living across the country. The appropriate governments must revise and review minimum wages at intervals not exceeding five years, ensuring that wage rates keep pace with economic changes and cost of living adjustments.

The Inspector-cum-Facilitator System

A significant innovation in the Code is the replacement of traditional inspectors with “Inspector-cum-Facilitators” appointed under Section 51 [3]. This fundamental shift in enforcement philosophy recognizes that compliance is best achieved through a combination of advisory support and regulatory oversight rather than purely punitive measures. The Inspector-cum-Facilitator serves a dual role: facilitating employer compliance through guidance and advice while retaining the authority to conduct inspections and initiate enforcement actions when necessary.

The Code empowers the appropriate government to establish an inspection scheme that includes provisions for web-based inspections and electronic calling of information related to inspections. This technology-driven approach enhances transparency and reduces the scope for discretionary or arbitrary enforcement actions. The Inspector-cum-Facilitator system also provides for randomized selection of inspections, ensuring that enforcement efforts are distributed fairly and that no particular employer faces disproportionate scrutiny without justification.

Graded Penalty Structure under the Code on Wages 2019

Section 54 of the Code establishes a carefully calibrated penalty structure that distinguishes between different types of violations and their severity [4]. For the offense of paying an employee less than the amount due under the Wage on Code 2019 provisions, a first-time offender faces a fine that may extend to fifty thousand rupees. This penalty addresses what is perhaps the most direct form of non-compliance: underpayment of wages that employees are legally entitled to receive. The monetary penalty serves as both a punishment for the violation and a deterrent against future non-compliance.

The Wage on Code takes a significantly stricter stance on repeat violations. If an employer, having been convicted of underpayment, commits a similar offense within five years from the date of the first violation, the consequences escalate dramatically. The second and subsequent violations attract imprisonment for a term that may extend to three months, a fine that may extend to one lakh rupees, or both. This escalating penalty structure reflects the legislative intent to give employers a fair opportunity to correct their practices while imposing serious consequences for persistent non-compliance.

For contraventions of other provisions, rules, or orders under the Code that do not involve direct wage underpayment, the penalty framework is somewhat less severe but still substantial. A first offense attracts a fine that may extend to twenty thousand rupees. Again, the Code provides for escalation in cases of repeated violations. If an employer commits a similar offense within five years of the first violation, the penalty increases to imprisonment for up to one month, a fine extending to forty thousand rupees, or both. This differentiated approach recognizes that while all violations deserve consequences, some breaches are more directly harmful to workers than others.

The Code also addresses the specific issue of record-keeping failures. Section 54(2) provides that if an employer fails to maintain records or maintains them improperly, they face a fine that may extend to ten thousand rupees. Proper maintenance of employment records, wage registers, and related documentation is essential for enforcement authorities to verify compliance and for workers to establish their entitlements. By penalizing record-keeping failures separately, the Code underscores the importance of transparent documentation in wage administration.

Prosecution Procedures and Safeguards

Section 52 establishes the framework for cognizance of offenses under the Code [5]. A court will take notice of an offense based on a complaint filed by the appropriate government, an authorized officer, an affected employee, a registered trade union, or an Inspector-cum-Facilitator. This broad standing provision ensures that wage violations can be brought to judicial attention through multiple channels, preventing employers from escaping accountability due to institutional inertia or worker vulnerability. Metropolitan Magistrates or Judicial Magistrates of the First Class have jurisdiction to hear and decide cases under the Code.

A critical procedural safeguard appears in Section 54(3), which requires the Inspector-cum-Facilitator to provide employers with an opportunity to comply before initiating prosecution proceedings. Before filing charges for violations of provisions other than wage underpayment or record-keeping failures, the Inspector-cum-Facilitator must issue a written direction specifying a time period for compliance. If the employer rectifies the violation within the stipulated period, no prosecution will be initiated. This provision acknowledges that many compliance failures stem from ignorance, inadvertence, or administrative difficulties rather than willful disregard of legal obligations.

However, this opportunity for compliance is explicitly denied to repeat offenders. If an employer commits a violation of the same nature within five years of a first violation, the Inspector-cum-Facilitator must initiate prosecution without offering any opportunity to rectify the breach. This exception to the compliance-first approach ensures that employers who demonstrate a pattern of non-compliance cannot indefinitely avoid criminal sanctions by making last-minute corrections each time they are caught.

Corporate Liability and Compounding of Offenses

Section 55 addresses offenses committed by companies, establishing that when a corporate entity violates the Wage on Code, both the company and every person who was in charge of and responsible for the conduct of the company’s business at the time of the offense shall be deemed guilty [6]. This provision prevents corporate employers from shielding individual decision-makers behind the corporate veil. However, it also provides a defense: a person can avoid liability by proving that the offense was committed without their knowledge or consent and that they had exercised all due diligence to prevent the commission of the offense.

The Wage on Code, 2019 recognizes that not all violations warrant criminal prosecution to conclusion. Section 56 provides for the compounding of certain offenses by a Gazetted Officer specified by the appropriate government. Offenses punishable only with fines, or with fines along with imprisonment, may be compounded for an amount not exceeding half the maximum fine authorized for the offense. This compounding mechanism serves multiple purposes: it reduces the burden on the criminal justice system, provides employers with a path to resolve violations through administrative settlement, and ensures that enforcement resources can be directed toward more serious or persistent violations.

Administrative Penalties Under Section 53 of the Code on Wages 2019

Section 53 of the Code on Wages 2019 establishes an alternative enforcement mechanism through administrative officers [7]. The appropriate government appoints officers not below the rank of Under Secretary to the Government of India or equivalent State Government officers to impose penalties in certain specified cases. These officers have the authority to adjudicate violations related to wage underpayment, contraventions of other Code provisions, and record-keeping failures, as well as violations of Section 56(7) concerning the composition of offenses. This administrative adjudication system provides a faster, less formal alternative to criminal prosecution for straightforward violations where the facts are not in serious dispute.

Judicial Interpretation and Legal Precedents

While the Code on Wages, 2019, has not yet generated extensive case law due to its phased implementation, the judicial interpretation of its predecessor statutes provides valuable guidance. In the landmark case of Bijay Cotton Mills Ltd. v. State of Ajmer, the Supreme Court upheld the constitutional validity of minimum wage legislation against challenges under Article 19(1)(g) of the Constitution [8]. The Court held that restricting an employer’s freedom to pay whatever wages they choose does not constitute an unreasonable restriction on the freedom to carry on business, particularly when such restrictions serve the constitutional goal of ensuring a living wage for workers as envisaged in Article 43.

The Supreme Court’s judgment in Unichoyi v. State of Kerala further reinforced this principle, observing that in an underdeveloped economy facing large-scale unemployment, workers might accept starvation wages out of desperation [9]. The Court recognized that minimum wage legislation serves to protect vulnerable workers from exploitation arising from their weak bargaining position. This judicial philosophy underlies the penalty provisions in the Code on Wages: employers who violate wage protections are not merely breaching contractual obligations but are undermining constitutional values and exploiting economic power imbalances.

Balancing Compliance and Business Ease

The penalties and prosecution framework under the Code on Wages reflects a deliberate effort to balance strict enforcement with ease of doing business. Unlike some previous legislation, where even first-time violations could result in imprisonment, the Code generally reserves custodial sentences for repeat offenders or those who demonstrate persistent disregard for their legal obligations. This approach aligns with the broader objective of India’s labour law reforms: to create an environment where compliance is achievable and violations are addressed proportionately.

The requirement that Inspector-cum-Facilitators provide compliance opportunities before initiating prosecution reflects an understanding that employers, particularly small and medium enterprises, may sometimes struggle with the complexities of labour law compliance. By giving employers a chance to correct violations once they are identified, the Code encourages voluntary compliance and reduces the adversarial nature of enforcement. At the same time, by explicitly denying this opportunity to repeat offenders, the Code on Wages ensures that employers cannot treat occasional penalties as merely a cost of doing business.

Implementation Challenges and Enforcement Realities

Despite the well-structured penalty framework, several challenges may affect the Code’s enforcement effectiveness. The requirement for written directions before prosecution, while promoting fairness, could potentially weaken deterrence if employers perceive they will always receive a warning before facing consequences. Additionally, the absence of mandatory timelines for claim disposal may lead to delays in adjudication, particularly in areas with high case volumes and limited administrative capacity.

The Code’s success in deterring violations will ultimately depend on the consistent and visible enforcement of its provisions. Research on regulatory compliance suggests that the certainty of detection and punishment often matters more than the severity of penalties. If employers believe they are unlikely to be caught or that enforcement is lax, even substantial penalties may fail to achieve their deterrent effect. The Code’s provision for web-based inspections and randomized selection of establishments for inspection represents an effort to enhance enforcement consistency and transparency.

Conclusion

The penalty and prosecution provisions of the Code on Wages, 2019, establish a nuanced enforcement regime that seeks to ensure employer compliance while respecting the practical realities of business operations. Through graded penalties that escalate for repeat violations, opportunities for voluntary compliance before prosecution, and a mix of criminal and administrative enforcement mechanisms, the Code creates multiple pathways for addressing wage violations. The framework reflects lessons learned from decades of labour law enforcement in India, attempting to correct weaknesses in previous legislation while maintaining strong protections for workers’ rights.

As implementation of the Code continues across Indian states, the effectiveness of its penalty provisions will become clearer. The true test will be whether these provisions succeed in changing employer behaviour, reducing wage violations, and ensuring that India’s workforce receives the wages they are legally entitled to. Given that the unorganized sector employs the vast majority of India’s workers and has historically been difficult to regulate, the Code’s enforcement mechanisms must prove robust enough to reach beyond traditional establishments while remaining practical enough to be consistently applied. Only time and careful monitoring will reveal whether the Code’s carefully calibrated approach to penalties and prosecution achieves its twin goals of protecting workers and promoting business compliance.

References

• PRS Legislative Research. “The Code on Wages, 2019.” Available at: https://prsindia.org/billtrack/the-code-on-wages-2019
• Wikipedia. “Code on Wages, 2019.” Available at: https://en.wikipedia.org/wiki/Code_on_Wages,_2019
• Shardul Amarchand Mangaldas. “The code on wages 2019: Key provisions.” Available at: https://www.amsshardul.com/insight/the-code-on-wages-2019-key-provisions/
• TaxGuru. “Offences and Penalties under Code on Wages, 2019.” Available at: https://taxguru.in/corporate-law/offences-penalties-code-wages-2019.html
• AAP Tax Law. “Section 52 Cognizance of offences, Section 53 Power of officers.” Available at: https://www.aaptaxlaw.com/code-on-wages-2019/section-52-cognizance-of-offences-53-power-of-officers-of-appropriate-government-impose-penalty-code-on-wages-2019.html
• Legal Window. “Offences and Penalties under Code on Wages, 2019.” Available at: https://legalwindow.in/code-on-wages-2019/
• TaxGuru. “Dissecting Code on Wages 2019.” Available at: https://taxguru.in/corporate-law/dissecting-code-wages-2019.html
• iPleaders. “Minimum Wages Act, 1948.” Available at: https://blog.ipleaders.in/minimum-wages-act-1948-2/
• Legal Service India. “The Constitutional Validity of The Minimum Wages Act,1948.” Available at: https://www.legalservicesindia.com/article/1770/The-Constitutional-Validity-of-The-Minimum-Wages-Act,1948.html

The post Penalties and Prosecution Under the Code on Wages 2019: Consequences of Non-Compliance appeared first on Bhatt & Joshi Associates.

Wage revision and fixation have remained central to India’s industrial relations framework since independence. The question of fair remuneration for workers has evolved from basic subsistence wages to structured periodic reviews that balance worker welfare with employer capacity. At the heart of this evolution lies a delicate equilibrium between ensuring dignified living standards for workers and maintaining the financial viability of enterprises. The introduction of the Code on Wages, 2019, which received Presidential assent on 8th August 2019, marks a watershed moment in India’s labour law landscape by consolidating four separate wage-related legislations into a unified framework for wage revision and fixation across all sectors.

The Code on Wages 2019 replaces the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976, bringing uniformity to wage determination across all sectors. While the code was notified in 2019, its implementation has been gradual, with the Central Government finally announcing its enforcement from 21st November 2025 [2]. This implementation represents one of the most significant labour law reforms since independence, affecting over 500 million workers across organized and unorganized sectors. Understanding the mechanisms of wage revision and fixation under the Code on Wages 2019 becomes crucial for both employers and employees navigating India’s changing industrial landscape.

Historical Context and Legislative Evolution

India’s journey toward structured wage determination began with the Minimum Wages Act, 1948, which established the principle that certain scheduled employments required minimum wage protection regardless of an employer’s ability to pay. This legislation was born from the recognition that market forces alone could not protect vulnerable workers from exploitation. The Act empowered both Central and State governments to fix and revise minimum wages for scheduled employments, creating a dual regulatory structure that continues to this day. However, the fragmented nature of wage legislation created complexities, with different laws governing different aspects of remuneration, leading to confusion and compliance challenges for employers.

The Minimum Wages Act, 1948, underwent numerous amendments over the decades, with periodic revisions attempted to keep pace with inflation and changing economic conditions. The Act categorized wages into minimum time rates, minimum piece rates, guaranteed time rates, and overtime rates, providing flexibility in wage determination based on work patterns. Yet, enforcement remained weak, with studies indicating that approximately 42 percent of wage earners received wages below the stipulated minimum wage floor [3]. This enforcement gap highlighted the need for a more robust framework that could extend wage protections universally while simplifying compliance mechanisms.

The Code on Wages, 2019, emerged from a larger initiative to consolidate India’s 44 labour laws into four comprehensive codes. Finance Minister Nirmala Sitharaman emphasized during the 2019 Union Budget speech that this consolidation would standardize definitions, streamline registration and filing processes, and reduce disputes arising from fragmented legislation. The wage code specifically introduces the concept of a national floor wage, which ensures that no state can fix minimum wages below a centrally determined baseline. This floor wage can vary across geographical areas based on regional cost of living differences, but it establishes a uniform minimum standard across the country.

The Code on Wages, 2019: Key Provisions

Universal Application and Floor Wage Mechanism

The most transformative aspect of the Code on Wages, 2019, is its universal application to all workers regardless of sector or wage ceiling. Unlike the Minimum Wages Act, 1948, which applied only to scheduled employments, the new code extends minimum wage protections to all categories of workers across organized and unorganized sectors. This expansion brings millions of previously uncovered workers under the protective umbrella of wage regulation, including gig workers, platform workers, and those engaged in unscheduled industries.

The introduction of a national floor wage represents a paradigm shift in wage determination. Under the code, the Central Government fixes a floor wage after obtaining advice from the Central Advisory Board and consulting with State Governments. The minimum rates of wages fixed by appropriate governments under the code cannot be less than this floor wage. Importantly, if existing minimum wages are already higher than the floor wage, they cannot be reduced, protecting workers from any downward revision. Different floor wages may be fixed for different geographical areas, acknowledging regional variations in living costs and economic conditions.

Periodic Revision Mechanism

Wage revision under India’s Code on Wages, 2019 mandates that minimum wages must be reviewed by central and state governments through a structured mechanism, while fixation of these wages occurs at intervals not exceeding five years. This five-year maximum revision period ensures that wages remain responsive to changing economic conditions, inflation rates, and cost of living adjustments. While fixing minimum wages, governments may consider factors including skill levels of workers and difficulty of work. The code provides for different wage structures including time work, piece work, and guaranteed time rates, offering flexibility in wage determination based on the nature of employment.

The Variable Dearness Allowance (VDA) mechanism continues under the new code, with the Central Government revising VDA twice annually based on changes in the Consumer Price Index for industrial workers. The most recent revision, effective from 1st October 2024, increased minimum wages across various categories, with unskilled workers’ daily wage reaching Rs. 783 and highly skilled workers’ wages touching Rs. 1,035 per day [4]. This biannual revision mechanism ensures that workers’ purchasing power remains protected against inflation, even between the five-yearly major wage revisions.

Judicial Interpretation: The Industry-Cum-Region Test

Foundational Principles from Supreme Court Jurisprudence

Indian courts have developed a rich jurisprudence around wage fixation, establishing principles that balance worker interests with employer capacity. The Supreme Court has consistently held that wage fixation must progress from minimum basic wages to need-based fair wages and ultimately to living wages. In landmark judgments, the Court articulated that minimum wages represent the floor below which no employer can operate, regardless of profitability or financial condition. Fair wages, meanwhile, must consider the industry’s capacity to pay while seeking to maintain and increase employment levels.

The industry-cum-region test has emerged as the cornerstone of judicial analysis in wage revision disputes. This test requires tribunals and courts to compare wages with similar industrial units in the same region, ensuring parity and preventing exploitation. However, this comparison cannot occur in a vacuum. The Supreme Court has emphasized that while wage scales should generally not be lower than comparable units in the region, the financial capacity of the employer remains a crucial factor that cannot be ignored.

The VVF India Ltd. Decision and Financial Capacity

The 2024 Supreme Court judgment in VVF Ltd. Employees Union v. M/s. VVF India Ltd. [5] crystallized the importance of employer financial capacity in wage determination. In this case, the employees’ union sought wage revisions to bring Mumbai workmen on par with counterparts in the Taloja unit of the same company. The Bombay High Court had directed certain wage revisions, but the Supreme Court reversed this decision, emphasizing that the High Court had failed to adequately consider the employer’s financial health despite evidence of losses.

The Supreme Court observed that while applying the industry-cum-region test for wage revision, the employer’s financial capacity must be considered alongside regional and industry benchmarks. The Court relied on its earlier decisions in A.K. Bindal v. Union of India and Mukand Ltd. v. Mukand Staff & Officers Association, which established that provisions for taxation and reserves must take second place to wage fixation and gratuity schemes, but this does not mean financial capacity can be entirely ignored. The judgment clarified that employers must account for their financial health when setting or revising wages, and transparent processes in wage determination help manage employee expectations and reduce disputes.

Implementation Challenges and State-Level Harmonization

The implementation of the Code on Wages, 2019, presents significant challenges despite its progressive framework. The code came into force on such date as the Central Government may appoint through official gazette notification, allowing for phased implementation of different provisions. This staggered approach acknowledges the complexity of transitioning from multiple state-specific wage regulations to a unified national framework. The Central Government announced full implementation from 21st November 2025, but the success of this implementation depends heavily on state-level rule-making and administrative preparedness.

Each state must now notify its own rules under the code, creating potential for significant variations between states on aspects like specific minimum wage rates, thresholds for applicability, and welfare schemes. This creates a risk of non-uniform regulatory environment, particularly for companies operating across multiple states. The challenge becomes acute in sectors like construction, agriculture, and domestic work, where state-level variations have historically been substantial. Employers must navigate these varied requirements while ensuring compliance with the overarching national floor wage and the five-year revision mandate.

The technological infrastructure required for effective implementation cannot be understated. The code envisions unified registration portals, electronic wage payment systems, and digital record-keeping mechanisms. The successful operation of these systems is crucial for enforcement, yet many states lack the robust technological platforms needed for seamless operation. Additionally, the code’s coverage of gig and platform workers requires new classification systems and contribution mechanisms that are still being developed. The transition from the old regime to the new code requires extensive training of labour inspectors, employers, and workers themselves about their rights and obligations under the reformed framework.

Impact on Different Worker Categories

Organized Sector Workers

Wage revision and fixation under India’s Code on Wages, 2019 affects different worker categories in distinct ways, with the framework creating both opportunities and challenges across organized and unorganized sectors. The principle of periodic wage revision remains intact, with the five-year maximum interval providing predictability for collective bargaining negotiations. However, the code’s universal application means that wage determination becomes more standardized, with clear benchmarks based on the national floor wage. Fixed-term employees, who were previously in a grey area, now receive explicit recognition with benefits on par with permanent workers, including gratuity eligibility after just one year of service instead of the previous five-year requirement.

The code’s provisions on bonus calculations remain largely similar to the Payment of Bonus Act, 1965, but bring greater clarity to dispute resolution. All employees whose wages do not exceed a government-notified monthly amount are entitled to an annual bonus of at least 8.33 percent of wages or Rs. 100, whichever is higher. Employers must also distribute a portion of gross profits among employees. These provisions, while not revolutionary, benefit from the code’s simplified compliance and dispute resolution mechanisms.

Unorganized Sector and Gig Workers

The true transformative potential of the Code on Wages, 2019, lies in its impact on unorganized and gig workers. Previously excluded from minimum wage protections due to their employment in unscheduled industries, millions of workers now gain access to statutory minimum wages and periodic revisions. The code recognizes gig workers and platform workers explicitly, requiring aggregators to contribute to social security funds. This recognition addresses the growing precarity in India’s expanding gig economy, where workers often lack basic employment protections.

For agricultural workers, domestic workers, and those in informal manufacturing, the universal floor wage provides unprecedented protection. However, the effectiveness of these protections depends entirely on enforcement mechanisms. The code strengthens inspector powers and imposes penalties ranging from Rs. 500 to Rs. 10,000 per underpaid employee, with imprisonment up to six months in severe cases [6]. Yet, the practical challenges of monitoring compliance in the unorganized sector remain formidable, requiring innovative approaches like worker helplines, community monitoring systems, and integration with digital payment platforms to track wage payments.

Gender Equality and Equal Remuneration

The Code on Wages, 2019, consolidates the provisions of the Equal Remuneration Act, 1976, prohibiting gender-based discrimination in wages for the same work or work of a similar nature. This prohibition now extends explicitly to transgender persons, marking an important step toward inclusive labour policies. Employers cannot discriminate on the ground of gender in matters relating to wages when the work performed is identical or of a similar nature. This provision applies universally across all employments covered by the code, eliminating sectoral gaps that existed under the previous regime.

The code also mandates that one-third of members on advisory boards, committees, and sub-committees must be women, ensuring female representation in wage-fixing deliberations. Additionally, the code permits women to work night shifts across all sectors, including mines and hazardous industries, subject to safety measures and consent provisions. This opening of employment opportunities must be accompanied by equal pay protections, ensuring that expanded access does not result in exploitation through lower wages. The code’s equal remuneration provisions provide legal recourse for workers facing gender-based wage discrimination, with claims authorities empowered to adjudicate disputes and order compensation.

Wage Payment Mechanisms and Timelines

The Code on Wages, 2019, modernizes wage payment mechanisms while retaining protections against delayed or incomplete payments. Wages may be paid through coins, currency notes, cheques, direct bank account credits, or electronic modes. This flexibility acknowledges the growing digitization of financial transactions while ensuring that workers without bank accounts can still receive wages through traditional means. Employers must fix wage periods as daily, weekly, fortnightly, or monthly, providing clarity on payment schedules.

The code specifies strict timelines for wage payment. For establishments with fewer than 1,000 workers, wages must be paid before the seventh day after the end of the wage period. For larger establishments employing 1,000 or more workers, payment must occur before the tenth day. These timelines prevent the accumulation of wage arrears and protect workers from financial uncertainty. Violations attract penalties, with claims authorities empowered to direct payment of delayed wages along with compensation.

Permissible deductions from wages remain regulated, with the code specifying that total deductions cannot exceed 50 percent of an employee’s total wage. Deductions may be made for fines, absence from duty, accommodation provided by the employer, recovery of advances, or other specified grounds. This cap on deductions prevents excessive wage garnishment that could leave workers unable to meet basic needs. The transparency requirements around deductions, including maintenance of detailed registers and records, further protect worker interests.

Compliance Requirements and Record-Keeping

Employers face enhanced compliance obligations under the Code on Wages, 2019, including detailed record-keeping requirements. Registers and records must document employee particulars, work performed, wages paid, receipts given, and other prescribed details. These records serve multiple purposes: facilitating government inspections, supporting wage dispute resolution, and ensuring transparency in employer-employee relationships. The shift toward digital record-keeping under the code promises to reduce paperwork burdens while improving accessibility for enforcement authorities.

Inspector-cum-facilitators appointed under the code have powers to inspect workplaces, examine registers, and investigate complaints. The code envisions a shift from purely punitive inspection regimes to facilitative approaches that help employers achieve compliance through guidance and support. However, inspectors retain enforcement powers, including the ability to initiate penalty proceedings for violations. The balance between facilitation and enforcement remains crucial for the code’s success, requiring careful training of inspection staff and clear procedural guidelines.

Future Directions and Living Wage Concept

Beyond the immediate provisions of the Code on Wages, 2019, India is exploring how wage revision and fixation can incorporate living wage concepts in collaboration with the International Labour Organization. A living wage exceeds basic minimum wages by covering essential social expenditures including housing, food, healthcare, education, and clothing. This concept represents the aspirational endpoint of wage policy, moving beyond subsistence to dignity and full participation in society. While implementation timelines remain uncertain, the dialogue around living wages signals a maturation of India’s labour rights discourse.

The five-year revision mechanism under the code provides a framework within which living wage considerations could be gradually incorporated. Each revision cycle offers an opportunity to assess progress toward living wage standards, benchmarking against international best practices and domestic cost-of-living studies. However, achieving living wages requires more than statutory mandate; it demands economic growth, productivity improvements, and equitable distribution of economic gains. The code’s emphasis on worker skill development and industry capacity building supports these broader objectives.

Conclusion

Wage revision and fixation under the Code on Wages, 2019, represents a fundamental restructuring of India’s labour law framework. By establishing universal minimum wage coverage, mandating periodic revisions at intervals not exceeding five years, and introducing a national floor wage, the code addresses long-standing gaps in worker protection. The consolidation of four separate legislations into a unified code simplifies compliance while strengthening enforcement mechanisms. The Supreme Court’s emphasis on balancing the industry-cum-region test with employer financial capacity provides clear guidance for adjudicating wage disputes.

Yet, the code’s success depends on effective implementation at state levels, robust technological infrastructure, and genuine commitment to enforcement in the unorganized sector where the majority of India’s workforce labors. The recognition of gig workers and platform workers, the prohibition of gender-based wage discrimination, and the streamlined payment mechanisms all point toward a more inclusive and modern labour regime. As the code comes into full force from November 2025, its impact will unfold over years, shaping not just wage levels but the broader character of industrial relations in India. The mechanisms established for periodic wage reviews will be tested through economic cycles, requiring vigilance from workers, employers, and government alike to ensure that the promise of fair wages translates into lived reality for India’s working millions.

References

[1] Code on Wages, 2019. The Gazette of India. Ministry of Law and Justice, 8 August 2019. Available at: https://labour.gov.in/sites/default/files/the_code_on_wages_2019_no._29_of_2019.pdf 

[2] “Four Labour Codes Come into Force from Today, Reforming 29 Existing Laws.” DD News, 21 November 2025. Available at: https://ddnews.gov.in/en/centre-implements-four-labour-codes-overhauling-29-existing-laws/ 

[3] “Minimum Wages Act 1948.” Wikipedia, November 2025. Available at: https://en.wikipedia.org/wiki/Minimum_Wages_Act_1948 

[4] “Latest Minimum Wages in India 2025.” ClearTax, 24 March 2025. Available at: https://cleartax.in/s/minimum-wages-in-india 

[5] VVF Ltd. Employees Union v. M/s. VVF India Ltd., 2024 INSC 293, Supreme Court of India, 15 April 2024. Available at: https://www.verdictum.in/court-updates/supreme-court/the-vvf-ltd-employees-union-v-vvf-india-limited-2024-insc-293-employees-union-wage-structure-1530686 

[6] “Minimum Wages Act 1948: Rules and Applicability.” ClearTax, 21 April 2025. Available at: https://cleartax.in/s/minimum-wages-act 

[7] “Code on Wages, 2019.” PRS Legislative Research, November 2025. Available at: https://prsindia.org/billtrack/the-code-on-wages-2019 

[8] “Analysis of Major Employment Law Decisions and Policy Changes in India (2024).” ICLG Employment & Labour Laws, 6 March 2025. Available at: https://iclg.com/practice-areas/employment-and-labour-laws-and-regulations/02-analysis-of-major-employment-law-decisions-and-policy-changes-in-india-2024 

[9] “A Guide to Minimum Wage in India.” India Briefing, November 2025. Available at: https://www.india-briefing.com/news/guide-minimum-wage-india-19406.html/ 

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India’s journey toward establishing wage equality has been marked by progressive legislative reforms aimed at eliminating discrimination in the workplace. The enactment of the Code on Wages, 2019 represents a watershed moment in Indian labour law, consolidating four separate enactments into a unified framework that addresses wage-related matters for all workers across organized and unorganized sectors. This consolidation demonstrates the government’s commitment to simplifying the complex web of labour regulations while strengthening protections against wage discrimination.

The Code on Wages received Presidential assent on August 8, 2019, and was published in the Official Gazette the same day [1]. This landmark legislation repealed and replaced the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976, bringing these diverse provisions under one comprehensive statute. The Code extends its protective umbrella to all employees in India, irrespective of their sector of employment or wage ceiling, thereby universalizing the right to minimum wages and timely payment. By replacing the gender-specific terminology of “men and women” with the inclusive term “gender,” the Code takes a progressive stance that recognizes the rights of transgender persons and other gender identities within its ambit.

Constitutional Foundations of Wage Equality

The principle of equal remuneration finds its constitutional moorings in Article 39(d) of the Indian Constitution, which is enshrined within Part IV containing the Directive Principles of State Policy. Article 39(d) explicitly states that “the State shall, in particular, direct its policy towards securing that there is equal pay for equal work for both men and women” [2]. Though Directive Principles are not directly enforceable in courts, they serve as fundamental guidelines for governance and policy formulation, representing the constitutional vision of establishing social and economic justice for all citizens.

The transformative judicial interpretation of this principle began with the landmark judgment in Randhir Singh v. Union of India delivered on February 22, 1982 [3]. In this seminal case, the Supreme Court held that while equal pay for equal work is not expressly declared as a fundamental right, it is certainly a constitutional goal capable of enforcement through constitutional remedies. Justice Chinnappa Reddy, speaking for the Court, observed that the principle is not a mere abstract doctrine but one of substantial importance. The Court established that Directive Principles must be read into fundamental rights as a matter of interpretation, thereby deriving the principle of equal pay from Articles 14 and 16 when read in conjunction with Article 39(d). The judgment emphasized that the Preamble to the Constitution declares India to be a Socialist Democratic Republic, and the word “Socialist” must mean at minimum “equal pay for equal work.”

This constitutional interpretation was further strengthened in subsequent judicial pronouncements. The Supreme Court has consistently reinforced that persons performing identical work under the same employer cannot be treated differentially merely because they belong to different departments or hold different employment statuses, provided all relevant considerations remain the same.

Legislative Framework: From Fragmented Laws to Unified Code

Prior to the Code on Wages, India’s legislative framework for wage regulation was scattered across multiple statutes. The Equal Remuneration Act, 1976 was enacted to provide for payment of equal remuneration to men and women workers and to prevent discrimination on the ground of sex against women in matters relating to employment. However, this Act suffered from several limitations that hampered its effectiveness in achieving true wage equality.

The Equal Remuneration Act adopted a narrow interpretation of “same work or work of a similar nature,” focusing primarily on identical job functions rather than recognizing the intrinsic value of different types of work [4]. This restrictive approach failed to account for the systematic undervaluation of female-dominated occupations such as caregiving, domestic labor, and other service-oriented roles. The Act also contained provisions under Section 16 that permitted the government to declare certain pay differences as non-discriminatory if based on factors other than sex, creating ambiguities that could be exploited to maintain wage disparities. Furthermore, the binary terminology of “men and women” excluded transgender persons and other gender identities from the Act’s protective scope.

The Code on Wages addresses these shortcomings through a more inclusive and robust framework. Section 3 of the Code prohibits discrimination in establishments among employees on the ground of gender in matters relating to wages for the same work or work of similar nature. The provision explicitly states that “there shall be no discrimination in an establishment or any unit thereof among employees on the ground of gender in matters relating to wages by the same employer, in respect of the same work or work of a similar nature done by any employee” [1]. The Code defines “same work or work of a similar nature” in Section 2(v) as work requiring the same skill, effort, experience, and responsibility when performed under similar working conditions, with any differences not being of practical importance in relation to terms and conditions of employment.

Substantive Provisions Ensuring Wage Equality

The Code on Wages, 2019 establishes multiple layers of protection against wage discrimination. Section 3(1) creates an affirmative obligation on employers, mandating that they must not differentiate between employees based on gender when paying wages for identical or similar work. This provision applies uniformly across all establishments regardless of size or sector, marking a significant departure from earlier legislation that often contained exemptions based on establishment size or industry classification.

Section 3(2) contains two critical prohibitions that strengthen the equal pay mandate. First, it prevents employers from reducing the wage rate of any employee for the purpose of complying with equal remuneration provisions, ensuring that wage parity is achieved by raising lower wages rather than lowering higher ones. Second, it prohibits gender-based discrimination in recruitment for the same work or work of similar nature, extending protection beyond wage payment to the initial hiring process itself. This recruitment protection applies to all terms and conditions of employment, with the sole exception being situations where employment of women in such work is prohibited or restricted by law.

The Code addresses potential disputes through Section 4, which empowers the appropriate government to notify authorities for deciding disputes regarding whether particular work constitutes the same or similar nature of work. This dispute resolution mechanism provides a formal channel for employees to challenge discriminatory classifications of their work without resorting immediately to litigation.

Minimum Wage Provisions and Universal Coverage

The Code on Wages, 2019 introduces a revolutionary concept of floor wage under Section 9, which requires the Central Government to fix a floor wage taking into account minimum living standards of workers. This floor wage serves as a baseline below which no State Government can fix minimum wages in their jurisdiction. The provision allows for different floor wages for different geographical areas, recognizing regional variations in cost of living and economic conditions [1].

Section 6 empowers the appropriate government to fix minimum rates of wages for time work or piece work, with specific provisions for ensuring that piece workers receive at least the minimum time-based wage. The Code mandates that minimum wages must be reviewed and revised at intervals not exceeding five years, ensuring regular updates to reflect changing economic realities. In fixing minimum wages, governments must primarily consider the skill levels of workers, categorizing them as unskilled, skilled, semi-skilled, or highly-skilled, and may additionally account for geographical areas and arduousness of work including factors like temperature, humidity, or hazardous conditions.

The universal applicability of minimum wage provisions represents a fundamental shift from earlier legislation. Previously, the Minimum Wages Act, 1948 covered only certain scheduled employments, leaving vast segments of the workforce without statutory wage protection. The Code extends minimum wage coverage to all employees across organized and unorganized sectors, eliminating arbitrary exclusions and ensuring comprehensive protection for India’s diverse workforce.

Judicial Interpretation and Case Law Development

Indian courts have played a pivotal role in developing the jurisprudence around equal pay for equal work, progressively expanding its scope and application. Beyond the foundational Randhir Singh judgment, the principle has been applied and refined through numerous subsequent decisions that have addressed various dimensions of wage discrimination.

The Supreme Court in State of Punjab v. Jagjit Singh, decided on October 26, 2016, addressed the critical issue of wage parity between temporary and permanent employees [5]. The Court held that the principle of equal pay for equal work constitutes a clear and unambiguous right vested in every employee, whether engaged on a regular or temporary basis. The judgment emphasized that in a welfare state, an employee engaged for the same work cannot be paid less than another performing identical duties and responsibilities, as such action strikes at the foundation of human dignity. The Court ruled that temporary employees performing similar duties and functions as permanent employees are entitled to draw wages at par with similarly placed permanent employees at the minimum of the pay scale, though not necessarily entitled to all allowances. This decision has had far-reaching implications for millions of contract and temporary workers across India.

However, the courts have also recognized that the equal pay principle is not a mechanical formula applicable in all situations. The Supreme Court has clarified that for the principle to apply, there must be complete identity of work, qualifications, responsibilities, and conditions of service. The judiciary has maintained that equation of posts and determination of pay scales primarily falls within the executive domain, and courts will interfere only when discrimination is clearly established and lacks rational basis.

Implementation Mechanisms and Enforcement

The Code on Wages, 2019 establishes robust implementation mechanisms to ensure compliance with its provisions. Central and State Advisory Boards are constituted under Section 42, with one-third of members required to be women. These boards advise governments on fixation and revision of minimum wages, increasing employment opportunities for women, and other matters related to the Code. The mandatory inclusion of women in these advisory bodies ensures that gender perspectives are incorporated into wage policy formulation.

Section 45 creates a comprehensive claims mechanism by empowering governments to appoint authorities not below the rank of Gazetted Officer to hear and determine claims arising under the Code. These authorities possess powers equivalent to civil courts for taking evidence and enforcing attendance of witnesses. Significantly, applications can be filed not only by affected employees but also by trade unions or Inspector-cum-Facilitators, enabling collective action and official intervention when individual workers may hesitate to approach authorities independently. The limitation period for filing claims is three years, providing reasonable time for workers to seek redress while maintaining administrative efficiency.

Inspector-cum-Facilitators appointed under Section 51 serve dual functions of ensuring compliance and providing guidance to employers and workers. They possess extensive powers to inspect establishments, examine workers, require production of documents, and even search and seize relevant records when violations are suspected. The Code emphasizes a facilitative approach, requiring Inspector-cum-Facilitators to first provide employers with written direction and reasonable time to comply before initiating prosecution for non-maintenance or improper maintenance of records.

Penalties and Deterrence Framework

The Code prescribes stringent penalties for violations to ensure effective deterrence. Section 54 establishes a graduated penalty structure that distinguishes between different types of violations and repeat offenses. An employer paying less than the amount due to employees faces a fine extending to fifty thousand rupees for the first offense. For subsequent similar offenses within five years, the penalty escalates to imprisonment for up to three months or fine extending to one lakh rupees, or both. This escalating penalty structure reflects the serious view taken of persistent violations.

Interestingly, the Code provides for compounding of offenses under Section 56, allowing first-time offenders to resolve violations by paying fifty percent of the maximum fine prescribed for the offense. However, this compounding facility is not available for repeat offenders within five years, ensuring that habitual violators cannot simply treat penalties as a cost of doing business. The burden of proof in cases alleging non-payment or underpayment of wages rests on the employer under Section 59, shifting the evidentiary burden in favor of workers who typically have limited access to relevant records.

Persistent Challenges in Achieving Wage Equality

Despite the comprehensive legislative framework and supportive judicial pronouncements, significant challenges persist in achieving genuine wage equality in India. Occupational segregation remains a fundamental barrier, with women concentrated in lower-paying sectors and occupations. Cultural attitudes that undervalue women’s work, particularly in caregiving and domestic roles, perpetuate wage disparities even when formal discrimination is prohibited.

The Code on Wages, 2019 is limited to addressing “same work or work of a similar nature” rather than adopting the broader principle of “work of equal value,” a point criticized by commentators [6]. The concept of equal value, recognized in international instruments like the ILO Equal Remuneration Convention, 1951, holds that different types of work requiring comparable skill, effort, and responsibility should receive similar remuneration, even if the specific tasks differ. By not embracing this principle, the Code on Wages, 2019 may fail to address the systematic undervaluation of female-dominated occupations that require equivalent qualifications and effort as male-dominated roles but command lower wages.

Implementation challenges also persist, including limited awareness of legal rights among workers, inadequate resources for enforcement agencies, and social pressures that discourage women from asserting their rights. The informal sector, where the majority of women workers are employed, presents particular difficulties for enforcement despite the Code’s theoretical universal coverage.

Comparative Perspectives and International Standards

India’s approach to wage equality can be contextualized within international frameworks and comparative experiences. The ILO Equal Remuneration Convention, 1951, which India ratified in 1958, promotes the principle of equal remuneration for work of equal value. This principle extends beyond identical work to encompass different jobs that are nevertheless of equal value when assessed on criteria of skill, effort, responsibility, and working conditions.

The United Kingdom’s Equality Act, 2010 provides a more expansive framework, distinguishing between like work, work rated as equivalent, and work of equal value. Under this framework, courts have found professions as diverse as clerical assistants and warehouse operatives, or nursery nurses and architectural technicians, to be of equal value despite their different nature [6]. Such comparative examples illustrate possibilities for more comprehensive approaches to addressing wage discrimination that accounts for systematic undervaluation of certain types of work.

Conclusion and Future Directions

The Code on Wages, 2019 represents significant progress in India’s journey toward eliminating wage discrimination and establishing comprehensive protections for all workers. By consolidating disparate legislation, adopting gender-neutral terminology, introducing universal minimum wage coverage, and establishing robust enforcement mechanisms, the Code on Wages, 2019 creates a strong foundation for wage equality.

However, legislative reform alone cannot eliminate deeply entrenched wage disparities. The Code’s effectiveness will depend on vigorous implementation, adequate resource allocation to enforcement agencies, sustained awareness campaigns to educate workers about their rights, and continued judicial vigilance in interpreting provisions broadly to advance substantive equality. Future reforms might consider adopting the principle of work of equal value, strengthening provisions addressing indirect discrimination, and developing more nuanced approaches to addressing occupational segregation and undervaluation of female-dominated work.

The constitutional vision articulated in Article 39(d) remains aspirational rather than fully realized. Achieving genuine wage equality requires not merely formal legal equality but transformation of social attitudes, workplace cultures, and economic structures that perpetuate discrimination. The Code on Wages provides essential legal tools, but their effectiveness depends on sustained commitment from government, employers, workers’ organizations, and society at large to translate legal mandates into lived reality for India’s diverse workforce.

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Introduction

The Code on Wages, 2019 represents a watershed moment in India’s labour law reform, consolidating four separate legislations into a unified framework that extends wage protection to every worker in the country. Enacted on August 8, 2019, this transformative legislation amalgamated the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976, into a single, streamlined code.[1] The most revolutionary aspect of this reform is the introduction of universal minimum wage coverage, extending protection to workers in both the organized and unorganized sectors who were previously excluded from wage security. At the heart of this reform lies a dual-tier wage structure comprising the floor wage and minimum wage, concepts that fundamentally reshape how wages are determined and protected across India’s diverse economic landscape.

The Historical Context of Wage Legislation in India

Before understanding the floor wage and minimum wage distinction, it is essential to appreciate the fragmented nature of India’s pre-2019 wage legislation. The Minimum Wages Act, 1948, which governed wage fixation for over seven decades, suffered from significant limitations. It covered only scheduled employments, leaving approximately 60 percent of India’s workforce without any statutory wage protection. Different states had vastly different minimum wage rates, creating regional disparities that often failed to reflect the actual cost of living. Workers in identical occupations received dramatically different wages depending solely on their state of employment, with rates ranging from INR 160 per day in Bihar to INR 423 per day in Delhi under the old framework.[2] This geographical arbitrariness, combined with inconsistent revision mechanisms, necessitated a complete overhaul of the wage determination system.

Understanding the Floor Wage: The National Baseline

Definition and Constitutional Mandate

The floor wage represents a groundbreaking innovation in Indian labour law. Section 9 of the Code on Wages, 2019 empowers the Central Government to fix a floor wage, defined as the absolute minimum wage that must be paid to workers across the country, taking into account minimum living standards. This provision states that “The Central Government shall fix floor wage taking into account minimum living standards of a worker in such manner as may be prescribed.” The floor wage serves as a constitutional guarantee that no worker, regardless of their geographical location or occupation, can be paid below this threshold. Unlike minimum wages that vary by state and occupation, the floor wage establishes a uniform national baseline that protects the dignity of labour throughout India.

Methodology for Determining Floor Wage

The determination of floor wage is governed by a consultative process designed to balance economic realities with worker welfare. Before fixing the floor wage, the Central Government must obtain advice from the Central Advisory Board and consult with State Governments. The Draft Rules under the Code specify that the floor wage should be calculated based on minimum living standards, considering food, clothing, and housing requirements for a family of three consumption units.[3] This calculation draws from recommendations of various expert committees over the decades, including the principles established by the 15th Indian Labour Conference in 1957, which suggested considering factors like food requirements of 2,700 calories per average Indian adult, clothing needs of 72 yards per annum per family, and housing rent corresponding to the minimum area provided under government industrial housing schemes.

Geographical Variations and Revision Mechanisms

Recognizing India’s economic diversity, the Code permits different floor wages for different geographical areas. This flexibility acknowledges that living costs in metropolitan areas significantly exceed those in rural regions. However, the Code mandates that floor wages be revised at intervals, though it does not impose the same mandatory five-year revision requirement that applies to minimum wages. This asymmetry has been criticized by labour experts who argue that floor wage revisions should be equally regular to maintain their effectiveness as a living wage benchmark. The Standing Committee on Labour in 2019 had recommended prescribing a specific methodology for floor wage determination to eliminate arbitrariness, but this recommendation remains partially addressed in the final legislation.

The Minimum Wage: State-Level Determinations

Fixation Authority and Procedure

While the floor wage is fixed by the Central Government, minimum wages are determined by appropriate governments—either Central or State—depending on the nature of the establishment. Section 6 of the Code mandates that appropriate governments fix minimum rates of wages payable to employees, considering factors such as skill levels (unskilled, semi-skilled, skilled, and highly-skilled workers), geographical areas, and arduousness of work including temperature, humidity, hazardous processes, or underground work.[1] The fixation process requires either appointing committees to hold inquiries and make recommendations, or publishing proposals for public comment with at least two months’ notice before implementation. This dual-track approach ensures that wage fixation balances expert opinion with stakeholder feedback.

Components and Structure of Minimum Wages

Minimum wages can comprise three possible structures as outlined in Section 7 of the Code. The first option includes a basic rate of wages plus a dearness allowance that adjusts periodically to match cost of living variations. The second structure combines the basic rate with or without dearness allowance, along with the cash value of concessions for essential commodities supplied at concessional rates. The third option provides an all-inclusive rate incorporating the basic rate, dearness allowance, and cash value of any concessions. This structural flexibility allows governments to adapt wage packages to local economic conditions and employment practices. The dearness allowance component, in particular, serves as an automatic stabilizer, protecting workers from inflation by recalculating wages based on Consumer Price Index changes typically every six months.

Mandatory Revision Requirements

One of the most significant improvements introduced by the Code is the mandatory review and revision of minimum wages at intervals not exceeding five years. Section 8(4) explicitly states that “The appropriate Government shall review or revise minimum rates of wages ordinarily at an interval not exceeding five years.” This provision addresses a chronic problem under the Minimum Wages Act, 1948, where many states failed to revise wages for extended periods, allowing inflation to erode workers’ real incomes. The five-year maximum interval ensures that wage rates remain relevant to contemporary economic conditions, though states retain the flexibility to revise wages more frequently if economic circumstances warrant such action.

The Relationship Between Floor Wage vs. Minimum Wage

The Non-Reduction Principle

The most critical aspect of the dual-tier system is the relationship established in Section 9(2) of the Code, which declares that “The minimum rates of wages fixed by the appropriate Government under section 6 shall not be less than the floor wage.” This provision creates an inviolable floor beneath which no state or sector-specific minimum wage can fall. Furthermore, the Code incorporates a crucial anti-regression clause stating that if existing minimum wages are already higher than the floor wage, governments cannot reduce those wages to align with the floor wage. This protection ensures that the introduction of a national floor wage does not result in downward harmonization of wages in states that have historically maintained higher wage standards.

Bridging Regional Disparities

The floor wage mechanism directly addresses India’s notorious regional wage disparities. States like Kerala, which has historically maintained higher minimum wages, will continue to do so, while states with depressed wage rates will be compelled to elevate their minimum wages to at least the national floor level. This creates a convergence effect, narrowing the gap between the highest and lowest wage states without penalizing states that have invested in better labour standards. For workers in states that previously had no minimum wage coverage for certain occupations, the floor wage provides immediate protection. For example, domestic workers and agricultural labourers in many states lacked any wage protection under the old regime, but now benefit from the universal floor wage guarantee.

Legal Framework Governing Wage Compliance

Prohibition on Underpayment

Section 5 of the Code establishes a clear prohibition: “No employer shall pay to any employee wages less than the minimum rate of wages notified by the appropriate Government.” This provision, combined with the floor wage requirement, creates a two-tiered protection system. Employers must pay at least the state-notified minimum wage for the relevant occupation and skill level, which itself cannot fall below the national floor wage. The definitional clarity provided in Section 2(v) defining “same work or work of a similar nature” as work requiring the same skill, effort, experience, and responsibility under similar working conditions further strengthens enforcement by preventing employers from circumventing wage requirements through minor job classification manipulations.

Enforcement Through Inspector-cum-Facilitators

The Code replaces the traditional inspector regime with Inspector-cum-Facilitators who serve dual functions. These officers, appointed under Section 51, not only conduct inspections but also advise employers and workers on compliance with wage provisions. Before initiating prosecution for wage violations, Inspector-cum-Facilitators must provide employers an opportunity to rectify non-compliance through written directions specifying a compliance period. This facilitative approach aims to encourage voluntary compliance rather than relying solely on punitive measures. However, this opportunity for correction is not available for repeat offenders who commit similar violations within five years of an earlier violation, ensuring that the facilitation mechanism is not abused by chronic violators.

Penalties for Wage Violations

The penalty structure under Section 54 of the Code establishes graded consequences for wage violations. Employers who pay less than the statutorily due amount face fines up to INR 50,000 for first offenses. Significantly more severe penalties apply to repeat offenders: those convicted of similar offenses within five years face imprisonment up to three months, fines up to INR 1,00,000, or both. This escalating penalty structure aims to deter systematic wage theft while providing first-time violators an opportunity to correct their practices. Additionally, Section 45 empowers designated authorities to award compensation up to ten times the claim amount, creating a strong financial disincentive for wage violations beyond the direct criminal penalties.

Judicial Interpretation and Constitutional Framework

The Randhir Singh Precedent

The constitutional foundation for equal pay principles was firmly established in Randhir Singh v. Union of India (1982), where the Supreme Court held that “equal pay for equal work” is not merely an abstract doctrine but a constitutional goal capable of enforcement through Articles 14, 16, and 39(d) of the Constitution.[4] Justice Chinnappa Reddy’s judgment declared that while equal pay for equal work is not explicitly enumerated as a fundamental right, it represents a constitutional mandate derived from the right to equality and the directive principle requiring equal pay for equal work. The Court emphasized that directive principles must be read into fundamental rights as a matter of interpretation, making them judicially enforceable when violations involve irrational discrimination. This precedent directly supports the floor wage mechanism by establishing that wage fixation cannot be arbitrary and must ensure substantive equality.

Application to the Code’s Provisions

The principles articulated in Randhir Singh provide constitutional validation for the Code’s dual-tier wage system. The floor wage serves as a mechanism to eliminate the type of arbitrary wage disparities that the Supreme Court condemned in that case. By establishing a national baseline below which no worker can be paid, the Code operationalizes the constitutional commitment to equal pay for equal work across geographical boundaries. The prohibition against reducing existing minimum wages when they exceed the floor wage reflects the Court’s holding that equality principles prevent downward adjustments designed merely to create uniformity. This jurisprudential foundation insulates the Code’s wage provisions from constitutional challenges based on Articles 14 and 16.

Implementation Challenges and Practical Considerations

Delayed Notification and Enforcement

Despite receiving presidential assent in August 2019, the Code on Wages remains only partially implemented as of 2025. Only provisions related to the constitution of the Central Advisory Board have been enforced through a notification dated December 18, 2020.[5] The substantive wage-related provisions, including the floor wage mechanism, await notification by both central and state governments. This implementation delay stems from the need for states to draft corresponding rules and align their existing wage structures with the new framework. The prolonged transition period has created uncertainty for both employers and workers, as the four pre-existing acts technically remain in force until the Code’s full implementation. This situation underscores a persistent challenge in Indian labour law reform: the gap between legislative enactment and actual enforcement.

Methodological Ambiguities

A significant practical challenge lies in the absence of a clearly prescribed methodology for calculating the floor wage. While the Draft Rules specify considering minimum living standards based on food, clothing, and housing for a family of three consumption units, they do not provide specific quantitative parameters or calculation formulas. This ambiguity grants considerable discretion to the Central Government in determining the floor wage amount, potentially leading to political considerations overshadowing objective needs assessment. Labour economists have highlighted this gap, noting that expert committee recommendations over the decades have proposed varying calculation methods, but the Code does not mandate adherence to any specific approach. Without transparent, formula-based calculations, the floor wage risks becoming a negotiated political figure rather than a scientifically determined living wage.

Comparative Perspective: Floor Wage vs. Living Wage

The floor wage concept in the Code on Wages represents India’s approach to establishing a national wage baseline, but it differs from the “living wage” concept being pursued in international labour standards. A living wage, as defined by the International Labour Organization, encompasses not just subsistence needs but also enables workers and their families to afford decent living standards including healthcare, education, and some discretionary income. India has expressed interest in establishing a living wage framework by 2025 in collaboration with the ILO, which would set an even higher threshold than the current floor wage contemplates. The floor wage focuses primarily on minimum living standards regarding food, clothing, and housing, representing a more modest baseline than comprehensive living wage standards. This distinction is significant: while the floor wage prevents absolute poverty-level wages, it may not provide sufficient income for workers to escape working poverty or achieve meaningful economic security.

Impact on Different Worker Categories

Unorganized Sector Workers

The Code’s universal application represents a transformative change for unorganized sector workers who previously lacked wage protection. Agricultural labourers, domestic workers, construction workers, and other informal sector employees now fall within the Code’s protective ambit. The floor wage mechanism is particularly significant for these workers, as many states had no minimum wage notifications for their occupations under the previous regime. For example, domestic workers in several states operated in a legal vacuum with no statutory wage protection whatsoever. The Code’s universal coverage principle, combined with the floor wage, extends a basic wage guarantee to these vulnerable workers for the first time. However, enforcement challenges remain acute in the informal sector, where employment relationships are often undocumented and workers lack bargaining power to demand statutory wages.

Interstate Migrant Workers

Interstate migrant workers face particular wage vulnerabilities due to their mobility and frequent lack of knowledge about local wage regulations. The floor wage mechanism provides these workers with a portable wage floor that applies regardless of where they work in India. Previously, migrant workers moving from low-wage states to high-wage states often found themselves paid at their origin state’s rates rather than the destination state’s higher rates. The Code’s provisions, particularly the requirement that minimum wages must exceed the floor wage everywhere, create a national baseline that protects migrants from exploitation based on their origin state’s lower wage standards. However, this protection depends heavily on effective implementation and worker awareness, both of which require sustained enforcement efforts.

Economic Arguments and Counterarguments

Employment Effects

Critics of stringent minimum wage and floor wage provisions argue that artificially elevated wages may reduce employment opportunities, particularly in labour-intensive industries where wage costs constitute a significant portion of total expenses. Classical economic theory suggests that wage floors above market-clearing rates create unemployment by pricing low-productivity workers out of the labour market. Some economists have applied this critique to the Code’s floor wage mechanism, suggesting it may discourage hiring in low-wage states and sectors. However, empirical evidence on minimum wage effects in developing economies presents a more nuanced picture. Studies in various Indian states have found that moderate increases in minimum wages have not produced significant negative employment effects, partly because informal sector compliance remains imperfect and partly because productivity gains offset wage costs.

Formalization Incentives

Proponents of the Code’s wage provisions argue that universal floor wages create incentives for formalization by reducing the cost advantage that informal, non-compliant employers enjoy over formal, compliant businesses. When all employers must pay at least the floor wage, formal sector employers face less competition from informal operators who previously undercut them through wage suppression. This leveling effect may encourage informal enterprises to formalize, expanding the tax base and extending social security coverage. Additionally, higher wage floors increase workers’ purchasing power, potentially stimulating demand in the economy. The multiplier effects of wage increases, particularly for low-income workers who spend most of their earnings on consumption, may offset any modest employment reduction through increased economic activity.

International Comparisons and Best Practices

India’s dual-tier wage system with a national floor wage and state-level minimum wages resembles approaches in federal systems like Australia and Canada, where national standards coexist with regional variations. Australia’s national minimum wage, set by the Fair Work Commission, establishes a floor beneath which state awards cannot fall, similar to India’s structure. However, Australian minimum wages are substantially higher relative to median incomes and are adjusted annually based on economic indicators including inflation, productivity growth, and living costs. Canada’s system involves both federal and provincial minimum wages, with workers entitled to the higher applicable rate. These international examples demonstrate that national wage floors can coexist with regional variations while maintaining higher absolute standards than India currently contemplates. Countries like the United Kingdom have successfully implemented national living wage policies that exceed basic minimum wage levels, providing models for India’s aspiration to transition from floor wages to living wages.

Future Directions and Reform Possibilities

As India moves toward full implementation of the Code on Wages, several reforms could strengthen the floor wage mechanism. Establishing a transparent, formula-based methodology for calculating floor wages would reduce discretion and increase predictability. Implementing automatic indexation of floor wages to inflation would maintain their real value without requiring repeated government notifications. Creating regional variations in floor wages based on objective cost-of-living indices could balance national standards with local economic realities more effectively. Strengthening enforcement mechanisms, particularly in the informal sector, remains crucial for translating legal rights into actual wage protection. Enhanced coordination between central and state labour departments, supported by digital wage tracking systems, could improve compliance monitoring. Finally, moving toward living wage standards rather than mere subsistence floor wages would align India with progressive international labour standards and support the government’s goal of inclusive growth.

Conclusion

The Code on Wages, 2019 represents a significant advancement in India’s labour law framework by establishing universal minimum wage coverage and introducing the floor wage concept as a national baseline. The dual-tier structure of floor wages and minimum wages creates a safety net that theoretically protects all workers while allowing states flexibility to set higher standards based on local conditions. The prohibition against wage reductions ensures that progressive states are not penalized for maintaining higher standards. However, the effectiveness of these provisions depends entirely on implementation, which remains incomplete years after enactment. The absence of a clearly defined floor wage calculation methodology, combined with enforcement challenges in the informal sector, raises questions about whether the Code’s promise of universal wage protection will be fully realized. Nevertheless, the Code establishes a legal and institutional framework that, if properly implemented and enforced, could significantly reduce wage inequality and provide genuine economic security to India’s workers. The success of this reform will ultimately be measured not by the elegance of its legislative design, but by its impact on the wages actually received by the most vulnerable workers in India’s economy.

References

[1] The Code on Wages, 2019 (No. 29 of 2019), Ministry of Labour and Employment, Government of India. Available at: https://labour.gov.in/sites/default/files/the_code_on_wages_2019_no._29_of_2019.pdf 

[2] India Briefing. (2025). A Guide to Minimum Wage in India. Available at: https://www.india-briefing.com/news/guide-minimum-wage-india-19406.html/ 

[3] PRS Legislative Research. (2019). Draft Rules under Code on Wages, 2019. Available at: https://prsindia.org/billtrack/draft-rules-under-code-on-wages-2019 

[4] Randhir Singh v. Union of India & Ors., AIR 1982 SC 879. Available at: https://indiankanoon.org/doc/1230349/ 

[5] Neeti Niyaman. (2025). Code on Wages, 2019: Key Provisions Explained. Available at: https://neetiniyaman.com/code-on-wages-2019/ 

Authorized and Published by Dhruvil Kanabar

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Introduction

India’s journey toward gender equality in the workplace has traversed from addressing wage discrimination to breaking barriers in the most challenging sectors. This transformation reflects not merely policy changes but a fundamental shift in recognizing women’s rightful place across all spheres of employment. The evolution from ensuring equal remuneration to enabling women’s participation in underground mining operations demonstrates the progressive expansion of gender equity principles in Indian labor legislation.

The Constitutional Foundation of Gender Equality

The constitutional mandate for gender equality in employment finds its roots in Article 39(d) of the Indian Constitution, which directs the State to secure equal pay for equal work for both men and women [1]. This directive principle established the philosophical foundation upon which subsequent legislation would be built. Article 14 guarantees equality before law, while Article 15 prohibits discrimination on grounds including sex. These constitutional provisions created the framework within which labor laws addressing gender disparities would emerge.

The Equal Remuneration Act 1976: A Watershed Moment

The Equal Remuneration Act 1976 emerged as a direct response to systematic wage discrimination faced by women workers across sectors. Enacted following India’s ratification of the International Labour Organization’s Equal Remuneration Convention 1951, this legislation prohibited discrimination in remuneration between men and women workers for performing the same work or work of similar nature [2]. The Act imposed a statutory obligation upon employers to pay equal remuneration regardless of gender while simultaneously prohibiting discrimination in recruitment for the same or similar work.

The practical implementation mechanism established under the Act required employers to maintain registers documenting employee details, nature of work performed, and wages paid. Central and State Advisory Committees were constituted to monitor compliance and recommend measures for improving women’s employment opportunities. Penalties for violations ranged from fines up to twenty thousand rupees to imprisonment, creating a deterrent against discriminatory practices. The Act’s overriding effect ensured that its provisions would prevail over conflicting contracts, agreements, or awards, establishing the supremacy of gender equality principles in wage determination.

Judicial Interpretation: The Air India vs Nargesh Meerza Landmark

The Supreme Court’s decision in Air India vs Nargesh Meerza (1981) represented a pivotal moment in India’s gender equality jurisprudence [3]. The case challenged Regulations 46 and 47 of Air India’s Service Regulations, which mandated retirement of air hostesses at age thirty-five, upon marriage within four years of service, or on first pregnancy. These restrictions had no parallel for male flight pursers, creating stark gender-based discrimination in employment conditions.

The Supreme Court’s judgment struck down the provision mandating retirement upon first pregnancy as unconstitutional, recognizing it as arbitrary and violative of Articles 14 and 15 of the Constitution. The Court emphasized that whether a woman would continue service after childbirth remained her personal choice, not a matter for employer interference. The judgment further invalidated the Managing Director’s discretionary power to extend service as it enabled arbitrary discrimination between air hostesses. While the Court upheld certain age-based distinctions as reasonable classification, it firmly rejected provisions rooted in gender stereotypes about women’s capabilities and roles.

The ruling established critical precedents regarding the interpretation of equality provisions. It clarified that while reasonable classification based on legitimate occupational requirements remained permissible under Article 14, discrimination based solely on biological characteristics like pregnancy violated fundamental rights. This judgment influenced subsequent reforms across public and private sectors, compelling organizations to eliminate discriminatory service conditions.

The Code on Wages 2019: Modernizing Pay Equity

The Code on Wages 2019, which received Presidential assent on August 8, 2019, consolidated four separate legislations including the Equal Remuneration Act 1976 into a unified framework [4]. This consolidation represented more than administrative efficiency; it embodied a progressive expansion of equality principles. Section 3 of the Code prohibits gender-based discrimination in wages for the same work or work of similar nature, extending protection beyond the binary framework of male and female to encompass all genders.

The Code introduced the concept of floor wages, establishing a national minimum below which no state government could set wages. This provision addressed regional disparities while ensuring baseline wage protection across geography and sectors. The universal application of minimum wage provisions, moving beyond the earlier schedule-based system, extended protection to approximately seventy percent of the workforce previously excluded. This expansion particularly benefited women in informal sectors who constituted a substantial portion of unprotected workers.

The Code’s gender-inclusive language marked significant progress in recognizing diverse gender identities. By replacing references to male and female workers with the term gender, the legislation acknowledged and protected transgender persons and individuals of non-binary gender identities. This alignment with the Transgender Persons (Protection of Rights) Act 2019 created a more inclusive legal framework for employment equality. The Code also removed Section 16 of the earlier Act, which had empowered government to declare wage differences as non-discriminatory, eliminating a provision that enabled arbitrary validation of unequal pay.

Breaking Underground Barriers: The Mines Act Amendments

The Mines Act 1952 originally imposed stringent restrictions on women’s employment in mining operations. Section 46 of the Act prohibited women from working below ground in any mine and restricted above-ground work to hours between six in the morning and seven in the evening [5]. These provisions, framed during an era when protective legislation often perpetuated gender stereotypes, effectively excluded women from core mining operations and advancement opportunities requiring underground experience.

Representations from women employees, mining companies, and students pursuing mining engineering courses highlighted how these restrictions denied women equal employment opportunities in the mining sector. The prohibitions created career impediments for women mining engineers who could not gain underground experience necessary for supervisory and managerial positions. Mining companies also pointed to the shortage of qualified personnel and the need for gender diversity in technical roles.

In a transformative policy shift, the Ministry of Labour and Employment issued notifications in January 2019 exempting women from Section 46 restrictions, subject to specific safeguards [6]. For above-ground operations including opencast workings, women could now be deployed between seven in the evening and six in the morning. For underground mines, women could work between six in the morning and seven in the evening in technical, supervisory, and managerial roles where continuous presence was not required.

The exemption imposed mandatory conditions to ensure safety and dignity. Written consent from the concerned woman employee became prerequisite for deployment. Employers were required to provide adequate facilities and safeguards regarding occupational safety, security, and health. Deployment needed to conform to Standard Operating Procedures framed based on guidelines issued by the Chief Inspector of Mines. Critically, women had to be deployed in groups of not less than three, recognizing safety concerns in male-dominated work environments.

Regulatory Framework and Implementation Mechanisms

The regulatory framework for gender equity in mining involves multiple layers of oversight and compliance mechanisms. The Directorate General of Mines Safety, operating under the Ministry of Labour and Employment, bears responsibility for ensuring compliance with safety provisions. Mine owners must develop and implement Standard Operating Procedures addressing specific concerns related to women’s employment, covering aspects from facility provision to emergency response protocols.

The implementation guidelines emphasize several critical elements. Separate changing rooms, sanitary facilities, and rest areas must be provided for women workers. Transportation arrangements ensuring safe commute during night hours become mandatory. Lighting at work sites and access routes requires enhancement to meet safety standards. Communication systems enabling immediate contact with security personnel and emergency services must be established. Regular safety training specific to women’s deployment contexts forms part of the mandatory protocol.

The requirement for written consent creates documentation establishing voluntary participation while providing an opt-out mechanism. However, the effectiveness of consent provisions depends on genuine alternatives being available and economic compulsions not rendering choice illusory. The mandatory group deployment of at least three women simultaneously addresses safety-in-numbers concerns while creating peer support structures. These provisions recognize that formal equality of opportunity must be accompanied by substantive measures addressing ground realities.

Challenges and Critiques of the Mining Sector Reforms

The removal of restrictions on women’s mining employment has drawn mixed responses from various stakeholders [7]. Trade unions and workers’ rights organizations have raised concerns about whether enabling women to work in hazardous conditions at night represents genuine advancement or equal opportunity for exploitation. Mining ranks among the most dangerous occupations globally, with India being identified by the International Labour Organization as among the three most hazardous countries for miners.

Critics argue that night work carries specific health implications, with studies indicating increased health problems for women working night shifts. The male-dominated environment of mining operations raises legitimate concerns about sexual harassment and assault risks, particularly during night hours when supervision may be limited. The requirement of three women together may prove inadequate for genuine safety in workplaces where women constitute a small minority. Questions arise about whether consent obtained in contexts of economic necessity truly reflects free choice.

Proponents of the reforms emphasize that denying women opportunities in a sector based on paternalistic assumptions about their needs perpetuates rather than eliminates discrimination. Women mining engineers and professionals have advocated for equal access to all roles and shifts, viewing restrictions as barriers to career advancement. The reforms open pathways to higher-paying supervisory and managerial positions previously inaccessible due to lack of underground experience. Coal India Limited, employing approximately three hundred thousand workers with twenty percent women in supporting functions, now has expanded opportunities for women in core operational roles.

Comparative Analysis with International Standards

India’s evolution in gender equality legislation must be understood within the context of international labor standards. The ILO Equal Remuneration Convention 1951, which India ratified in 1958, established the principle of equal remuneration for work of equal value [8]. This concept extends beyond equal pay for identical work to encompass work requiring comparable skill, effort, responsibility, and working conditions, even when job content differs significantly.

Indian legislation has historically employed the narrower formulation of equal pay for the same work or work of similar nature. This approach limits comparisons to roles that are substantially identical, proving less effective in addressing gender pay gaps arising from occupational segregation where women cluster in undervalued sectors. The European Union’s Pay Transparency Directive and Iceland’s Gender Equality Act exemplify broader approaches requiring assessment of work value using objective, gender-neutral criteria encompassing qualifications, effort, responsibility, and working conditions.

Regarding mining sector participation, India’s progressive stance of removing blanket restrictions while mandating safety measures aligns with evolving international practice. Many countries have moved away from protective legislation that categorically excluded women from certain occupations, recognizing such provisions as discriminatory rather than protective. The focus has shifted to ensuring safe working conditions for all workers regardless of gender, with specific provisions addressing harassment and violence prevention.

The Path Forward: Substantive Equality in Practice

The expansion of gender equity from pay equality to underground mining access represents significant legal progress. However, formal legal equality must translate into substantive equality in practice. Several challenges require ongoing attention to realize the full promise of these reforms. Implementation gaps between legislative intent and ground reality persist, with enforcement mechanisms needing strengthening to ensure compliance across diverse establishments.

The persistence of gender pay gaps despite legislative prohibition indicates the need for enhanced monitoring and transparency mechanisms. Pay audits, mandatory reporting of wage data disaggregated by gender, and stronger penalties for violations could improve compliance. The narrow interpretation of same work or similar nature in judicial decisions limits the legislation’s effectiveness in addressing gender segregation and undervaluation of female-dominated occupations. Moving toward the work of equal value standard would better address systemic pay inequity.

In the mining sector, genuine equality requires more than removing restrictions. Creating inclusive workplace cultures where women can work safely and advance professionally demands sustained effort. This includes zero-tolerance policies for sexual harassment with robust complaint mechanisms, adequate representation of women at all levels to normalize their presence, training programs addressing gender sensitivity for all employees, and mentorship opportunities supporting women’s career progression. Infrastructure investments in proper facilities demonstrate organizational commitment beyond mere legal compliance [9].

The intersection of gender with other identity markers including caste, class, disability, and religion creates compounded discrimination requiring attention. Intersectional approaches recognizing how multiple marginalized identities interact prove essential for addressing the experiences of women from scheduled castes, scheduled tribes, and minority communities. Policy frameworks must evolve to address not only gender but the full spectrum of workplace discrimination.

Conclusion

India’s trajectory from the Equal Remuneration Act 1976 through the Code on Wages 2019 to the removal of mining sector restrictions demonstrates expanding recognition of gender equality as a fundamental principle. This evolution reflects changing societal understanding about women’s capabilities and rights. The legal framework has progressed from addressing explicit wage discrimination to dismantling structural barriers preventing women’s full participation across all sectors and roles.

The journey remains incomplete. Statistics indicate that India ranks poorly on global gender gap indices, with the economic gender gap being particularly pronounced. Women’s labor force participation remains significantly lower than men’s, with substantial pay disparities persisting across sectors. The reforms opening mining sector access offer opportunities but also present challenges requiring vigilant monitoring to ensure safety and dignity.

The true measure of these reforms will be their impact on women’s lives, economic security, and workplace experiences. Legal provisions create necessary frameworks, but cultural change, institutional commitment, and consistent enforcement determine whether formal equality translates into substantive justice. As India continues its development trajectory, ensuring that women participate fully and equitably in economic opportunities remains both a rights imperative and a development necessity. The expansion from pay equity to underground mining access charts a progressive direction, with the ultimate destination being workplaces where gender imposes no artificial barriers to any worker’s potential.

References

[1] Constitution of India, Article 39(d). Available at: https://www.indiacode.nic.in/handle/123456789/2448

[2] The Equal Remuneration Act, 1976. Available at: https://labour.gov.in/sites/default/files/theequalremunerationact1976_2.pdf

[3] Air India v. Nargesh Meerza, AIR 1981 SC 1829. Available at: https://indiankanoon.org/doc/1778777/

[4] The Code on Wages, 2019. Available at: https://labour.gov.in/sites/default/files/the_code_on_wages_2019_no._29_of_2019.pdf

[5] The Mines Act, 1952. Available at: https://labour.gov.in/sites/default/files/theminesact1952.pdf

[6] Ministry of Labour & Employment, Government of India. “Rules to Allow Employment of Women in Mines” Press Information Bureau, February 4, 2019. Available at: https://pib.gov.in/newsite/PrintRelease.aspx?relid=187977

[7] Jha, Praneta. “Allowing Women to Work Nights in Mines Is ‘Equal Opportunity For Exploitation'” People’s Dispatch, February 8, 2019. Available at: https://peoplesdispatch.org/2019/02/08/allowing-women-to-work-nights-in-mines-is-equal-opportunity-for-exploitation/

[8] ILO Equal Remuneration Convention, 1951 (No. 100). Available at: https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C100

[9] International Bar Association. “Rethinking Indian Law on Equal Pay: Towards Gender Pay Equality in Workplace” Available at: https://www.ibanet.org/rethinking-Indian-law-on-equal-pay-towards-gender-pay-equality-in-workplace

The post The Expansion of Gender Equality: From Pay to Underground Mines appeared first on Bhatt & Joshi Associates.

Introduction

The landscape of employment compensation in India has undergone a fundamental transformation with the introduction of the Code on Wages, 2019. This landmark legislation, which consolidates four pre-existing labor laws, has redefined how wages are calculated and structured across the nation. While the reform aims to bring uniformity and fairness to wage determination, it carries significant implications for both employers and employees, particularly concerning take-home salaries and long-term benefits. The restructuring mandated by this legislation represents one of the most significant changes to India’s labor framework since independence, affecting millions of workers across all sectors.

Understanding the Code on Wages, 2019

Legislative Framework and Consolidation

The Code on Wages, 2019 received Presidential assent on August 8, 2019, marking a historic moment in Indian labor law reform [1]. This legislation emerged from a broader government initiative that began in 2015 to consolidate India’s complex web of 44 labor laws into four streamlined codes. The Code on Wages specifically amalgamates the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976 into a single, unified framework. The consolidation was driven by the need to simplify compliance procedures, reduce ambiguity in wage-related definitions, and extend protections to a broader segment of the workforce, particularly those in the unorganized sector who constitute approximately 93% of India’s total working population.

The Redefined Concept of Wages

The most consequential change introduced by the Code on Wages, 2019 relates to the definition of wages itself. Prior to this legislation, various labor laws contained at least twelve different definitions of wages, creating confusion and enabling employers to manipulate salary structures to minimize statutory obligations [2]. The new definition under the Code establishes that wages include salary, allowance, or any other monetary component expressed in terms of remuneration. However, it specifically excludes certain elements such as bonuses payable under any law, house rent allowance, conveyance allowance, traveling concessions, employer contributions to pension or provident funds, gratuity, retrenchment compensation, and other retirement benefits. Most significantly, the Code mandates that basic wages along with dearness allowance and retaining allowance must constitute at least 50% of the total wage or Cost to Company (CTC). This provision fundamentally alters how salary packages are structured across Indian industries.

The Fifty Percent Rule and Its Ramifications

Mandatory Basic Wage Structure

The requirement that basic wages must comprise a minimum of 50% of the total remuneration package represents the cornerstone of the new wage code’s impact on employee compensation. Previously, many employers maintained basic salaries as low as 30-40% of the CTC, allocating larger proportions to various allowances. This practice allowed organizations to minimize their statutory obligations toward provident fund, gratuity, and other benefits that are calculated based on basic wages. Under the new regime, if an employee’s total CTC is Rs. 50,000 per month, the basic salary along with dearness allowance must be at least Rs. 25,000, with the remaining Rs. 25,000 comprising other permissible allowances [3]. This restructuring ensures that statutory contributions are calculated on a more substantial base, thereby strengthening the social security net for employees while simultaneously increasing the cost burden on employers.

Impact on Provident Fund Contributions

The increase in the basic wage component directly affects Employee Provident Fund contributions, which are calculated at 12% of the basic salary for both employer and employee. When basic wages increase from 40% to 50% of the CTC to comply with the new code, the provident fund deductions rise proportionately without any corresponding increase in the overall CTC. For instance, with a monthly CTC of Rs. 50,000, if the basic salary increases from Rs. 20,000 to Rs. 25,000, the monthly PF contribution (combined employer and employee) increases from Rs. 4,800 to Rs. 6,000. This additional Rs. 1,200 monthly deduction translates to Rs. 14,400 annually, which directly reduces the employee’s take-home salary. While this results in lower immediate disposable income, it significantly enhances long-term retirement savings, with employees potentially building a substantially larger retirement corpus over their working lives.

Gratuity Calculation Changes

Gratuity payments, governed traditionally by the Payment of Gratuity Act, 1972, are now calculated based on the expanded definition of wages under the Code on Wages, 2019. Previously, gratuity was computed only on basic salary and dearness allowance. Under the new framework, the calculation base now includes basic salary and all allowances except house rent allowance and conveyance allowance. This expanded computation base means that employees will receive significantly higher gratuity amounts upon retirement, resignation, or termination. For an employee who has worked for twenty years with a final drawn salary structure where the wage component (as per the new definition) is Rs. 40,000 per month, the gratuity calculation would yield substantially more than under the previous system where only basic and dearness allowance of say Rs. 25,000 would have been considered. This change represents a major enhancement in terminal benefits for employees, though it increases the financial liability for employers who must maintain adequate provisions for these obligations.

Regulatory Oversight and Implementation

Central and State Government Roles

The Code on Wages, 2019 establishes a dual regulatory framework where both central and state governments exercise jurisdiction over wage-related matters. The central government retains authority over employments in sectors such as railways, mines, oil fields, and other specified industries, while state governments regulate wages for all other employments within their jurisdictions. Both levels of government are empowered to fix minimum wages, review them at intervals not exceeding five years, and take into account factors such as skill levels and difficulty of work when determining wage rates [4]. The Code also mandates the constitution of Central and State Advisory Boards comprising representatives from employers, employees, independent persons, and state government representatives. These boards play a consultative role in advising governments on wage fixation, increasing employment opportunities, and ensuring gender parity in the workforce. The establishment of these advisory mechanisms ensures that wage determinations are made through a participatory process involving all stakeholders.

Enforcement Mechanisms and Penalties

The Code on Wages incorporates stringent enforcement provisions to ensure compliance with its requirements. Section 17 of the Code stipulates that wages must be paid within two working days in cases of removal, dismissal, retrenchment, or resignation. This provision significantly compresses the timeline for final settlement compared to previous practices where delays were commonplace. The Code also specifies that wages may be paid through coins, currency notes, cheques, bank transfers, or electronic modes, bringing wage payment mechanisms into alignment with digital payment systems. Regarding deductions from wages, Section 18 permits deductions only on specific grounds including fines, absence from duty, accommodation provided by the employer, or recovery of advances, but mandates that total deductions cannot exceed 50% of the employee’s wages. Violations of the Code’s provisions attract penalties, and the legislation establishes a framework for employees or registered trade unions to file complaints with appropriate authorities for adjudication and remedial action.

Judicial Interpretations and Precedents

The Vivekananda Vidyamandir Judgment

The Supreme Court’s judgment in The Regional Provident Fund Commissioner (II) West Bengal vs. Vivekananda Vidyamandir and Others (2019) represents a landmark decision that significantly influenced the conceptual framework underlying the Code on Wages [5]. In this case, the Supreme Court was required to determine whether various special allowances paid to employees should be included in ‘basic wages’ for the purpose of computing provident fund contributions under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. The Court, in a bench comprising Justices Arun Mishra and Navin Sinha, held that the crucial test for inclusion of any allowance as part of basic wages is one of ‘universality.’ The judgment established that all allowances which are universally, uniformly, necessarily, and ordinarily paid to all employees or to all employees in a particular category must form part of basic wages for PF computation purposes. The Court clarified that for an allowance to be excluded from basic wages, the employer must demonstrate that the allowance is variable, linked to incentives for production resulting in greater output, or is not paid across the board to all eligible employees. This judgment effectively prevented employers from camouflaging wage components as allowances to evade provident fund obligations, and its principles have been incorporated into the conceptual framework of the Code on Wages.

Historical Precedents on Minimum Wages

The Supreme Court’s decision in U. Unichoyi and Others vs. The State of Kerala (1961) provides foundational jurisprudence on the philosophy underlying minimum wage legislation in India [6]. In this case, the Court addressed challenges to the validity of the Minimum Wages Act, 1948 and a notification issued by the Kerala Government fixing minimum wage rates for the tile industry. The petitioners argued that the wage rates were fixed without considering the capacity of employers to pay, rendering the notification ultra vires. The Supreme Court, in its judgment delivered by Justice P.B. Gajendragadkar, upheld both the Act and the notification, emphasizing that the primary objective of minimum wage legislation is to prevent the exploitation of labor and ensure that workers receive wages sufficient for their sustenance and efficiency. The Court observed that in an underdeveloped country facing large-scale unemployment, labor might be compelled to accept even starvation wages, and it is the duty of the legislature to intervene through statutory minimum wages to prevent such exploitation. The judgment clarified that the capacity of employers to pay is not a relevant consideration when fixing minimum wages, as the statute aims to establish a floor below which wages cannot fall, regardless of economic conditions faced by individual employers. This principle continues to inform wage policy in India and underpins the provisions of the Code on Wages regarding national floor-level minimum wages.

Practical Implications for Stakeholders

Impact on Employees

For employees, the implementation of the Code on Wages presents a paradoxical situation where immediate financial circumstances may worsen even as long-term security strengthens. The increase in basic wages to meet the 50% threshold results in higher statutory deductions for provident fund and potentially for Employee State Insurance contributions where applicable. An employee earning a CTC of Rs. 8,00,000 annually might see their monthly take-home salary decrease by Rs. 2,000 to Rs. 5,000 depending on their existing salary structure and the extent of restructuring required. This reduction occurs because allowances, which were previously paid in full without deductions, are now converted into basic wages subject to provident fund deductions. However, this restructuring simultaneously ensures that employees build significantly larger retirement savings through enhanced PF accumulation. Additionally, the higher basic wage component means substantially increased gratuity payments upon separation from service. For workers in the unorganized sector, the Code’s universal applicability represents a major advancement, extending statutory wage protections and social security benefits to segments of the workforce that were previously excluded under the earlier patchwork of legislation that covered only about 40% of India’s workers.

Challenges for Employers

Employers face substantial operational and financial challenges in transitioning to the new wage structure mandated by the Code on Wages. Organizations must undertake detailed salary restructuring exercises, ensuring that the basic wage component of every employee’s compensation package meets the 50% minimum threshold while maintaining overall cost structures within sustainable limits [7]. This restructuring requires careful analysis of each employee’s current compensation breakdown, identification of allowances that can be reclassified as basic wages, and recalculation of all statutory obligations. The increased basic wage component results in higher provident fund contributions by employers, increased gratuity liability provisions, and potentially higher costs under various other employee benefit schemes that calculate contributions based on basic wages. Many organizations have historically maintained lower basic wage percentages specifically to manage these statutory costs, and the mandated restructuring could increase overall employee costs by 10-15% for some employers. Companies must also update their payroll systems, revise employment contracts to reflect the new salary structures, communicate changes transparently to employees to manage concerns about reduced take-home pay, and ensure absolute compliance to avoid penalties under the enforcement provisions of the Code.

Gender Equity and Equal Remuneration

Non-Discrimination Provisions

The Code on Wages incorporates strong provisions prohibiting gender-based discrimination in wage matters and recruitment processes. Section 3 of the Code explicitly mandates that employers shall not discriminate on the ground of sex in matters related to wages and recruitment for the same work or work of similar nature. The legislation defines work of similar nature as work requiring the same skill, effort, experience, and responsibility, thereby establishing objective criteria for comparison. This provision consolidates and strengthens the protections that were previously contained in the Equal Remuneration Act, 1976, which the Code on Wages now replaces. The non-discrimination mandate extends beyond merely ensuring equal wages for identical work; it encompasses the broader principle that where work requires comparable levels of skill, effort, and responsibility, gender cannot be a factor in determining remuneration or in making recruitment decisions. The Code also prohibits employers from reducing the wages of any employee on the ground of sex, ensuring that gender equality measures cannot be achieved by leveling down male wages rather than elevating female wages to equitable levels.

Institutional Mechanisms for Gender Parity

The Code on Wages, 2019 establishes institutional mechanisms to promote gender equality in the workplace through its provisions regarding Advisory Boards. The legislation mandates that one-third of the total members on both the Central Advisory Board and State Advisory Boards must be women. This ensures meaningful representation of women’s perspectives in the formulation of wage policies, minimum wage determinations, and other labor-related policy matters. The Advisory Boards are specifically tasked with advising the respective governments on increasing employment opportunities for women, making gender equity a central consideration in labor policy formulation. By institutionalizing female representation and making gender equity an explicit advisory mandate, the Code seeks to address the persistent gender wage gap that has characterized Indian labor markets. These structural measures complement the substantive equal remuneration provisions, creating both normative standards and institutional mechanisms to advance gender parity in employment and compensation.

Interaction with Social Security Legislation

Harmonization with the Code on Social Security, 2020

The Code on Wages operates in conjunction with the Code on Social Security, 2020, which consolidates nine social security laws including the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, and the Employees’ State Insurance Act, 1948 [8]. The redefinition of wages under the Code on Wages directly impacts the calculation base for all social security contributions governed by the Code on Social Security. The unified wage definition eliminates the previous situation where different laws used different wage definitions, leading to inconsistencies in how various statutory benefits were calculated. Under the harmonized framework, provident fund, employees’ state insurance, gratuity, and other social security benefits are all calculated based on the same definition of wages, simplifying compliance and reducing the scope for disputes. The synchronization between these two codes represents a significant advancement in India’s social security architecture, ensuring that workers receive enhanced protection through contributions calculated on a more realistic and substantial wage base. However, this harmonization also increases the cost of formal employment, which raises concerns about potential negative impacts on job creation and formalization of the economy.

Long-term Benefits and Retirement Security

While the immediate impact of the Code on Wages may reduce take-home salaries, the legislation significantly enhances long-term financial security for workers through increased retirement savings and terminal benefits. The higher provident fund contributions resulting from the elevated basic wage component ensure that employees accumulate substantially larger retirement corpora over their working lives. For a worker earning an annual CTC of Rs. 6,00,000 whose basic wage increases from 40% to 50% of CTC to comply with the Code, the additional annual provident fund contribution (employer and employee combined) amounts to approximately Rs. 14,400. Over a 30-year career, assuming modest salary increases and a conservative interest rate of 8%, this additional contribution could result in an incremental retirement corpus of approximately Rs. 20 lakhs. Similarly, the expanded base for gratuity calculation means that employees receive substantially higher lump-sum payments upon retirement or separation from service. These enhanced long-term benefits represent a fundamental shift in the employment contract, tilting the balance toward deferred compensation and social security rather than immediate disposable income. This reorientation aligns Indian labor policy with international best practices that emphasize adequate social security provisions as essential components of dignified employment.

Implementation Status and Future Outlook

Phased Roll-out Across States

The implementation of the Code on Wages, along with the other three labor codes, has followed a phased approach requiring coordination between the central government and state governments. As of March 2025, barring five states including West Bengal, Meghalaya, Nagaland, Sikkim, and the union territory of Andaman & Nicobar Islands, all other states and union territories have pre-published draft rules under the four labor codes [7]. The phased implementation reflects the federal structure of Indian labor legislation, where labor and employment matters fall under the Concurrent List of the Constitution, requiring both central and state action for effective implementation. The central government’s Ministry of Labour and Employment has been coordinating with state governments to ensure harmonization of rules and facilitate a smooth transition from the old legislative framework to the new codes. The staggered roll-out allows governments to assess implementation challenges, provides employers time to restructure salary components and update systems, and enables workers and their organizations to understand and adapt to the new framework. While the extended implementation timeline has created some uncertainty and compliance challenges, it also reflects a pragmatic approach to transforming a complex and deeply entrenched labor law system.

Anticipated Challenges and Adaptations of Code on Wages 2019

The implementation of the Code on Wages, 2019 is expected to face several challenges that will require continuous policy refinement and adaptive measures. One significant concern relates to the potential impact on job creation and formalization of employment. The increased cost of formal employment resulting from higher statutory contributions may incentivize some employers to shift toward informal employment arrangements or contract labor to avoid these obligations, potentially undermining the Code’s objective of extending social security coverage. Additionally, the requirement for substantial salary restructuring may create tensions between employers and employees, particularly in cases where take-home salaries are significantly reduced. Workers may resist restructuring that reduces their immediate disposable income, even if long-term benefits increase. There are also concerns about the compliance burden on small and medium enterprises that may lack the administrative capacity to implement complex salary restructuring and manage enhanced reporting requirements. Looking ahead, the success of the Code on Wages will depend on effective enforcement to prevent evasion, clear communication to all stakeholders about the benefits and requirements of the new framework, potential revision of certain provisions based on implementation experience, and complementary policies to support job creation and formalization despite the increased cost structure. The government has indicated its commitment to monitoring implementation closely and making necessary adjustments to ensure that the Code achieves its objectives of fair wages, social security enhancement, and labor market modernization.

Conclusion

The Code on Wages, 2019 represents a transformative reform in India’s labor law landscape, fundamentally altering how wages are defined, structured, and regulated across all sectors of the economy. By mandating that basic wages constitute at least 50% of total remuneration and establishing a unified definition of wages across all labor legislation, the Code addresses long-standing inconsistencies and closes loopholes that employers had exploited to minimize statutory obligations. The immediate impact of this reform includes reduced take-home salaries for many employees as provident fund and other deductions increase on a higher base. However, these short-term reductions are counterbalanced by substantial enhancements in long-term financial security through increased retirement savings and higher gratuity payments. For employers, the Code necessitates significant restructuring of compensation packages and increases the cost of formal employment, potentially affecting hiring decisions and workforce composition. The legislation’s provisions on equal remuneration, timely wage payment, and universal coverage extend protections to previously excluded segments of the workforce, particularly in the unorganized sector. Judicial precedents, particularly the Vivekananda Vidyamandir judgment, have reinforced the principles underlying the Code by preventing employers from circumventing statutory obligations through creative salary structuring. As implementation progresses across states, the true impact of the Code on Wages will become clearer. While challenges remain, particularly regarding compliance costs and potential effects on employment formalization, the Code represents a necessary modernization of India’s labor law framework. It reflects a policy choice to prioritize long-term social security and worker welfare over immediate take-home income, aligning India with international best practices in labor protection. The success of this reform will ultimately depend on effective enforcement, continued stakeholder engagement, and willingness to refine the framework based on implementation experience.

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