Labour code

Is your establishment UP for upcoming labour codes?

The new labour code has been enacted in the pursuit of simplifying, consolidating and rationalizing the central and state labour laws. One of the objectives is to improve India’s position in the global ‘ease of doing business index. All the four codes have received presidential assent and expected to be implemented shortly. The state governments are in the process of finalizing their rules with respect to these codes. The existing 28 labour acts have been amended and consolidated into the following four codes:

  • The Code on Wages
  • The Code on Social Security
  • The Occupational Safety, Health and Working Conditions Code
  • The Industrial Relations Code

Definition of Wages

All the codes have adopted a uniform definition of wages. The definition of wages covers all salary components expressed in terms of money or capable of being so expressed. However, the codes provide some specific exclusion to arrive at the wages.


  • Bonus payable under any law which does not form part of the terms of the employment contract
  • House Rent Allowance
  • Conveyance allowance
  • Leave travel concession
  • Overtime allowance
  • Commission
  • House accommodation provided under government order
  • Employer contribution to provident fund or pension fund
  • Amount paid to defray special expenses
  • Gratuity
  • Retrenchment compensation
  • Award or settlement

The above exclusions (except gratuity and retrenchment compensation) are capped at 50% of total remuneration. Remuneration in kind to the extent it does not exceed 15% of total wages need to be included in wages.

Key Aspects

Key aspects

Budget 2021 – Impact on Individuals