FAQs - Code on Wages, 2019 official link
The Ministry of Labour & Employment has released official FAQs on the new Labour Codes, and these clarifications are highly relevant for HR, payroll, and leadership teams planning their compliance roadmap. These FAQs reduce interpretation risks and give employers clearer policy direction, but they also signal the need to revisit salary structures, appointment letters, payroll logic, contractor engagement, and HR policies in a time‑bound manner. For HR leaders, this is the right time to move from basic awareness to structured readiness through policy reviews, system changes, and focused communication with employees.FAQs on Labour Codes
Q1. Which rules will be applicable during the transition period?
Ans: As per Section 6 of General Clauses Act, 1897, old rules will remain in force till final notification of new rules under the Code, to the extent these are in line with Codes.
Q2. What does the term “wages” mean?
Ans: Wages include all remuneration payable to an employee such as Basic Pay, Dearness Allowance, and Retaining Allowance. If other allowances exceed 50% of total remuneration, the excess amount is added back to wages.
Q3. Definition of wages and the components it would cover.
Ans: Wages include Basic Pay, Dearness Allowance, and Retaining Allowance. If allowances (except gratuity and retrenchment compensation) exceed 50%, the excess is added back. Performance incentives, ESOPs, and reimbursements are excluded.
Q4. What is the 50% rule for allowances?
Ans: If allowances exceed 50% of total remuneration, the excess is added back to wages for statutory purposes.
Q5. Whether Leave Encashment be part of allowances?
Ans: No. Leave encashment is not part of allowances as per Section 2(y) of Code on Wages, 2019.
Q6. Does this definition of wages apply to all labour laws?
Ans: Yes. This single definition applies across all four Labour Codes uniformly for statutory calculations.
Q7. Explain the allowance rule with a clear illustration.
Ans: Example: Total remuneration ₹76,000; Basic + DA ₹20,000; Allowances ₹40,000; Other components ₹16,000. Max allowance allowed: ₹38,000. Excess ₹2,000 added back to wages for compliance.
Q8. Whether Gratuity calculation will be applicable prospectively or retrospectively?
Ans: Gratuity applies prospectively from 21st Nov, 2025 (date of enforcement of the Code).
Q9. Clarification on gratuity calculation for December year-end companies.
Ans: Gratuity applies from 21st Nov, 2025. Establishments may make provisions as per accounting norms.
Q10. When is gratuity payable to an employee?
Ans: On termination, superannuation, resignation, death, disablement, expiration of fixed-term contract, or other notified events.
Q11. Are there special provisions for gratuity?
Ans: Completion of five years is not required in cases of death, disablement, or fixed-term expiration. For minors, gratuity is deposited with a competent authority.
Q12. How is gratuity calculated?
Ans: 15 days’ wages per completed year based on last drawn wages. Special cases apply for piece-rated, seasonal, and fixed-term employees. Max gratuity: ₹20 lakhs.
Q13. Does gratuity affect other agreements or awards?
Ans: No. Employees retain rights to better gratuity terms under awards, agreements, or contracts.
Q14. Whether a person drawing ₹18,000 or more is covered under OSH & WC Code?
Ans: No. Supervisory employees earning above ₹18,000 are excluded from the definition of worker.
Q15. Clarity on Core and Non-core activities.
Ans: Defined under OSH & WC Code, 2020 [Section 57]. Contract labour may be engaged for intermittent or time-bound core activities.
Q16. Whether Journey Allowance for ISMW within the State may be allowed?
Ans: Yes. Employers must pay to-and-fro journey allowance once a year from native place to place of employment.
Q17. How will ESI coverage be governed until finalisation of Rules?
Ans: The definition of wage applies from 21st Nov, 2025 with Code enforcement.
